I remember it like it was yesterday. Why? Because it was yesterday.
The frustrated trader was about at his wit's end. He had been trading for less than a year and was the typical story - make some, lose some, make a lot, lose a lot, then lose a lot again.
He emailed me to see if I had any advice. I told him, no - and good luck.
Of course I didn't say that.
I asked him to describe how he found his trades. This turned into a long, rambling description that seemed to go on and on. As I began to fall asleep I heard terms like tops, bottoms, reversals, bounces, retracements and moving average cross overs.
I instantly knew the problem.
I told him to stop everything he was doing - and do this - and NOTHING but this:
Buy stocks at all-time highs and sell short stocks at all-time lows.
If your account isn't large enough to buy or sell the stocks outright, buy and sell "just in the money" options on those stocks.
(Here are 5 stocks at all-time highs: http://goo.gl/X9VXCS)
Most traders are afraid to do this. The response I hear is usually something like, "What??? I can't do that! I'll be buying right at the top!" (Or "selling right at the low!")
YES - that's the point.
Stop trying to predict tops and bottoms just buy it or sell it with the trend.
This is more than just "start trend trading" - that's not what I'm talking about.
I'm talking about a major shift in your thinking as a trader.
Somewhere along the line traders decided that trying to find turning points was the only way to trade.
Why do most traders lose money? There's your answer - they are constantly doing battle with momentum. It's insanity and you will always lose. Even if you do find a turning point, it may only be for a few ticks and then you're going to get stopped out as the price moves back in it's original direction. (sound familiar?)
So, if you are struggling, losing money, and can't understand why, start buying all-time highs and selling all-time lows.
It will almost always result in a higher winning percentage. Will you sometimes buy at the top? Of course. Use your stops and manage the trade like you always would.
But more often than not you'll start to make some money and it will be a huge confidence booster.
Now, if you don't mind, a bowl of Fruit Loops is calling my name.