How To Trade Trend and Range-Bound Days in the Market

TraderInterviews.com: Hello everybody. Welcome back to TraderInterviews.com. Thanks very much for joining me for a new episode. This week, we're going to be speaking with Corey Rosenbloom. He's spoken recently at the Traders' Expo in Los Angeles. If you were there, you may have caught his workshop but he's a great trader, a nice guy. We're going to talk to him about his blog as well which is "Afraid To Trade" and what he means by that first of all. But then we'll also talk to him about his trading strategies to get him to talk about how he approaches the markets and finds opportunities everyday. Corey, thanks very much for joining us on the show today.

Interviewee: Thank you for having me Tim. It's great to be here.

TraderInterviews.com: How do you describe yourself as a trader? Are you a day trader, swing trader? What do you categorize yourself as?

Interviewee: I have evolved all the way up and down the scales. I currently most of my strategies are going to be in the intraday futures market. So, I'm trading the Dow Emini, S&P Emini. So, I would almost classify 90% intraday and probably 10% in exchange trade funds, in ETFs of the cross markets.

TraderInterviews.com: Okay, futures, intraday, and the Emini contracts. What kinds of thing are you looking for in the charts to find opportunities?

Interviewee: For me, it comes down to one where it's confluent. So, I guess a larger description would be confluence across multiple non-correlated strategies. And so, using candles for example, using moving averages, using momentum. That's more so in principles, market internals, the tick, the trend, the VIX, how those kind come together and I'm looking for key turning points, looking at what the day structures are going to be. For example, maybe it's a trend day or range day. I'll be more active and involved in a trend day. We'd had a market that has a large gap that moves in one direction as opposed to a choppy day. I may not even trade that day at all depending on the strategies but I'm usually for small targets, I'm highly more going for accuracy in combining three or four reasons that the market has come to a turning point and then flick upward or down off that point and my stop is placed relatively close to that point that I believe are going to turn and my target is, you know, usually two times that position.

TraderInterviews.com: All right, let's break that down a little bit then and talk about if you could describe for us those two or three things that you want to see come together to give you a signal. You talked about tick, the trend, VIX, if you had ideal trade if you will, which three of those or which things would wind up and how would they look if you could describe that for us.

Interviewee: The ideal trade would be at the top so Elliott impulse. We have a five-wave structure making a new high on a momentum divergence on a tick divergence and maybe into some kind of resistance area that forms a reversal candle and that's four things right there that have nothing to do with each other that are all pointing in one direction. So, I'm looking to combine those to see where the market is going to go and most importantly, it's going to be the price itself. Beyond that is going to be the market internals, the tick. Is the tick confirming what I'm seeing? In other words, are new highs are being made with new tick highs? If so, I want to be buyer. And momentum, is momentum also making a new high? So, there's the picture of strength would be a new price high, a new momentum high, a new tick high and perhaps I want to buy the pullback into a support area to play for a higher high. When the price goes to the top of the range and I think we're finishing out the level, I'm looking for bearish candlesticks, divergences, and the tick maybe a breadth. if I see some sort of the markets making new high but fewer stocks are participating in that, that's a non-confirmation. And so, I want to save that and sort of play for maybe a reversal.

TraderInterviews.com: Right. so, people talk about buying the pullback but how do you find comfort in knowing that it's just a pullback temporarily or if it's already the end of the move and you've missed it?

Interviewee: Probability and it's something that works that way. I wish I had, you know, all the perfect answers but just looking and putting into context. And so, maybe it's a bull flag and maybe the pullback comes into a key support level. Maybe a Fibonacci level combined and with a moving average. So, when that hits, when that triggers and if there's a bullish candle for example, I know where the stop is going to be. And I'm comfortable taking that risk and I'm playing for a target higher than that. If it doesn't work out, if the market reverses on me, you know, it doesn't upset me as much but after doing analysis and looking at the patterns, looking at trading those. So, I kind of tried to as much as possible, take the emotion out of it and just play those stop levels and then look at the targets and if I'm stopped out, I'm stopped out.

TraderInterviews.com: I know a lot of people use Fibonacci and certain levels to define their stops. Is there some place where you put it slightly away from that so that you don't get stopped out when everybody else seems to get stopped out and you can remain in that trade to take advantage of the move is hopefully will be happening after?

Interviewee: We have to and I absolutely have to do that. What I'm looking to do is place it beyond that. What I'm actually doing when I'm combining this method is not so much the moving average is the key level that always inflects over 38% Fibonacci or 50% Fibonacci or whatever the case maybe. I'm looking to see where people are putting their stops. So people that use moving averages, I know where their stop is going to be and the Fibonacci people, their stop is going to be at this level. Maybe there is the daily pivot, people that follow those I'm really trading off of that and looking for those levels and you have to put that beyond that. Especially in intraday markets now, they tend to pop certain levels where it's very obvious and very obvious that this is the support level. The stop has to go beyond that. What usually tends to happen, the larger stops, you get a more accurate trading methodology in terms of the overall stats but can you handle those drawdown when your stops are hit? I'm looking to place where multiple people are putting stops using non-correlative methods. If I get beyond them, I'm okay. But then again if it goes beyond that certain level, then my ideas are incorrect and I would prefer to be stopped out because the market probably is going to fall through as their stops are taking out and maybe momentum comes with a downside.

TraderInterviews.com: You're right. You do have to...that sounds like you do have to put your stops further away. So, are you more careful with your trade size if you're having to put that stop further away that you're maybe comfortable with?

Interviewee: That's exactly it and I have a little bit. I don't so much do...one reason I got away, I used to trade the ETF, the DIA and the SPY and the QQQQ and you would have to position those perfectly, you know. My stop is here and I had an Excel calculator I was using all the time to figure that out. Even before I traded ETF, I was in stocks. What I like about the futures market, if you tend to have a fixed position and with the DIA or with the Down Emini, you know what their contracts are going to be. For example, every single point per contract is $5. So if my stop is 20 points away in the DIA, or look at the DIA and the Down Emini together, I know that's going to be risking a certain level. So per contract, so that kind of helps and plus the confidence how many things I have lining up on a position that will dictate to me, you know, whether I play for A, B, or C, A being a certain level, a small level, B being more of a moderate level, and C being an aggressive, full position. So, I'm looking at just three things in terms of two contracts, five contracts, eight contracts whatever the case is. But I have that determined in advance. So, just based on the confidence, I'll pick one of those and that's the position. So, to me, it's feels like you're doing less decisions but it's almost predetermined.

TraderInterviews.com: Yeah, I know a lot of traders would like us to sit here and talk about how want the VIX and the trend and the tick to all lineup and find good support but rarely does it happen that way. So, it sounds like you can have A, B, and C great trades and you'll adjust your trade size depending on how comfortable or how many of those things are lining up.

Interviewee: That's right and the day structure too is going to determine and so I spoke about the presentation looking at if it's a trend day. So, that's going to dictate. I can only put on the largest position that I have on trend days. On a range day, you want to keep the levels smaller, your position smaller because it tends to be choppier and your accuracy rate is going to decrease. And I call that the range is more inefficient. You're doing a lot of work, a lot of analysis, a lot of trading and sometimes you wind up not getting all that much profit. So, that's really inefficient to trade those choppy, choppy days. But a trend day, those are when the market gaps up largely, there's some sort of reason. Maybe it's a Fed day, maybe it's earnings announcement of a major company and the market will open at one range, the tick will confirm the whole day. Breadth will continue in that direction and price will pull back the key moving averages, for me, the 20 and the 50. So, then, I will get very, very aggressive with the headwinds of the trend day or behind me and in that case, I'm using relatively closer stops to larger position. So that tends to work for the market is almost surging in one direction all day long really.

TraderInterviews.com: All right. So sounds like an ideal day for you would be the market gaps up, it retraces back a little bit, maybe to a strong moving average or 20-period moving average or a 50-day. Is it the day moving average that you'd be looking?

Interviewee: No, no. Intraday, I'm looking at the five-minute charts.

TraderInterviews.com: Okay, so the five-minute charts.

Interviewee: The five minute, 15 sometimes I'll go as low as one-minute but usually, in my focus, it's going to be on the five-minute charts.

TraderInterviews.com: And your experience has been typically that when the markets do gap up that it comes back enough that you have time to get in and then play the long side again because I know some days, it will gap up and it won't move any lower and really won't move any higher. It's done pretty much for the day in the first 10 minutes.

Interviewee: Yeah. And the market had a consolidated move that way but I'm looking at sort of looking at what the day, how it progresses. So, if the gap, normally, the impulse is to fill the gap. If it's a relatively smaller maybe less than 1% then that would be a range, a play to fill the gap. But if a gap is larger than say, 0.9% or 1%, then we want to play that gap in the direction that it occurred. I'll wait a couple of minutes, maybe 10 to 15 minutes to see if we get continuations. If we do, I'm long at that point playing for a larger target, then the price because usually, the stops are being taken out. There's a higher time frame player. There's some urgency to get the trade on and that's what really draws the market higher. Anybody in the wrong direction is being stopped out. So, that's creating counter momentum to the upside if it's a down day, to the down side. And so, yes, those pullbacks tend to have high odds of finding support and making a higher high provided the internals are confirming what we're seeing at the price action.

TraderInterviews.com: I want to talk about your CMT designation, certified market technician. Is that correct?

Interviewee: Chartered.

TraderInterviews.com: Chartered, of course. Chartered--

Interviewee: With the country music television, I've got this often. You're at Country Music Television?

TraderInterviews.com: Right. Okay, chartered market technician. How has that helped your trading or has it helped your trading is probably the question.

Interviewee: Immensely. I started really full time in later 2006 and I became involved with the MTA program. I've known about it for quite sometime but never really took the plunge and took that. It's a two-year program really, three examinations that are six months apart. And I'll take it eventually. I'll get to it and so I finally did and I came to the market really with a broader approach, more so Martin Pring methodology, intermarket, John Murphy, the classics really. But what I didn't have was the intraday trading, or even trading strategies. I really came from a fundamental background that the technicals were new to me and the bear market of 2002 and 2003, that's when I had done technical analysis really which is the fundamentals aren't working so what is? Oh, charts. So, to get more proficient, I had a certain skill set that really wasn't professional or wasn't, you know, trained. I just read random books left and right about the subjects. So, I didn't really know, they were college textbooks really and the CMT, what it did was provide the examination process where it's sort of almost like, I call it a graduate school class. They assign you books you have to read. Some of them are Pring and Murphy, Candles, Elliot Wave, Point and Figure, all kinds of things. And there were things I would really probably never have gotten exposed to and I remember one of the biggest things is I thought Elliot Wave was, you know, not so much a joke but how can you count five ways and make money? That made no sense to me and some of the point and figure, and, you know, all these little things that I didn't know what they meant. And so you're forced to read about them and learn about them. You know what they are. And so, I broadened, more so I broadened the approaches that I was able to take and weed out the things that did not work for me and focus more on things that did and I began to learn more. For example, I use Elliot Wave everyday, maybe not so much on the purest sense but I'm looking to use that as a confirmation and that's overlay of all the methods I was using. I learned all about the candles. You had to memorize every single candle pattern, which it's not that important to know all of them but the key ones and if they're reversal patterns or continuation, all about the indicators. It was a really...I guess to summarize it, it was a formal process almost like a structured graduate program or some sort of college program to know all about the technical and the charting, sentiment and really everything. And that helped a lot when I have analyzed and put that to real practice.

TraderInterviews.com: You know, I like that you said it's structured because the reason I like that approach is that it forces you to take a step-by-step method because I think a lot of traders will try to find whatever hot right now or whatever this person recommends or whatever that trader recommends. This forces you to kind of take a look at all of them and then see what fits your personal style.

Interviewee: Well, that's what I did. I was a frequent attender. I think I attended five trading expos throughout, you know, 2005 or 2004 till "07 or '06 and I became acquainted with different methodologies from different trader educators which led me to read other books and look at their web sites etc., or follow their blogs, but again, it was kind of hodge podge. It was just all over place. This person does this and this works for them and this methodology is great for me and just really, at one point, I had so many indicators on a chart, I was just classic as that's what people do. You have so many indicators and it becomes, what is it, analysis paralysis or something. Maybe, you just sort of, "I can't do it. What is it?" And so, the CMT formally takes them and says, "This is what this works for this kind of style." I went to some statistics to learning about trading strategies which I've never been exposed to really and in terms of research on that. But yeah, it really gave us structure, a basis. Step one, start here. Start with trend. What is a trend? Okay, let's define trend. Let's move on to indicators. Here are a list of indicators. Here's what the function is. Here's what they do. Here's when they work. Here's when they don't work. Let's overlay that with sentiment, et cetera, et cetera. Volume, how do they go in so that it really...and that led to the method I have now which is a confluence. It's not so much I'm a master of one methodology. I just need to know what the people are using a certain method or seeking and therefore I can figure out what they're entering. Maybe I want to enter with them. Maybe I want to save them when their stops and when all these methods come together for example, if an Elliot pattern forms on a trend line with a candle or whatever and these people see that and react to it. Well, you can't have a trade from that because you can play off on that momentum or that supply and demand imbalance that occurs. So, that really came from the structure of the CMT that I probably would never...if I got it, it would be years later through much trial and error.

TraderInterviews.com: Now, you still use quite a bit, a few indicators. You talked about he moving averages of course, the 20-period and the 50-period and exponential moving average and the 200-day simple moving average. You also...you've looked at Bollinger Bands but for you, what was the limit? When did you say, "Okay, I've seen enough indicators. I'm going to concentrate on a few of these that seem to be working for me well."

Interviewee: Well, mainly it was, well trading losses when I took the indicators. I used to...when I was in the college, they had free printing. So, I'd print all the multiple charts, usually the Dell stocks and look at those and I had stochastic, I had Bollingers, moving averages, MACD, RSI, you know, all those kind of things and I would look to align them all up so if everything was making a buy or everything is oversold for example, I want to buy that stock. The problem is I was not looking at the concepts when those indicators gets so over sold or probably in a down trend, making new momentum lows and probably that's not a good time to be buying especially you do the counter trend. So, it really brought me up to a level and said, "Okay, let's focus on supply and demand." That's what's moving the market anyway. It's not the indicators. It's not these magical concepts. It's supply and demand. It's people that respond to fundamentals, maybe respond to chart patterns, those sort of things and it became more conceptual momentum, range, expansion contraction with the price, trend, those basic Dow Theory concepts really and build from that and the indicators I use were not so much, you know, magical nor do I take signals within isolation. I use a momentum indicator that tells me what then momentum status is. The Bollinger bands are for the contraction expansion to the range environment to let me know what the clues are for that. Moving averages for support and resistance which also confirm the trend, and the candles, of course, confirm early reversal signals. And so, that's what I'm using. It's not a whole lot but the indicators I use are really conceptually based. So, that's what I'm doing, concepts than, you know, "Oh, this is oversold. I'm buying, it," or whatever the case is.

TraderInterviews.com: The 3/10 oscillator which is something I think that Linda Raschke talks about, how do you use that? Can you talk about what that is?

Interviewee: Yeah! That's the indicator I use more than anything and it was taught by Linda Raschke to me and to all of us within the trading community. It's simply taking a three-period. It's using the standard MACD, I'm taking a three-period and a 10-period so in this case, it's a simple moving average and the actual MACD is exponential average, not a huge difference and then smoothing that period by 16 periods. The way to get that, say on stock charts or whatever, the kid of web site that offers charting on a standard MACD, type in 3/10 and then 16. And what happens is essentially an unbounded indicator. It no longer becomes the MACD so it's not, you know, or crossing the zero line, that's something to do or there's this and that. It's really taking the fast line, well the ones with the MACD line and then using it as a momentum oscillator for example, and comparing it to price highs and price lows. A price, a new price high and a new momentum high is not so much overbought, it's a new momentum high, will tell me that on a signal at least, that possibly a higher high is yet to come. It's also based on a trend function. Trends, once established have greater odds of continuing than reversing itself. So, I'll be able to look to buy the first pullback after that especially if it comes to a key support area. What's also very important to me is comparing divergences. So, if price makes a new high, the momentum oscillator does not make a new high, that's non confirmation and I'm looking to either sell or to exit my long position or maybe take a reversal playoff of that and it really becomes...it's a momentum function. It's also a little bit of a trend indicator too because the longer 16-period smooth average tells a little bit. If it's above that zero line, but then again it kind of correlates with the moving average function anyway, would talk about, you know, is this an up trend or a down trend? Bias long or short? And that's really comparing oscillator highs to price highs and seeing confirmation or non-confirmation.

TraderInterviews.com: Well, Linda Raschke obviously hugely respected, do you think that it's important to know why this is working? I mean do you kind of dig into it deeper or you just try different things you see that is working and you say, "I'm going to start watching that." I mean how deeply, I guess, do you dig into the why behind these indicators?

Interviewee: For me, I'm a digger. I'm an analyst and so naturally and I sort of I like to study and research behind new concepts and yeah, I look at this, I test it out, with TradeStation and I read so much that I could from her, from Linda about the oscillator and just tried different functions and went through that and yeah, I definitely would go into the whys. I'm a curious person, you know, why is this working? Not because it's magic. I don't really believe in magic. It's how it affects a structure and those sort of things. So, anything that works, why does Fibonacci work? Why does Elliot work? It's just sort of...I guess it affects my curiosity and my need to understand things which I find the whole market, you know, as a whole is like a puzzle. The same with indicators, why is it working? What is the mathematics behind it? Why do people use it and not something else? Why is it superior to this? Why use a simple moving average function versus an exponential function? Is there really a difference? And those sort of things. Yes, I want to know as much as possible and there's real money on the line here. So, you're going to be as well informed as you can.

TraderInterviews.com: How long did it take you to really become a confident trader, confident in the indicators and the chart patterns that you're looking for to really feel like you could make money as a living in the markets?

Interviewee: Gosh. I don't put a time on that. I'm still well I'm not saying still learning but it just seems like that there's so much to take in and the market, you know, you think you figure something out and the next thing you know, the trend will change, or the volatility will change and the markets from late '08 are not the markets from early '09. For me I discovered again technicals about 2002, 2003, and I think meeting people at the traders' expo, what helped me there was to see other people and talk with them actual traders, and kind of see what are your methodologies, what's your background and seeing these, you know, I could say, famous, these educational traders that write the books and give the seminars and they're just people like us. So, that it almost felt like that they have this magic knowledge or they have something that I don't have. They have an indicator or that kind of thing. And I think once I realized it wasn't about that, it was all about probability, then it became more in my reach, in my grasp. I could understand this because they're doing it. I'm only human like them I'm no different. They're no different than me. So, if they figure this out and I can do it, it takes a lot of work but, you know, here's the concept. The CMT helped a lot with the confidence level definitely. Having the blog and having the reader feedback and watching my progression and watching as my knowledge grew and analysis grew and watching the feedback get positive et cetera. That was confidence building. And to the account obviously growing in trading, the strategies are moving from a swing-based trading strategy of almost like a hedge fund, sector rotation based to intraday ETFs to the actual futures. So, that was kind of a professional move down or I guess up to the futures market. I wish I could say I'm a 100% confident but, you know, it doesn't get that way. I've gotten really sort of like arrogant at times. "Now, I know what this is. I'm taking a bigger position than normal," and I'll always get smacked. And so, I've learned that arrogance in the market is no fun, no place for arrogance in this market.

TraderInterviews.com: What do you think sets apart the 10 maybe 15% of traders that make money in this market consistently and the 85%. Some would say 90, 95% that don't.

Interviewee: Yeah. Gosh. Hard work, motivation. I believe that anybody can do this. This isn't really, I mean you hear all the time, "This is really hard." It's not that difficult but there's a barrier to get to this level and it takes trial and error. I think I mentioned how did I find what worked and what didn't. Trial and error, losing money, realizing that, "Oh! Why is it and why are they not working? Or why is the strategy not working? He said it was going to work but it's not. So, really that, kind of broadening out and sort of looking at those sort of concepts and moving forward for that. But I think you have to love it. You have to love this game. You have to love the process. You have to love, putting in all the hours. It's not, you know, read a book, push a button, make money. That's and I thought that was the way it was. I'm sure we all think that. We come into this business but it's not that way. You can just walk up and you find some 3X leverage fund, and you know, trade it and make a million dollars. That's not the way that the game works. It's, you know, day in, day out, do the work, put the homework in, get experience, journal everything. Write your experiences down. For me, I think writing it down helped a lot. Annotating charts by hand, really being serious about this. And people that treat it like a game or like fun, which is a lot of fun but if you treat it just for that, or you just think you're going to be doing it for the money, then I think you lose motivation. I think what's most important is keeping your psychological capital more so than you're...and you can always get back money or later or whatever the case is. But if you lose your motivation, your will to learn, you know, to better yourself in this business, then the game is over. You just burn out. I think a lot of people burn out before they give it time. It took me three to four years after getting introduced to technical analysis to realize, "Hmm, I can do this, even though I was trading in different things and using more fundamentals but in terms of trading, put the hours and document what you're doing, learn and journal and just continue to grow and just realize that it's not going to...I guess, to someone I have realistic expectations. It's not easy and requires a lot of work.

TraderInterviews.com: You mentioned the leveraged ETFs so I know those are popular with traders these days. Are you trading those at all?

Interviewee: No. No way and then on the blog, I was kind of campaigning with my clients. I have sort of a campaign against them. I just feel like they are holding up long term without rebalancing. There's this issue with them. They're all going to essentially go to a dollar or whatever just on the percentage function. As the underlying say for example, moves down 50% or something. It falls 50% and a double leverage long, a triple leverage or I have to say the long there is going to decrease by, you know, down to zero essentially. And that will happen in one day. But over time, they are wasting away. They're almost like options essentially. They will and as the volatility increases, you know, if you lose half of your account, you can't get that exact same, you know. if you lose 50 grand of a hundred grand account, you can't get 50 grand back or you can't get 50% of that to get back to where you are. It requires a doubling of your account on $50,000. That's much more difficult. It's easy to lose 50%. It's difficult to gain 100% especially with motivation. And that what these things are. They are tied to an index and as that index or as that other fund, the financials or the S&P or crude oil or whatever the case it has that moved, the fund will, you know, lose their money. It really can't reach that level. So, that's a long...there's a fallacy of thinking the long term. That's one issue. Second is the intraday. If you're right on the position, if you're a professional and you have a track record and experience, yes they're great. But most people that are drawn to them and in my experience is not necessarily the professionals; it's the new traders which is a whole separate issue but they maybe don't have the psychological skills or the strategies. They see it going up and they buy it and they don't realize, maybe it's at the end of the trend or whatever the case is, the market will be volatile and if you say, loses even a couple or the underlying moves of one percent, that's a three percent move in the account, or if you're fully long that's security. It's just too volatile for new traders to take advantage to understand in my opinion. With experience maybe but for new people it seems like it's difficult for them.

TraderInterviews.com: Yeah, it's interesting because I've never heard of a professional trader who makes their living in the markets talk about needing additional movement to make that happen or additional leverage to make it happen.

Interviewee: Right, right.

TraderInterviews.com: There is something there because if that was the case, then all these pros would be using it but it's mostly the newer traders who are looking for faster moves and professional traders just seem to say, "Look , I don't need faster moves. I just need them to move the way I expect them to."

Interviewee: Yeah, I mean with those accounts, and they're essentially leveraged vehicles themselves. They have six or seven times leverage. We don't treat it that way and not to mention we have money management kind of a net to catch that. Besides, most of these moves and stop losses will be outside of our money management rules. So, that's one thing to look at too.

TraderInterviews.com: Can you talk about a trade that you've had recently maybe that you are particularly proud of? Can you describe it? I usually ask my interviews about a good trade and a bad trade. So, maybe you could be thinking of a bad trade too but or didn't go as well as you thought. But how about a good trade that you've had recently that you're proud of?

Interviewee: There's plenty of that trades. Monday, for example, the 22nd of June, I mentioned I was looking at the...even wrote on the blog that the weekend analysis showed that there was a weakness. There was multiple divergences taking place in the larger market. So, setting up the larger picture is very important. I haven't mentioned that yet but setting up a larger structure as we play it out on the intraday chart and they was a range consolidation day on, I belie the Friday before. So, you know, the odds were good, were favorable and we can have some sort of expansion move. I expected the down side on Monday. So, as Monday rolls around, sure enough, we have a large...the futures were down. The market gapped down quite aggressively. To me, that's my trigger. You know, for a trend day, I want to be very aggressive. And so, that's essentially comprising of shorting the market aggressively and then shorting each individual pullback. It doesn't require great confirmation. The tick continue to making lows to every single pullback we got short, short the market at the sense. And so taking the market that way with a larger position because I had the larger structure. I had the larger...the gap was not filled by any sense of the word on that day. And so, any kind of pullback even scalp pullbacks were affected. So, I'm not holding all the day for this. Anytime the market will pull back to a key average or, you know, whatever happens, I'm scalping aggressively in a large position. So, I had multiple trades in a row that worked just because I was in the direction of the original trend. And I understand the trend day concepts and I make the most money on trend days. The rest of the days are kind of mediocre, you know, give some, take some back, give some, take some back but it's those trend days and it's proper execution of those that it really makes my month. I don't look at a day-by-day comparison of profit or losses. I used to. That's very stressful. And what winds up happening anyway is just a handful of your trades or a handful of your days necessarily will make your month or your quarter and so that is a power of a trend day and just the realization that the larger structure is in your favor, the trend day, the gap, the momentum low, the tick low. The tick makes new lows. The breadth makes new lows. Short every single pullback. I love those kind of days. They don't happen very much and when they happen, they're...they stand out in your mind. They're great.

TraderInterviews.com: Yeah, I think it's fascinating that you say that a couple of days a month or a couple of days a quarter can make the entire quarter and I think that's a mindset that professional traders have because we're all used to careers, jobs, you make the same amount of money everyday because you just split your salary up on a daily basis. But traders don't think of it that way. They think, "I can make my 100 grand for the year in a series of days over those weeks," and just getting through the days that are between those days can be difficult but it sounds like you've got used to doing that and that's what I hear from other traders too who, who are really successfully. That's what they have found themselves being able to do.

Interviewee: Honestly, when I went full time, after grad school, that was the most stressful thing possible. In fact, it's why I started the blog to reach out to people during those times. And I was just starting on the concept. I knew the concept existed but it's actually, participate and do that and to really be so aggressive on a select number of days, it was stressful. It was isolating. So, I wanted to reach out and connect to people and share strategies and, you know, learn throughout the times when it would get boring or flat or whatever the case is. So, I'm not trading every single moment of the day. And so, I needed some more interaction. When I realized that concept, it's so hard to really wrap your head around and not to mention that we're just trained to have salaries. "Oh, I'm going to get this at the end of this next week," or, "I can pay the so and so bill. I know how much I have coming in. I know what my budget is." As a trader, you don't and sometimes, you're working, working, working, and you lose money for a month. That is no fun. But it's those times, it's that understanding of that principle. There are certain days that the market is really and, you know, not much easy but, in a mode of payout, I guess in terms of, you know, your mentality, your strategy, your experience, they are all in alignment with the market. And to make a lot of money, really, those things have to be in alignment: strategy, experience, mental state, psychology, and then the market itself. You can be the best person with the best strategy but if the market is being flat and you have a trend based strategy like typically like I do, you don't do well on range days. You don't do well when the market is consolidating or vice versa if you like to be a person of fates and ranges and doesn't like trend days. But yeah, it's a concept that you've got to be there present, mental, and looking at all these things just waiting for that moment, for that day. Not so much the moment but the structure, the trade, the perfect...like you mentioned. Your perfect trade has to be there and if it is, you can't just lollygag around and say, "Well, I'm going to put on, you know, one or two contracts." You've got to max. I'm going to take that risk." They won't always work out and you will get stopped out in a larger position from time to time but over the course of months or, you know, quarters or a year, the money should add up at least from the edge standpoint.

TraderInterviews.com: I like that phrase you used, "When the market is in payout mode." I like that. I'm going to use that. So, we're all looking for those days when the market is in payout mode, for sure.

Interviewee: Yeah, what happens after that is, again, you only get maybe one or two golden moments like that for months. That's happening more now than it did, you know, a couple years back or even 2007 because the market is more volatile. But you've got to be there and what happens after that, is the ones that's happening I guess real quick is that people see a day like that, they say, "I could have made this much money," and get so excited and then they'll wind up very, very, very aggressive on the following day. The day following a trend day is almost always a range bound, choppy, chaotic day because the market is grinding out. It's coming to a value area or and people realize this new level and it's choppy. You don't get two trend days in a row very often. So, a lot of people will go small. They think the opposite. "Oh it's going down so much. It can't keep going down. I'm going to try to get long on this," you know, move and they continue to get stopped out and the next day they get, you know, they just see the opposite of what should be happening.

TraderInterviews.com: All right. Well listeners, we'll link to Corey's blog, Afraid to Trade and you can find out more about him in his blog and read what he's thinking about in the markets and what he's trading. Corey, thanks very much for your time today.