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Flag-Trader Special Broadcast

Hi Everyone. In this blog-mail I’m going to talk about the state of the market from a Flag-Trader perspective, anecdotes of two friends who made the mistake of not trading like us, a couple of decent looking flags that have shown up despite the current messy market conditions, and a great trade I made a few weeks ago.

Current market conditions from a Flag-Trader’s perspective

The market is continuing to bounce around like a headless chicken, however, there are signs of technical trading slowly returning.

Remember, the markets trade in a “technical” fashion around 70% of the time.  This is what we do as Flag-Traders.  We identify a pattern in a precise way, we manage our trades in a strict manner, and we make money safely and consistently.  Pure and simple.

When the patterns don’t show up, as I’ve taught you in the CDs, the market is telling us something.  It’s telling us from the uglypatterns that the markets are panicky – not the ideal trading environment for anyone, and that the charts are temporarily not tradable according to our methods.

What’s the answer to this?  You know the answer … Be patient, and happy that the system is telling you something constructive that will preserve your capital.  Trust me on this, there are some valuable lessons you can learn, even when the charts are ugly as they have been over the last two weeks or so.


To emphasise the point let me tell you about two people I know who traded recently without a plan.  

Two terrible trades:

I find it amazing when people (who should know better) trade without any plan whatsoever other than a “hunch”, or when they trade just because they’ve seen a pattern.  The two trades below were made by friends of mine who trade for “fun” and don’t bother with trading plans.  See the results!

 Remember, a pattern on its own is not enough to trigger a trade.  In our world, the price must also break out of the consolidation area.  We never trade before the breakout (unless we’re trading straddles, but we’re not talking about those here).  

Anyway, one of these guys bought RIMM in late August on the basis of a cup and handle formation.  I asked him where the breakout was on the chart.  There was none.  That means there should be no trade, and therefore no losses.  But he did trade it. Net result … he’s lost over half his money in that trade.  That would never happen with us. 

The second bad trade involves a friend of mine who traded a bank stock recently on the basis of it “looking cheap”.  After one day he’d lost over 30% on that trade. 

Again, as Flag-Traders we don’t trade like that.  We don’t gamble.  We trade a system and when the charts are ugly we sit on the sidelines, preserving our capital.  We wait for our opportunities like a predator hunting its prey, and we trade our trading plan each and every time.  And that’s why we win consistently.

Two decent charts:

In the midst of all the panic I’ve spotted a couple of charts that weren’t too bad given in these crazy conditions, though I should point out that I didn’t trade them.  The reason being because this market could reverse sharply at any moment and I’d rather wait just a bit longer. 

First, ALOG, which was in Tuesday night’s list as a bear flag and duly broke down on Wednesday.


Then there’s HIG which has done something similar albeit with a tentative breakout to the downside so far.


A great trade:

Now this one I did trade, just after the Labor Day weekend on 3rd September.  The stock was BGC and it represents one of the best trades you could ever wish to see.  Take a look at the chart


Not only did this form a wonderful bear flag, but something you can’t see from the above chart is that the stock price had notclosed below $50 since March 2007 even though it had traded below that level. 



So, let’s now see what happened …

This stock is now at $18.00, though it should be said that you would have been knocked out of the trade at around $36 when the stock made a steep retracement.  However, it did give you another chance to go short at around $32.50. 


I hope this special broadcast has given you a reminder of how to trade properly, the Flag-Trader way, and how not to do things.  Don’t be tempted just because you’re over-anxious to put on a trade. 

Have faith, the over-reaction of the markets will bear fruit for us soon. 

All the best



PS. If you’re interested in any of our OVI trading services for stocks or options such as a fast-track mentorship or workshop event, book yourself an appointment here to speak with us. Many of our members aren’t aware of all the services we offer to help you become a more ‘informed’ and confident trader with the OVI. Remember, everyone is an individual, and we ensure that we can cater to you and your particular needs.

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