Why E=MC/2 Works
Many traders lose money! Common sense tells us most traders must be making the same types of trading mistakes over and over again. In contrast, note all the good trading opportunities E=MC2 offers. If you stay the course, E=MC2 works!
UNDERSTAND TRADING IS NOTHING MORE THAN A PROBABILITY GAME!
Of course you feel every trade should win, because you will be entering on price/volume patterns that are successful a majority of the time.
But you must realize, that while E=MC2 patterns have a high probability of success in the long run (the edge for you as the trader), not every single market participant is the exactly the same for every identical pattern that sets up.
Therefore, the exact same outcome cannot be expected each time a repetitive pattern forms!
With the exact same pattern, some trades will provide much larger gains than the previous pattern.
Other trades will pull back further than the pullback that occurred with the previous pattern. Other trades will pull back very far and stop you out for a loss.
You never know. All you know is that you are taking trades that have a high probability of turning into price momentum, and this gives you an edge in the long run.
With each new trade, there are new participants than before so the outcomes are always random.
E=MC2 doesn’t look to capture small moves in the market, although many trades end up either as either small winners, or break even trades after commissions.
E=MC2 builds its foundation around the premise that capturing bigger moves in the market will prove to be significantly more profitable in the long run, than trying to capture smaller moves.
Here is why. Trading to capture small profits leaves virtually no room for error, and errors come in all shapes and forms in the world of trading.
Trading is one of the most psychologically demanding ventures there is - from entering trades, to exiting trades, to trying to follow your trading plan, to everything in between.
Trading successfully is difficult no matter which method you choose.
It is hard to execute trades even when you know you must. It is hard to stick with a trading plan even though you know it is sound. It is hard to remain consistent when you encounter a series of trades that do not go your way, and it is easy to make many other trading mistakes in the face of all of the emotional obstacles you are faced with each day as you watch price move up and down.
When you factor all these variables into the trading equation, the best chance for success comes from a trading method that attempts to capture bigger price moves and large profits rather than small moves and small profits.
With E=MC2, trading costs won’t destroy your bottom line, and in time, as you see your bottom line continue to grow, you will be filled with the confidence to consistently execute this method day after day, even in the face of all of the emotional hurdles thrown your way.
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Trading is a three part game, and you must perform all three parts well to succeed.
The first part is a method to select trades that in the long run provide you with a probability edge. EMC2 uses multiple timeframe analysis, continuation vs. consolidation pullbacks, short timeframe entry relative to large timeframe structure, volume confirmation, and this makes up about 1/3 of the total picture.
The next 1/3 centers around what to do after you are in a trade. This discussion centers first and foremost about managing risk, and second about taking profits. We call this “trade management”
The final 1/3 ingredient necessary to trade successfully is far subtler than the first 2/3.
The third piece to the puzzle is you must have the mental strength to carry out your method and trade management.
If you took a survey, a majority of traders place most of their effort into method, some effort into trade management, and very little effort into the mental discipline necessary to carry it all out.
The breakdown is probably something close to 70/20/10.
When it comes to successful trading, all three areas must carry equal weight, and the level of difficulty for each area easily moves from method (easiest) to mental discipline (hardest).
This means we not only need to redistribute our trading priorities, but we also must work exponentially harder to manage risk and execute our method in accordance with the probabilities.
Many traders yearn for all aspects of trading to fall into one nice neat package, including exact places to enter and exit all trades, and exact rules to apply to all trading situations etc.
There are ways to set up such nice neat packages, but the best traders do not act this way!
Market conditions are never exactly the same from trade setup to trade setup, and trade selection often dictates the best way to manage a trade.
E=MC2 works because because it looks at the entire trading picture, and recognizes trading is much more than just telling you when to buy or sell.
E=MC2 eliminates the three most common problems most traders face:
- The trader watches price move up and down each day with many opportunities to make excellent profits, yet sits idly by on the sidelines, unable to recognize or take advantage of such opportunities until after they have passed.
- The trader fails to grasp the "big picture" of what is happening in the market each day, and is unaware of the repetitive opportunities offered by the market.
- The trader experiences losing trades far more often than desirable or affordable, and finds it difficult to know when to exit winning trades as well.
E=MC2 is the outgrowth of overcoming these trading problems. Every rule and nuance of the E=MC2 method is rooted in a deep sense of sound market and trading logic including:
1. Consistent approach to defining trend
2. Avoidance of overtrading
3. Consistent trade execution
4. Optimal trade management
5. Sound trade location relative to market structure
6. Combining Price + Volume for all trades
7. Applying multiple timeframe analysis to maximize risk/reward
E=MC2 works because it takes into account all of the comprehensive factors required to succeed at trading - method, trade management, and motivation to carry it out, and sets up a trading plan that capitalizes on the notion of trading as a probability game where you must have a trading plan in place that puts the odds in your favor- trade after trade after trade!
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