Steve Palmquist.Author of ‘The Timely Trades Letter’. ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns. New traders are often focused on what happens after they sell, or what happened to positions they did not take, or what happened if they would have ignored the the trading systems rules. This sort of focus develops bad habits that eventually cause problems. I want tools that are repeatable, I want tools that work more often than they fail, and then I just focus on using those tools in specific market environments where they have worked well. There is no technique that leads to profits on every trade. I have seen the adds for systems that work ’98% of the time’, but the guy selling them is the one making the money. Trading is a statistical business, and traders find tools that have a good percentage of success and use them in appropriate market conditions. Traders make their money by testing and analyzing tools and techniques in order to learn what actually works, and what just sounds good but does not lead to profits. A few examples can be very misleading, traders test their potential trading tools over many different trades in different types of market conditions. Trading an untested system is taking unknown risks and often just churns the account. Extensive testing has led to several practical trading techniques based on the Bollinger Bands. I have found that in most cases I am ahead in the long run to avoid trading when the market is extended above the upper Band. As indicated by the testing data shared in ‘How to Take Money From the Markets’, it is generally best to not initiate new positions when the market is extended above the upper Band. You can also see from just glancing at a two year chart of the NASDAQ that when the market becomes extended above the upper Band it most often pulls back, or trades sideways, for a few days in order to get back below the band. Trading should be data driven, not based on emotion, wishful thinking, or hot tips from TV hosts. To be data driven one needs to test and analyze trading tools and find out what really works, and when each tool should be used. Traders must understand which tool to use for a specific task, and have a clear understanding of how the tool works, and what can and cannot be done with it. I have extensively tested several trading systems, the results of this testing on specific trading trading tools are outlined in ‘How to Take Money from the Markets’, and Money-Making Candlestick Patterns. The testing process helps us understand how stocks usually behave after forming a specific pattern such as being outside the Bollinger Bands, showing strong distribution or accumulation, or pulling back or retracing during a trend. Understanding what a stock is most likely to do forms the beginning of a trading strategy. Trading without this information is taking unknown risks. Taking unknown risks can lead to disaster…