TraderInterviews.com: Yeah. So one of the things I’ve heard with successful traders over and over again is that they’re not looking at a chart about where price is going next. Let me back that up. What they’re looking at is what are traders going to pay for this in two minutes rather than what I think this thing is worth in two minutes. Is that going to sum up what you’re talking about?
Derek: Either way, yeah. I think and probably not good in explaining as I’m doing it. But, yes, because being part of that is support and resistance comes in play, the trend and momentum. I love analogies. I always say, “Eat famine. Don’t be famine. Don’t fight the trend.” When we talked about the entry and exit, the entry is the critical thing and maybe a little bit early or a little bit late but if you’re not fighting the trend, the average is, the oldest thing in the industry is the trend your friend and tell the trend then. The trend is your friend. It will compensate for that mistake. Traders are looking at not only where it has been but what does that mean and what potentially into the future. So, again, I’m not trying to predict. I don’t want to predict, but I can say because of this pattern, because of the price escalating or declining, and there are some things, there are a couple specific indicator tools I use. I’m telling you, I’m one of the simplest guys there is out there when it comes to tools. I mean, I see some of these guys’ screens and pages. My joke is the prettiest page with all that stuff on it never makes money. It just never does. So it’s really all about support and resistance where price has been, and the flow, and the trend. Is the momentum and trend accelerating or decelerating? Are we reaching resistance or support? How are we dealing with things under resistance and support? The best trades I’ve made this week have been based on dealing with support and resistance, and handling and looking at support. You can use support and resistance for your benefit, both for target standpoints and from stop to standpoints. So you use those, but you use that past information as a benefit for future.
TraderInterviews.com: What are you watching that helps you with support and resistance whether be pivot points, moving averages? What is it for you?
Derek: Again, here comes pure price. Pure price identifies support and resistance very eloquently. When you’re looking at pure price and remove time, it doesn’t matter. Your technical indicator, or study, or oscillator tool, they all become more efficient and work. You can reduce lag when you remove time. I don’t know of any other way to remove time other than what I’ve done, and that’s because the pure pricing model makes sense. As far as technical indicators or things that I look at specifically, so again, no time frame, it’s price. But if you look at the other things I do, moving averages have a lot to do with it. Support and resistance has a lot to do with it. There is one oscillator that we use. We created it. I’m going to say it looks pretty similar to like a MACD. It kind of based on a MACD philosophy. The inherent problem with oscillators is they’re all major lagging indicators and so is removing the lag and creating an oscillator more of a MACD type instrument that is, again, looking at a pure price. I can’t harp on that enough. And then there’s one specific tool that we’ve created and that I have spent an enormous amount of time. The two things I’d probably spend more time back testing and utilizing with the past 15, 17 years is moving averages. The latest things that I’ve created are what I call the currency strength index or my CCYX. I know there are other currency strength tools out there, but I’ve taken the best of everything that can possibly be done. I’m disassembling pairs. I’m looking at each individual currency. You say, “The Euro dollar is going higher.” So in a pair situation, that means the Euro is moving up but the dollar is moving down in theory. But when you’re looking at a currency pair, you can’t see that pair. You would just assume because you’re looking at the average chart of the two. So I created a tool that disassembles it. So I’m looking what the dollar is doing, and I’m looking at the Euro is doing individually. I’m actually looking at the eight major currencies, and then I sit down and look at that, and say, “OK. What’s trending higher? What’s trending lower? How does that affect the pairs I trade? Which one of those is moving up the most? Which one of those is moving down the most? Which is moving up mostly that is being most consistent, not having so much jagged activity on the way up or down?” And then if we get it, how does that affect the pairs I trade, the consistency of trading something over and over again? There’s another big problem, traders, they jump from tool to tool. They’re searching for lowly grail. They never give anything a chance to work. They want instant gratification, and they jump from stock to stock, or option to option, or pair to pair. And the fact is you just got to dig in. You got to dig your fox hole and make it work. You got to develop confidence in your tools, and then trade your tools with confidence.
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