Sometimes it takes two bites at a cherry to really get to the bottom of how someone trades.
Repeat guest Richard Jackson (see EP07) left me wondering after our last interview and I wanted to get to the bottom of it.
He’s the only trader I’d come across who speaks about trading “convergence” but isn’t talking about the opposite of “divergence” trading – which is what most technical traders refer to when price heads in the opposite direction to an oscillating indicator.
To put this to bed I asked Richard to share more detail around his version of convergence trading and how it lets him reduce his risk to virtually nothing and maintain great risk to reward trades.
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Richard’s Convergence Strategy Explained
This video is a much watch for anyone who’s been knocking around with the concept of trend lines, Fibonacci, Elliot Wave and … well virtually everything. Enjoy!
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- [10:49] A lot of them fall apart because they don’t have the discipline and the accountability to stay consistent.
- [11:48] Learning technical analysis is one aspect. Learning fundamental analysis is another aspect. Learning cognitive biases and heuristics is a completely separate subject on the side.
- [13:32] Education is one thing but, in the end, who are you reporting to? Nobody.
- [14:22] A lot of what we are doing as traders is more filtering the market out to find high probability trades.
- [14:51] Divergence is looking for weakness in a trend and that’s a potential reversal in the market.
- [15:51] Stop thinking about what you’re thinking, think about what everybody else is thinking about.
- [18:56] Dow Theory is a precursor to Elliott Wave.
- [19:45] The market is built up of other people, they’re all doing the same thing that I’m doing.
- [20:06] If we can focus on what other traders are seeing or thinking then we’re on the right track.
- [22:04] When we identify high volatility, like a big wick as a reversal pattern, then that stuff gets us excited.
- [23:22] When we find things like the reversal patterns, big wicks, volatility, momentum, then the boys really get excited.
- [25:58] We can only work in the program of probability.
- [30:49] We put our news strategy as a market order and our swing strategies are all limit orders.
- [37:03] Trading isn’t something that you can do overnight.
- [38:09] I had to formulate my own plan so that I could believe in my probability.
- [38:38] Capital raising is pretty difficult. It’s not as easy as people think it is.