Methods and Markets





Trader Scott’s Market Blog

October 5, 2016





A method is important for success in markets (but not nearly as important as most people assume). I talk about my own method a lot, because it’s a big part of what I do in markets, so therefore it will be discussed often. And I receive a lot of questions about the method. But I’m not trying to convince anyone as to the validity (or not) of my method. I know it works formeand that’s all that matters tome. But what I am trying to get people to believe is that we need to forget most of the conventional “wisdom” we have assumed to be true regarding markets. And instead focus on what matters the most for success in markets – that is to focus on RISK and PROBABILITIES and how to get them as much in our favor as possible. That greatly increases our own odds of survival in markets. And if we can survive long enough, then we’ll likely begin seeing consistent profitability eventually. It’s a long process. But how you accomplish that goal is unimportant. I keep rolling out the ways I get there, but we all need to find the ways which are most comfortable to us. So when I receive correspondence from our great readers telling me they can see much more clearly and they are beginning to have some confidence in themselves regarding markets, it’s music to my ears. I know that if they continue working hard, they will be shocked by how just having a totally new approach to/focus onmarkets will really help them attain some financial goals. And I received the following e-mail from a reader which made me feel very good. Because I know that he is beginning to view markets in a more professional manner. He got there faster than I did in my early days. So congrats to him. I can remember early on when I could see the Dollar signs in front of me, but I couldn’t quite grasp them, because I kept doing dumb things. And I kept wondering if I’d ever be able to truly grab those Dollars. I hope my experiences with failure can help others. So with an old world Biblical tone to it, here is a contribution from a reader which spells out the most important concept – how we need to not lose money:

The greatest Commandment is:

Thou shalt not lose money.

For this is what the whole law of trading means:

If you were to write a “Ten Commandments” of trading it would be summed up by this prime directive: “Thou shalt not lose money!” For one to be effective in realizing profits in the markets, one must recognize that there are forces ready to mete out justice on the transgressor – from the naive and inexperienced and also from the proud and the greedy who thought their profits were theirs. By one’s ignorance, hubris, or haste, or by an unbridled desire to assume what was theirs will remain theirs – this will lead to inevitable failure in markets. The market always has different intentions than those of the transgressor and what used to be theirs will be taken from them and given to another.

Recognizing that once we take a position in a trade, it is the market which will judge us accordingly, for its’ judgement is impartial. It is going to tell you if you are right, or if you are wrong. Take care; for in the end, you must not blame the market for any loss, nor praise it for any gain, the blame and praise are on you. This means taking full responsibility for having one’s own capital at stake, and this is a sobering motivator that if taken to heart can serve one well: inspiring due diligence, proper timing, self-control, courage when justified and humility when necessary. As you enter this arena, no one else will fight for you as hard as you will, and no one else can be responsible for what is in your own stewardship… you and you alone must reap what you sow, so sow effectively and sow wisely, doing it with the confidence that you will reap accordingly. Though at times the crop may fail, and at times it may feel like you are sowing with tears. So by obeying the natural laws which can be summed up by the Ten Commandments of trading and can be further summed up in this discussion of the greatest single Commandment – “Thou shall not lose money”, you will reap with a joyful shout.

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img_0074bwcrsmTrader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.




'Trader Scott’s Market Blog – Methods and Markets – October 5, 2016' have 2 comments

  1. October 6, 2016 @ 4:22 pm David

    Dennis Gartman opines on the PM rout: “As for gold and the other precious metals they remain rather obviously weak and as we move away from Tuesday’s collapse it appears more and more that this was a forced liquidation on the part of a large… actually a massive… hedge fund out of London. The sheer panic that swept through the gold market then really hadn’t the look of a sell off predicated upon a rumoured push by the ECB to curtail its purchases of sovereign debt securities, nor had it the look of a rush on the part of hedgers in the gold mining industry to hedge forward production. Rather it had the look of forced margin-clerk liquidation. It looked like panic on the part of someone, somewhere who had lost control of the situation.”
    Question: Would an fund liquidate their holdings with a market orders at the Comex open, on a week the Chinese buyers are on holiday?


    • October 6, 2016 @ 9:50 pm traderscott

      I understand your point David and the answer is no, not voluntarily. But floor traders and strong hands play a lot of games. They likely saw a ton of sell stops piled up below $1305 and also $1300. So they gave the market enough of a nudge to push it thru.


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