If all the evidence is in on a given signal, it is said to be Confirmed. If we are waiting for some last piece of evidence the technical signal is Unconfirmed. An example of a Confirmed signal would be the closing of a price above a given Moving Average. An -example of an Unconfirmed signal would be that same signal prior to the close.

SUMMARY:

Now we have the building blocks for our foundation. In CHAPTER 3, I'll put the foundation firmly in place. All of the concepts taught in the remainder of this book will fit within the confines of this structure.

TRADING WELL:

At certain times of the year we all do things better than at other times of the year. Whether it's your golf game or the way you interact with others, it's critical to be able to identify when things are flowing well. In golf, you can look at your score to get a measure of how well you are doing. In trading it's more difficult. Today's evaluation of profit and loss doesn't tell you much.

You are Trading Well when you are following your Trading Plan. A trader who does not Trade Well is, by definition, making mistakes. If he does not take corrective action according to his Trading Plan, he will never leave the game with profit on a consistent basis. You can always change your Trading Plan if you don't realize acceptable profit, but if you don't Trade Well, you are lost! Sell grapefruit, build houses, or remain retired. Don't trade!

TRADING PLAN:

A Trading Plan is a set of rules by which your trading is governed. They can be formulated with some flexibility as in a judgmental trading approach, or with absolute rigidity as in a non-judgmental trading approach. Even a judgmental approach should contain as many rigid rules as possible, so you will know with near certainty when you are Trading Well (not making mistakes) and when you are not.

MISTAKE:

A Mistake occurs only when you go against your Trading Plan, when you do something and you know better. A Mistake and a large loss may or may not occur simultaneously. In fact Mistakes can sometimes produce significant gains. If your Trading Plan is poorly defined, or you lack experience in the formulation of a Trading Plan, Mistakes will be hard to define. With experience, your Trading Plan will take form and Mistakes will be identifiable. It is critical to know when a large or small Mistake has been made, since the number and extent of Mistakes you make is the best way you can judge your progress - or lack of it.