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Dick Diamond's Trading Course: Day Two
An actual report by an actual student -- part two
By Vadim Pokhlebkin
Thu, 07 Jun 2012 21:45:00 ET
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As I mentioned in the first report, there were 2 of Dick Diamond’s trading rules that had struck me as particularly wise: 

  1. Dick likes to take only what he calls 80/20 trades -- that is, only those trades where his odds of winning are at least 80%.
  2. His second rule is: be defensive. Offense will take care of itself.
The first rule strikes a chord because, when it comes to trading, one of my biggest personal problems is lack of patience. I like to trade and I want to trade. Waiting around for a perfect trade setup sounds even less fun than watching grass grow. Interestingly, Dick says that on the intraday timeframe -- that is, 2 to 10-minute charts -- he finds at least two 80/20 trades per day, on average, giving him a couple solid opportunities daily. I can live with that!
 
Dick spends 2 full days in the course showing students in detail how he picks his 80/20 trades -- and then he trades them live in class.
 
As I was listening to Dick describe his second rule -- be defensive -- a parallel came to mind between a good trader and a good driver. What makes a good driver is the exact same skill: being defensive on the road. Assume other drivers can’t see you -- and your chances of staying out of trouble increase dramatically. (Auto insurance companies know that, and many even offer discounts if you take a defensive driving course.)
 
Here's what defensive trading means to Dick (among other things):
 
  1. Trade small. If you trade futures (Dick’s trades E-mini, the “mini” version of the S&P 500’s futures), start by trading just 1 contract. Then gradually increase the size to what Dick calls your core position -- that’s the size of the trade that you don’t lose sleep over at night.
  2. Reduce your position size. Both when you lose AND when you win. Cutting back when you’re losing is a no-brainer, but let me explain Dick’s approach to winning. On those days when he suddenly starts making 2-3 times more on each trade than he normally makes, he reduces the size of his trades! Dick knows that you tend to be most vulnerable when you are doing well. Winner’s hubris has destroyed many success stories.
  3. Don’t worry about “leaving money on the table.” The easiest time to get out of the trade, teaches Dick, is when the market is moving in your direction. Don’t wait for it to go against you. Get out early, say thank you -- and come back for seconds!
  4. Forget the word “hope.” Hope is the antipode of discipline, says Dick, and hope is what kills most traders. Stop hoping that a loss will turn into a profit, or that a small profit will turn into a bigger one. Take that profit. Take that loss. Don’t just sit there. 
Some people say that speculating in the markets is just gambling. No, says Dick. The difference between a trader and a gambler is control. When a gambler throws the dice, he gives up control over his future. A good trader never does.
 
At a later time, I also got to speak to Dick's assistant and star protégé, Roberto Hernandez. He teaches the Elliott wave portion of the 4-day course. While Dick picks his 80/20 trades on a proprietary blend of technical indicators (each student in class gets a manual describing them in detail), Roberto picks his 80/20 trades on the market's Elliott wave patterns and oscillator momentum indicators. I asked him to explain how he does it:
 
Vadim Pokhlebkin: Roberto, your mentor, Dick Diamond, speaks very highly of your trading skills. Coming from someone like him, a 45-year market veteran, it says a lot. You also are a fan of Elliott wave analysis. How often do you trade?
 
Roberto Hernandez: I look for opportunities every day. And I always come in "flat" -- that's one of the things Dick has taught me. I always come to the office in the morning having no bullish or bearish bias about the market. I try not to let the market news before the open sway me -- instead, I look at what the wave patterns and oscillators are telling me. Usually, I trade 4-5 times a day, but sometimes none at all. You have to pick your moments.
 
When I see my momentum oscillators moving into an extreme territory, for me it's like a dark cloud on the horizon: I know the "rain" is coming, and I get extra cautious -- and extra patient. But when oscillator readings are confirmed by the price, I know it's going to be an 80/20 call. And if the wave pattern kicks in, that's even better. In fact, Dick often calls me and asks for Fibonacci turn windows to time his trades. I explain it all in class.
 
As a day-trader, I'm used to being in and out of the market many times a day, but with increased volatility lately, I learned I had to reduce the frequency of my trades. Many day traders would do the opposite and try and ride volatility into bigger profits, but I learned to respect it.
 
VP: What word of advice would you offer to would-be traders?
 
RH: First, way too many new traders jump into trading before they know up from down. Make sure you know what you're doing. There are lots of books on trading, and obviously I think Dick's course is good for that.
 
Second, trade with the trend -- although, you'd be surprised how many people lose money even then! They have no game plan: no stop placement strategy, no plan on when to take a loss or a profit. Dick can give you the trading tools, but the discipline part is up to you. So be very careful out there.
 
Read part three of this report for more impressions from Dick Diamond's trading course.
 
 
...at Dick Diamond's 4-day Market Mentor Trading Course on July 22-25 in Orlando, Florida.
 
Dick teaches you the tips and techniques he has developed over 45 years of successful trading to help you overcome the obstacles that hinder your success.
 
Diamond's protégé and former student, Roberto Hernandez, "shares the stage" with Dick and shows you how he pinpoints "80/20" trades using the Elliott Wave Principle. (Hernandez was a struggling trader until he met and learned from Diamond.)
 
During days 3 and 4, you’ll see your newly-learned trading methods in action as Dick and Roberto make real-money trades in live market conditions.
 
SPECIAL OFFER: Register by June 15 and save $300! 

Secure your seat -- and save, and learn -- at the Market Mentor Trading Course, July 22-25 in Orlando, Florida, today >>

 

 

Tags: Dick Diamond, Elliott wave, Elliott Wave trading, futures trading, momentum, online trading, oscillators, technical indicators, trade targets, trading lessons
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