Ghost Trading Helps Qualify a Trade

Ghost trading is the real-time equivalent to bathtub analysis using a chart library. It is the essence of being a proactive trader.

Most good traders do more watching than trading. The guerilla may be the exception. While you are watching you can do the live equivalent of bathtub analysis, ghost trading.

My trading method requires that I make price projections on the charts. I probably make 40 or 50 during a typical trading session. Charles Goodman called this ghost trading. Most never happen. But when they do occur, I know I am 'in sync' with that market process.
The market has donated free information to my cause! Without projecting such "What Ifs," I would miss many good trades.

"If you don't look, you won't see." As you watch the markets, ask questions and make predictions -- even if they are silly ones. "What happens if the high of the last swing is taken out? The low? If this is a good PTS forming, then it should do this soon."

Only then, watch. You have gone proactive by asking a question. Waiting for the answer requires you to be more alert to what is happening in that market. You are, in effect, paper trading without even touching the order button.

Chart formations always look great in the textbooks, but many of them do not work. We do not see them when they fail for two reasons: (1) A broken formation will not look like the formation at all -- one has to be very objective and proactive to see them; and (2) we want to see only what we want to see, especially if we are only passive observers. Traders often fail for not understanding this fact. Bathtub analysis, ghost trading, and being proactive with your charts will keep you from being one of them.

Tip: Ghost trading is a form of qualifying a trade candidate. The more your hypotheses are proven correct by subsequent chart action, the higher your confidence can be that you are in sync with that currency pair and the market process.
By Michael Duane Archer
Michael Duane Archer has been an active futures and FOREX trader for more than 35 years. He has worked in various advisory capacities, notably as a commodity trading advisor, registered SEC investment advisor, and branch manager for Heinold of Hawaii. He currently trades FOREX and futures and is involved in several technical analysis research projects.

Copyrighted 2016. Content published with author's permission.

Posted in ...