netpicks interview with anne-marie baiynd, author of the trading book part 3

8/3/2019 NetPicks Interview with Anne-Marie Baiynd, Author of The Trading Book Part 3

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NetPicks Author SeriesInterview with Anne-Marie Baiynd, Author of The Trading Book

- Part 3 of 5 -

In NetPicks¶ Author Series, NetPicks President Mark Soberman sits down with theleading day trading authors as they discuss key concepts that will help individuals elevatetheir trading. Read this 5-Part series as Mark chats with Anne-Marie Baiynd, author of The Trading Book, and see what insights are in store.

To listen to the entire interview, to listen to past interviews with top trading authors, or to

be notified of future webinars, please visit: http://netpicks.com/authorseries.

chairs always to work when we sit in them. We want our computers to work. And so wesort of force that mentality into the trading space where really it¶s like a river full of fish.

They¶re not always going to sit in the same place ± well, that¶s not exactly true if you're a

trout fisherman. You're going to know that they sit in a certain place all the time. But,you know what I mean. Generally, they are going to be here, there or wherever. Andyou¶ve got to say, ³Well, wait a second. What's the wind? Is it overcast?´ And I am a

big fisherman which is why I'm using this analogy. So you¶ve got to be a little bit moreflexible in terms of what you're looking at. So many of us just don¶t know what we¶re

looking at, that that seems almost impossible to do.

Mark Soberman: Right. I mean I know you point out how important the slope is intrading, especially if you're doing any kind of momentum-base trading. And I guess that

has ± it's the same thing of being able to look at a market to determine that, you know, theslope of the move, up or down isn¶t there even though your indicators might be firing a

trade, they¶re not going to stop firing trades. I guess --

Anne-Marie Baiynd: Correct.

Mark Soberman: -- pulling back and not being in the market is something you need todo, but obviously, quite difficult for people.

Anne-Marie Baiynd: Exactly. That¶s really true. And you¶ve, actually, put stop on a

point that is incredible. We think that because we look at the markets and because welook at the charts, that we have to be in a trade, and that is just simply not true.

Mark Soberman: Yeah. I mean I think people feel like, ³Hey, I'm turning from eight toten, that¶s what I'm here for. I have six, I have five trades, you know. No matter whatthe markets, you know, do even if __________ [29:13] is about to come out or whatever

and it¶s not moving, I'm going to get my profits.´ And unfortunately, it doesn¶t tend towork that way as much as you want it to.

With the Fibonacci, I know that¶s very key for you in trying to sort of determine what¶s

next to happen and the structure of the market. And I remember that you mentioned there



were a few key levels. And you pointed out some percentages, I think you said like the100% level, 200% level are almost always, at least, temporary reversal points. Then you

also mentioned you like your golden ratio, the 61.8. I know we got some fib people somaybe can you talk about this a bit, so kind of what your favorites are?

Anne-Marie Baiynd: Sure. For fibs, here¶s something very interesting. If you take alook at the ZB which is a 30-year treasury bond futures, right, you¶ll notice that it really pays attention to a 50% fib which is why I say, ³Hey, listen. Focus on a stock. Take a

look at it. Understand it because it¶s going to have a trading personality.´ Based on allthe algorithms that are trading that, they¶re in pockets, right? So the people that trade in

the ZB aren¶t necessarily trading Google, right? And so there¶s a different kind of atemperament associated with that. That being said, over all, here¶s how market

formations work; if something is in a trend and it's in the middle of a pull back, if it pulls back lightly, it will pull back to 30.2 and then begin to move forward again. If that 38.2

level holds and it begins to bounce, you know that the trend of that you're moving is verystrong. The deeper the retracement levels, the weaker the overall trend is or the more

conflicted the traders are in that particular chart.

So you can see that in terms of saying, ³All right. Well, I'm in a bit of a conflicted chart.It's retracing 78.6% every single time. So I'm going to have to be careful about where I

put that stop level.´ So it's about paying attention to what's happening in the formationsspecifically. So let¶s say we¶re looking at Google right now. Google is in a very

important space. It broke out over that 618 a few days ago and it's continuing to power forward. It's using a 61.8 retracement level because it's doing so well moving forward,

that¶s the standard. ³Okay. I'm going to take a breath to here and move forward.´There¶s a very specific pattern called the ABCD Pattern that a lot of folks are using in

Forex, but I find it works tremendously well in the general market and it assumes a 61.8 pull back and then a 1618 projection from the initial wave.

And so when we look for that, everything is nice and structured. So if we are fortunate

enough to see something pull back to that 61.8, we see it's in uptrend, we don¶t seeanything breaking down underneath, we can project out to that 1618 which I love. Now,

if I'm working with the futures, we had the Globex high and low. And as we move outthrough the day ± here¶s something very interesting, it happens 90% of the time. If we

come into the open within two points of the Globex High or the Globex Low, we willrapidly accelerate away from it, either in a positive way or the negative way, right? it¶s

going to move. So watch those moving averages and then watch those fibs. So see itwith a Globex High and Low. If it projects over like it breaks out of the Globex High, it's

going to come back and retest more than likely, sometimes it takes two hours to do thatand so you can chase it out. But sometimes it¶ll do it in 15 minutes and you can bounce

right back, it¶ll go into the 127.2. If it holds 127.2 it's going into the 1618. Clock work,day, day, day, day.

Now, the problem is the retracement levels that we¶ve been forced to stomach over the

last weeks, they are so long and the weeks are so hart and so heavy that it's almost like a bunch of stop hunters are out there looking to blow us out which, luckily, I use mental



stops so that doesn¶t normally get me, until, you know, the mental stop really does killme because I'm having to chase it out of the trade because it just gone crazy in the other

direction. But those are the kinds of things that I look for. But in the futures, 127.2,1618, in the general trending stocks, I¶ll look for that 61.8 and 161.8.

Mark Soberman: And I guess that's why, like you mentioned earlier, it's really importantto get to know a limited set of markets because you¶re sort of describing some behaviorsthat these markets seemed to have fall on a regular basis. And I'm sure that comes

through observation and, you know, you sticking west in these certain markets.

Anne-Marie Baiynd: Very true.

Mark Soberman: One thing that I noticed you talked about a little -- quite a bit, and probably some of it has to do with, you know, the ability to sort of, you know, create

some structure in the markets, maybe with the Fibonacci, is you do a lot of scaling in andscaling out. I think you mentioned that you don¶t typically go in with, you know, full

margin when you're initially, you know, establishing a position. And you seem to,actually, even try the sort of sell into some strength on a buy and then rebuy it on a

pullback. So I mean is that still the philosophy you follow? And would you say you're ascale in, scale out, scale in, scale out type trader?

Anne-Marie Baiynd: Absolutely, I am. Absolutely, I am. Here¶s the reason; my goal ±

because I learned how to lose a lot of money, my goal is, ³Hey, listen. First andforemost, how can you minimize your risk and maximize your profit?´ And again, that's

all around framing the trade, getting your fibs in the right space and so on and so forth.But for me, depending on how many conflicting signals I might have sitting around, or

how much overhead resistance is sitting, I will say, ³Okay. I'm going to go half size, I'mgoing to go quarter size.´ When it gets into a particular space, if I¶ve gone half size and

it starts looking a little weak, I¶ll go back down to quarter size. Clean profit off the top.Right there my money is out of the market and I'm sitting in that one space.

If it fails and it comes into support, I'm out flat instead of down for the most part. If it

bounces, what I¶ve done is give up an opportunity cost of having twice the size becauseas my original position which was initially half size, I gave up a little bit of that, but now

that it's holding steady, I can add back to the position. And once it gets into a formationevent, where I see the crest, I go, ³Okay. I'm going to get out. It's time to pull back.´

And then I'm going to wait for that floor.

Now, Google, typical example this morning. I'm doing a premarket report. I go listen.Google is going to run today. It¶s going to run and so what we have to do is realize that

it's going to go up easily into that 634 level. And what we want to see is we want to see itcome back into maybe the 15-minute low or yesterday¶s high. Fill a little of that gap and

then we¶ll go in. Well, I had to reboot my system. I came in three candlesticks later. It¶salready blown out to my end target, 635. And so I looked at it 636 and I go, ³All right.

You're just going to have to sit and wait on this one because it's going to come back andit's going to come back to test that 50 on the five because stocks do that.´ It was way too



extended so I sat there for two hours, literally, almost two hours ± maybe an hour and 40minutes ± before it came into 50 on the five and I said, ³All right. I'm going in,´ and took

it to the 632 level because I was getting ready to come in here. What I¶ve left part of iton as I see it coming to 634, that's what I want to see, and if it holds that level it's going

to go, you know, back up to 636 and then continue moving forward. So yeah.

Mark Soberman: Yeah. I think, you know, in the NetPicks world, we call them in our systems, you know, add-on trades, we have reentry trades, and then we have something

called Get BoB trades which is basically just Get Back on Board. And so definitely big believers in that as well. It's almost like you're asking the market to prove itself before

you're, you know, kind of willing to go in full bore but at the same time, like youmentioned, I think you also talked a little bit about trailing stops and how you're not a

huge fan. I think I read that, right?

Anne-Marie Baiynd: Yes.

Mark Soberman: -- trailing stops. More of a scale in, scale out. I guess what's the ± what did trailing stops ever do to offend?

Anne-Marie Baiynd: Well, here¶s the thing about the trailing stop. A long ago ± long

ago ± a couple of years back, maybe 2009-2010, the trailing stop wasn¶t that bad. But welive in an environment where the market is so volatile that if you¶ve got a trailing stop,

you¶re sure to get blown out of your trade. Trailing stops are arbitrary. And real stopsthat work are based on significant lines of support and resistance. So if you want to use

something arbitrary to make your trades, then you're actually saying, ³No, sure. I am allfor arbitrary results.´ But if you are not for arbitrary results then you don¶t need to use

something arbitrary like a trailing stop. Use a stop that makes sense.

So many folks use stops to go, well, you know, 75 cents, that's it. Well, does thatactually make sense? What's the low of the candlestick that broke the level ± which is

why I always say, ³Hey, listen. You broke a level. Look at the low of the candlestick that created the break. Look at the low of the wave that created the move. How strong is

it? Where is it? Your stop needs to be above it or below it.´ You can¶t have somethingarbitrary like trailing stops. And now, we choose arbitrary trailing stops because we

don¶t understand the nature of our stock, maybe, or it's just plain easier. And easier never really points to better results. Something harder in terms of analysis and using all the

information being presented to you is really always going to rip the greater reward.

Mark Soberman: Yeah. I would ± I think we totally agree with that because we alwaysteach, you know, using dynamic stops, dynamic targets. I haven¶t really ever met

somebody who uses, you know, stubborn targets and stubborn stops is ever successful,you know, in the long run. If you say always on my TF trades, I'm going to go for two

points target, you know, one and half points risk, it could work for a while but it never holds up.



Anne-Marie Baiynd: No, it never does. It never does. Actually, that is just terrible. Ihear people saying, ³Not all the time.´ I really have to go, ³Okay. How¶s that worked

for you?´ because it really doesn¶t. It does not prove itself out to work.

Mark Soberman: You had mention also when you're talking about Google this morning

and, you know, the hour and change, way down on 45 minutes which, you know, got methinking about, you know, patience a little bit in trading. I know this morning I hadsomething similar which was it took a little bit of an hour, I¶d trade gold and silver early.

And basically just kind of sat there for an hour waiting and waiting and waiting for theset up. Now, ultimately, the reward was there but it's not the easiest thing to do as a

trader to kind of sit on your hands because, you know, one, you feel like you're missingout. Two, it's just ± it's boring as all it could be, just sitting there, staring at the charts.

To listen to the entire interview, to listen to past interviews with top trading authors,

or to be notified of future webinars, please visit: http://netpicks.com/authorseries.

netpicks interview with anne-marie baiynd, author of the trading book part 3

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