Traders: Ready Your Spears


— Today I’m going to reveal how I *might* have taken leave of my senses… more on that in a second. But for a sneak peek at where I think the markets are headed next, take a look at my recent video market update from last Thursday…

— When you enter the market arena you come with your own idea of what trading shares is all about.

— You watch movies like Wall Street, read things in the paper, hear stories of big stock market wins from friends…or look at the chart of the latest junior miner market darling and see it going up from say 10c to $3, thinking if only you bought it here and sold it there you’d be rich!

— But what you’re not looking at is the other 1,000 stocks out there that didn’t go up 3,000%.

— It’s kind of a ‘status anxiety’ that’s common among active investors. It’s natural. But this kind of thinking – for the most part – is damaging to your trading.

— For the most part…

— Sometimes you need to (and probably should) aim for the stars. That’s why I’m about to try something very different with my Slipstream Trader service in the months ahead.

— Regular subscribers relax: I won’t be changing the laws that governed the successful trading strategy I put in front of you in 2010. For most of my trades, the risk-management strategy that served us well will be firmly in place.

— But I AM going to introduce a small cadre of trades that will operate ABOVE these laws. Specifically, I’m adding a new category of small-cap trades to the Slipstream Trader service, starting May 16th – I’m calling these ‘Spear Trades’.

— For these trades, many of my normal trading rules will not apply. And some risk controls will be relaxed or even removed completely in order to go after higher rewards. Holding periods for each trade are going to be much shorter (days to weeks vs. weeks or months). And no trade will be off limits simply because it’s a high-risk, low-probability position to enter.

— What’s at stake is obvious: if you want to join me on this adventure, from May 16th, every cent you put into these trades is at risk. I can’t be any more frank than that.

— What’s on the table?

— Well, hopefully bigger trading profits – made more regularly. I’m going to deliver a whole new calibre of short-term, higher-risk, greater-return trades on TOP of the many other trades I’m already generating for Australian investors.

— I can’t guarantee it will work.

— But I’m confident to try – because the new trades will be generated using the exact same technical methodology I used to generate conservative, lower-risk trades in 2009 and 2010. Following this softly softly approach, I was able to lead Slipstream Trader members to a cumulative 57% return in 2010… while buy-and-hold investors endured yet another year of misery as the ASX lost 2%.

— By the way – that includes all wins and losses. I’m talking about an overall 57% return in 12 months trading ultra-carefully. You try getting a 57% return in a year from any fixed-asset investment or term-deposit account…

— Anyway, I’m not trying to big note myself… well I guess someone has to… But just so you know: in looking for higher-risk trades, I will be using exactly the same chart-based trading method – centered on detecting ‘false breakouts’ in price caused by flawed analysis by other traders.

— How do I identify winning trades?

— I won’t go into the deep technicals in The Daily Reckoning.

— Basically I track how a price behaves around something called the ‘Point of Control’, which is the centre of gravity for price action.  As I explained to Slipstream Trader members last year:

‘What I’m looking to detect are FALSE BREAK-OUTS from the Point of Control. There are more “false breaks” from an established range than genuine moves to higher highs or lower lows. Loads of traders make bad trades because they don’t know a “false break” when they see one. “False breaks” are short-lived. But many traders get suckered by them. This doesn’t make them stupid. It just means they lack the proper analytical tools with which to trade profitably.’

— Without the right experience and analytical framework, most traders do precisely the wrong thing at exactly the wrong time. They fundamentally misread the price action and do the opposite of what they ought to.

— That’s why my actual trading method won’t change a bit with these ‘Spear Trades’ I’m planning to include from next week onwards, which will be predominantly small caps. I know this method works because I’ve been doing it for nearly 20 years. The only difference now is that for one single category of trades, I’m going to recommend members take bigger risks in search of bigger rewards.

— And along with these new trades, I’ll continue in my quest to create a whole new class of better educated Australian traders.

— You’ve probably heard that old expression, ‘Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.’ That saying has a dual meaning for me.

— First, I believe if I can help make you a better trader I will teach you how to ‘feed yourself for life’. I’ve traded the markets professionally since 1993, when I started at the Sydney Futures Exchange. Put simply: I’ve learned valuable lessons about trading all manner of markets that should be very useful to you, such as:

  • My theory on price action in the share market
  • How to manage open positions when the market becomes increasingly difficult to predict.
  • How to cut risk to an absolute minimum while still ‘staying in the game’
  • What to do when your mind is telling you one thing about the market and the charts another
  • How to avoid the common mistakes all traders make

— It’s my mission to pass all this knowledge onto my members – old and hopefully new – in a clear and compelling way. In fact I consider this the most valuable part of the work I do for readers of my Slipstream Trader service. In short, experience tells me that an educated trader is a better trader.

Murray Dawes
Daily Reckoning Australia

Murray Dawes
Murray began his career on the Sydney Futures Exchange trading floor in 1993 with Swiss Banking Corporation (SBC). He spent a couple of years in the 3 and 10 year bond and option pits before moving on to the Share Price Index (SPI) futures and options pit. From there he became a broker with SBC specialising in SPI futures and options to institutional clients. After leaving SBC Murray continued his career in broking at Bankers Trust Australia. Then in 2001 Murray moved to Melbourne to work as a hedge fund trader for one of Australia’s wealthiest families. In 2003 he was ready to set up his own firm providing the same proprietary technical trading system to some of Australia’s boutique hedge funds. The success of Murray’s system led to him trading a $10 million account for a high net worth individual. This involved trading Australian and US futures and Australian stocks. Now Murray heads up the technical analysis desk for us passing on to readers some of his experience from 16 years of trading.
Murray Dawes

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