Elite Trader Insights: Brian Shannon
Episode 8: Insights from Brian Shannon on Trading
Each week we try to unlock the collective wisdom of the Trading Elite. Strategies and unique insights from hours of interviews with top traders, sliced into bite-sized pieces and delivered to your inbox for your pleasure.
Brian Shannon is a seasoned professional trader with over two decades of experience in the markets. He is the author of the highly regarded book "Technical Analysis Using Multiple Timeframes" and the founder of AlphaTrends, an educational company aimed at teaching traders how to navigate the market successfully. Shannon's trading approach combines technical analysis with a deep understanding of market psychology, making his insights particularly valuable for traders looking to refine their strategies.
Key Learnings and Takeaways from the Interview
1. Understanding Market Psychology: Shannon emphasizes the significance of comprehending the psychology behind market movements. "Think behind the chart," he advises, suggesting that the story and behavior behind price movements are as critical as the movements themselves.
2. Volume Weighted Average Price (VWAP) Utilization: "Only price pays," Shannon remarks, highlighting his preference for the VWAP as a pivotal tool in his trading arsenal for identifying support and resistance levels with a volume perspective.
3. Flexibility with Market Conditions: Adaptability is key, according to Shannon. He suggests that traders should be fluid with their strategies, adjusting to the ever-changing market landscape. However is a big believer in ‘Following the Trend’.
4. Risk Management Over Ego: A poignant lesson from Shannon is on the importance of risk management and controlling one's ego. "We are all our own worst enemy in the market," he reflects, underscoring the need for disciplined risk management and ego control in trading decisions.
5. Choosing the Right Time Frame: Finding a trading time frame that aligns with one's personality and lifestyle is crucial. Shannon’s approach underlines the importance of starting with longer time frames and gradually exploring shorter ones as one gains more experience.
6. Strategic Use of Moving Averages: Despite some traders' skepticism towards moving averages, Shannon finds value in them as indicators of trend direction, provided they are interpreted within the broader context of market conditions.
7. Embrace Learning from Losses: Shannon sees losses as educational opportunities. "You can't make excuses in the market; you get exactly what you deserve," he states, advocating for a reflective approach to trading setbacks.
8. Navigating Market Cycles: Understanding the four stages of market cycles—Accumulation, Markup, Distribution, Decline—is fundamental to Shannon’s strategy, offering traders a framework to align their strategies with market dynamics.
9. Technical Analysis as an Informed Guide: Rather than predicting market movements, Shannon views technical analysis as a guide for making informed trading decisions based on probabilities.
10. Don’t Gamble on Earnings: Brian sees no ‘Edge’ in gambling on earnings announcements, and prefers to wait for the dust to settle before trading.
Brian Shannon's trading philosophy, enriched with technical acumen and a deep understanding of market psychology, offers a comprehensive guide for traders seeking to navigate the complexities of financial markets. The ‘Think Behind the Chart’ quote held particular relevance for me, as someone who believes that market moves (particularly around key events) can be explained by rational human behavioral patterns.
Cheers
Marto