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What is the Zen Trade?

First of all, and to keep you open minded, Zen trading is nothing esoteric!

It is just a name that I chose for a style of trading or investo-trading that results in less stress and work but more profits. This definition of Zen trading comprises all styles of trading that match these goals.

To put it simple, Zen traders just enter a favorable situation and relax. And later they are cashing in on their investment. On average, of course.

Sounds too simple? Right, but it is almost that simple...

There are indeed some strong methods to drain the financial markets the elegant way. And they are not necessarily secret. They are just not so outstanding that it is clear that one should concentrate on just them.

Let's see what a Zen trader is looking for:

  1. The long running trend with an unknown but possibly large potential. It can be called megatrend if it is the trend once in a lifetime of a specific market. But it could also be a trending phase of many, or the trend of a lifetime with pauses. Alternatively it could be any situation with the potential for a large move and a specific reason for that potential.

  2. You want to do exactly nothing? The direct answer is an automated system. A software that does the trading for you. It also isolates you from the emotional problem. Trading is also psychology, and having an automaton is the solution if you feel that incorrect execution of your trading system is the real problem. There are many types of trading robots and many of them don't work. Still, searching for the holy grail may lead to finding something that works at least partly.

  3. Combine a situation with potential and a software that does the trading. If solidly in plus territory, you may detach the robot from your position and just hold it for a long ride.

  4. A market that has had a terrible downturn and now has a tremendous potential to recover. This sort of chance has a risk that is bigger than with a fine trend situation. If something went downhill, chances are, the worst is not over. But it still has the large potential that makes the possible gain so much bigger than the worst case loss.

  5. Something that flies under the radar and shows suddenly activity. Examples are exploding penny stocks or virtual goods like Bitcoin in a monster trend. Such a market may face manipulation. But prices are still moving like they do in other markets. They go up and down, just with a larger volatility. Again, the huge divergence of possible gain and maximal loss is what makes this situation so interesting.

Do these methods work? Yes, they work! Of course, with a little help from the best friend of every trader, the stop loss. Zen trading means doing a trade lightheartedly, well knowing that a tight stop (and a sound money management) will not only protect you, but make the trade work on average.

Why does that work?

  1. In any situation that has more potential for a move into the desired direction than to the other side, the math is on your side with holding or stopping after entering the trade.

  2. Having a tight stop in place keeps you calm. It is indeed time to relax. The right mindset and a stable psychology are much more important than many traders think. They will put you on the winning track.

Note that the penny stock explosion (E) needs some adaption to the stop method, because markets may be illiquid and the software robot (B) has the stop loss built into its algorithm, perhaps indirectly or probabilisticly.

To say it again, Zen trading is nothing esoteric. It is just psychology and math. If you have the right system, you can be calm and confident and you will hear the silent voices of the markets among all screaming loudness. You will find the trading situations or systems where the odds are a bit skewed to your favor.

The reality looks much different for most. At least at times, they begin to lose. If they don't lose money, they lose their positive vibrations by struggling with their trading systems or styles. Some typical patterns of private market warriors look like these:

  • Investors burn themselves sitting on positions deep in the red and waiting for the holy recovery. To not experience the hell on earth, they need all energy to convince themselves constantly that everything is alright.

  • Investors playing it safe are not losing, but they are also not gaining much. They need a long life. If the market turns south eventually, they may wake up and find that even a long life doesn't help.

  • Traders try everything under the sun, change their original plans, or give up at all. They rotate like a propeller, but they run not as smoothly.

  • In what is actually total despair, traders turn investors or vice versa.

You could do better...

Just take trading lightly. Do the simple thing, but be active. Don't be the investor hoping for things to finally turn around as planned!

It can indeed be so easy, but most people are not able to see this. And if they hear it, like right here and right now, they may not believe it...

The simplest Zen trade (A) looks like this:

Doing the basic Zen trade is betting on the right trend, but not necessarily at the right time. The right method? A tight stop! Of course, knowing the right time would be tremendously helpful, but that is also nearly impossible. Just accept it. To enter the right trend, typically multiple attempts are necessary. Also accept that. What if you are stopped out and the trend turns around or vanishes? It simply wasn't the right trend then. What if it restarts unexpectedly thereafter? This is the way the market works. Accept it and reenter.

Zen trading the trend in short:

  1. Find a situation with the odds in your favor
  2. Enter the trade with a tight stop
  3. Be prepared to be stopped out by pullbacks or an ending trend
  4. But wait for new strength and if the trend is still or again running
  5. Reenter

Seen from the Zen angle:

  • Happily enter or reenter.
    There just has to be some local strength. No technical formulas, indicators, chart formations. All these will only help to miss the chance. Psychology! If you want TA, do it right and use a completely mechanical system (B).

  • Happily accept to be stopped out.
    That's the price for getting on a great trend. No stop means great trouble and not accepting them happily will make you miss the best chances.

The Zen system with some simple charting for the stock market:

The laws of probability will eventually get the Zen trader on a true trend and make all small losses back, and much more.

Does Zen trading mean that you have to know it better than others most of the time? No, Zen traders need quite some trades to enter some huge winners.

So, don't be astonished that our free newsletter doesn't present infallible trading signals! Instead it digs out interesting market situations, possibly working software systems, and alternative trading methods.

You can also download our .pdf with the Zen trading method in detail plus about 100 unconventional trading systems for rethinking the whole thing and staying open minded.

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