The Wrong Questions:
Whenever I get emails from newer traders, they consist of questions like "How Can I Make A Lot Of Money?" and "What Method Can I Use To Make A Lot Of Money?" and "How Should I Know When To Buy And When To Sell To Make The Most Money?".
Just by reading the questions asked in the emails I can tell the experience level of the trader. I usually don't even give a straight answer to these emails since these are the types of traders who are destined to fail in the first place. Remember that about 90-95% of traders end up losing money, and that is simply because new traders are getting involved in trading for all the wrong reasons. My typical response is something along the lines of "You need to learn what to ask and how...
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Articles
FALLING IN LOVE WITH A TRADE
How Loss Aversion and Regret Impact Trading Performance
In his book, Blink, Malcome Gladwell describes an event where the experts from the J. Paul Getty Museum in California encouraged the museum's purchase of a marble statue purported to be from the sixth century B.C. The statue was an amazingly rare piece with an estimated value of just under $10 million dollars. There was only one problem. The experts from the Getty museum failed to detect what outside experts had suspected and then later confirmed; the statue was a fake. So why were the Getty museum's experts not able to confirm what outside experts suspected at first glance? Because the Getty museum's curators desperately wanted the statue to be...
My wife and I are Olympic junkies. There are only a couple of television shows that we will watch together during the week. But when the Olympics are on, there is a lot of family TV time.
Having played hockey in my youth, I was of course glued to the TV for the men's USA vs. Canada gold medal hockey game.
The game was as spectacular as we all hoped it would be; clean checking, great play-making, fast action. What more could you ask for? Well, I suppose I could have asked for the US to score in overtime to win the game. But Canada did seem to out-play the US just a bit, so I was not terribly surprised at the outcome. Nor was I terribly surprised at the look of despondency on the US players? faces as they received their silver medals...
If you were to ask most retail day-traders what is the most important factor for them when trading, there would probably be many different answers given. For me the most important and overriding consideration is the ability to close an open trade. For most people this does not go beyond setting a stop loss whether fixed or trailing.
However, there are many possible scenarios that could result in large losses being incurred if not catered for and in this article I will be discussing a number of these and how to overcome them.
Issue 1 - Loss of Power
A sudden loss of electrical power could cause a much bigger problem than you thought possible. If you are trading using a desktop computer and the power fails you could be in an open trade...
Each year as we prepared for these holidays, we planned for all those we had bought gifts for and careful thought was put into each person's gift:
* We planned where we will shop for the gift
* Our trips to the stores were planned to eliminate too much back-tracking
* Consideration for the type of wrapping paper and bows was given
* After all this, we then had to plan on how we would get the gifts to the people and still allow for the time to get it done
Wow, seems like a lot of work? Believe it or not, most traders will plan this type of event out on paper so that there will be no mistakes. Come that special holiday morning, they will be sitting back and enjoying the holiday because everything on the checklist was done just like...
Back when John Belushi and Dan Aykroyd were regulars on Saturday Night Live (SNL), a younger and wilder Steve Martin frequently joined that outrageous cast during guest-appearances. A relatively new face in comedy, Steve Martin fitted in perfectly. I remember some absolutely hilarious SNL moments from those days.
One particular skit that Steve Martin did stands out in my mind. It was called, "How to be a millionaire and not pay taxes." Standing all alone on stage wearing his trademark white suit and black tie, Steve Martin looked into the camera and carried on like a cheesy investment guru trying to rustle up clients with a ploy that went something like this:
"Yes, you too can be a millionaire and not pay taxes. How, you ask...
Many traders seem to know that a trading journal can be important to their success, but when asked why this is so, they draw a blank. Many traders do not understand how a trading journal can be a vital tool for self-development. This may be one of the reasons why many traders don't bother with one. Failure to keep a trading journal, however, is a disservice to the trader and may be an important factor in why traders continue to struggle with trading.
The Compounding Effect of Keeping a Daily Trading Journal
The trading journal is one of the best ways to improve your trading every day. If you were able to improve just a little each day, can you imagine how skilled you would be after, say, 90 days? What about a year? The effects...
Through my years of trading, one thing I have found is that one strategy does not fit all. We all have different risk tolerances and monetary goals. One of my goals in each E-mini Futures class I teach is to show the students a strategy and have them take it home and use it as a foundational starting point for defining their own strategy. My style is to follow the trend and enter on pullbacks. You could call this style Intraday Swing trading. This works for me because it fits my personality, patience and discipline. I understand that trading is a business dealing in probabilities and that it takes a series of trades to make a trader, not just one or two trades. However, with that said, not everybody trades like me. Of course, that is a...
Every year at New Year we hear of people making resolutions of all varieties. Have you ever noticed that these resolutions are usually made without any serious thought or planning involved? This is the difference between a resolution and setting goals.
Goal setting is:
A focused plan based on proven methods to achieve desired results
A predetermined set of rules and regulations
We often hear about having a trading and or business plan to succeed in trading. Then comes the education needed to be successful. Before long we are at the screens trading for a living. Day in and day out we follow all our rules and can actually see our account size growing. We are enjoying our trading career for all that it has to offer. Then, one day you...
It is time to revisit an ever important topic. I have been in the trading and trading education world for many years. This has allowed me to watch traders grow at different levels and reach different levels of success and failure. I have often wondered and speculated on the difference between those who achieve success and those who fail. For me, the answer lies in the proper definition of success when it comes to trading, or any occupation for that matter.
Let me explain a scenario that I have experienced hundreds of times with individuals going through trading education. There was a gentleman back in 1999 whom I met at a trading seminar. He walked up to me before it started and introduced himself. He had been reading my daily trading...
Part of the learning process is for you to understand the different types of traders. In essence there are two, and these are a fundamental trader or a technical trader. For you to succeed as an online trader you must understand the differences. Both have very different views in the techniques they use to assess market conditions and the direction an instrument may take.
Whilst there is some overlap, these are two very distinct methodologies, and you need to be comfortable with one or the other. You will come across this terminology all the time. Whilst there are huge differences in the approach, it is safe to say that most large financial institutions now employ both methods as both have their strengths and weaknesses. Fundamental...
The following situation happens quite often to many traders. Look it over and see if it has been happening to you:
You have been faithfully following your trading plan and the rules you've set for trading. By following them you are now in a trade that doesn't look so good. At the same time, by following your trading plan, you see that you've missed a beautiful move in a different market, one that could have made you a lot of money.
You are in a bad trade and you've missed out on a great trade. You become disgruntled. You think to yourself that your trading plan must not be so great. You think there must be a better methodology that you should use that will prevent this from happening. You think to yourself, "Yes! That's it, I'll...
While traders constantly search for new and improved methods on their quest for the "holy grail" trading system, they often overlook the most significant element that dictates their success. This inherent element is pacing. Proper pacing means you flow with the market. When the market is running fast out of the gate, so should you. When the market slows to a crawl, so should you.
In a nutshell, have you ever made nice profits in the first hour of the trading day only to give it all back gradually throughout the day? Uh huh.
Before I delve too far into this, let's first start off understanding why pacing is overlooked. Traders tend to believe that a method should be working in all market conditions at all times. When the method doesn't...
Three losses in a row are tough. That's about the most consecutive losses that novice traders are psychologically prepared to accept before they feel compelled to take action and 'correct' the situation.
If you're anything but a total newbie, I'm sure you'll recognize the symptoms:
Frustration - Why me? I've worked so hard. Everyone else in the forum appears to be getting good results with this strategy? Nothing ever works out for me.
Anger - That strategy developer is a liar and a crook. My broker is running my stops. Someone should be held accountable for this.
Doubt - What if the strategy doesn't work? What if I can't trade? How am I going to support my family?
Fear - I can't lose more money, what will everyone say about me when...
If we consider that the two key variables to achieving trading profitability are having a trading strategy with edge and a positive expectancy combined with the ability to consistently execute that strategy, then assuming a trader has the first one (and developing this is a primary concern) then it is the consistency of execution that becomes the key focus.
Trading Success Formula
Trading Strategy With Edge + Ability To Be Able To Execute It Consistently
/Positive Expectancy
In my work with traders I have seen many traders who do not have the first ingredient in place and this is the primary cause of their lack of trading success and also the emotional challenges that they have experienced. Of the traders...
Getting Started Technical Analysis Trading Systems Trading Systems – A Complex World with Simple Answers
Advances in technology have been the driving force behind the change and growth in the world of market speculation. One of the many recipients of faster and stronger technology is system trading as high speed computers now help retail and institutional traders develop systems, crunch numbers, and back test hypothetical results in seconds. In the world of professional money management, I have seen plenty of trading systems. Ironically, most don't seem to work and of the ones that do, they typically work for a bit and then fail. Being on the education side of the industry as well, I have seen hundreds of automated systems yet, I can only say that I have seen less than a hand full actually produce a consistent profit year after year. I...
Most consider the father of technical analysis (the science of forecasting market movements based on price patterns) to be Charles Dow, the founder of Dow Jones and Company which publishes the Wall Street Journal. Around 1900 he wrote a series of papers which looked at the way prices of the Dow Jones Industrial Average and the Dow Jones Transportation Index moved. After analyzing the Indexes he outlined his belief that markets tend to move in similar ways over time. These papers, which were expanded on by other traders in the years that followed, became known as "Dow Theory".
Although Dow Theory was written over 100 years ago most of its points are still relevant today. Dow focused on stock indexes in his writings, but the basic...
One fascinating realization I have come across during my years as a private trading coach and instructor is how different female and male traders can approach, analyze and trade the markets. Without offering outrageous generalizations, it has been my experience that women possess a particularly logical mindset that can give them a substantial advantage in market speculating. Simply, the trading method I developed and use quantifies the supply/demand and human behavior relationship that ultimately determines price in any market. It is based on a very objective and mechanical set of criteria. In other words, the goal is to learn the method and then simply follow the rules. The female mind has a much easier time doing this than the male...
You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing!
What stocks do they talk about? - The same old group, every day of every year - Why? Because they don't know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news -
Why?
They aren't going anywhere. Some of the stocks that make the headlines every night were leaders of the market 20 years ago. New cycles bring new leaders; this has been proven year in and year out. So many of these TALKING HEADS shout out about "buy and hold" but what are they really holding? They hold old...
This is the second part of Jea's article entitled Trading on Borrowed Time. The first part is available here.
Most day traders are going to blow out their accounts, they just don’t know it yet. The same applies to almost every new trader entering the game. They are all on borrowed time, a disaster waiting to happen. It’s a gloomy picture, unless they take the right steps to prevent the impending disaster. The initial goal of trading is to diffuse the bomb before it explodes. It’s not about making money. This is what traders don’t realize until it’s too late.
The only way to diffuse the time bomb is by slowly building a foundation of knowledge and experience so that you will be properly equipped to handle all situations. I see newbie...
Have you heard the one about the poor guy who ends up lost in a minefield? Having no clue what to do, he prays, covers his eyes and walks a straight line. Miraculously, he survives. Brimming with confidence, he is convinced that if it happens again, he will employ the same technique to survive. Well, you can figure out the rest of the story. Boom. It’s just too obvious. That guy was simply on borrowed time.
This ‘guy’ could be any number of traders, including you, who trade in the same style. Finding themselves in that proverbial minefield with huge intra day losses. In a fit of desperation, they put on crazy Hail Mary trades with double, triple, and quadruple the normal size just looking for that miracle. You also know the ending to...
As a trader and educator, I have come across thousands of traders during the past 15 years. I can honestly say that I have never met or seen one trader be able to sit down in front of a screen each morning without a trading plan, look at a few charts, start trading, and make money consistently year after year. I am not saying it's not possible, I have just never seen it. The people you see do well have a trading plan. Of that group that does well, it is typically the people with the short, simple trading plans that do the best. The key is making sure your trading plan is yours and works for you. Make sure it ensures that almost everything that can be a rule, is a rule. These don't have to be the best rules, the fact that they are rules...
Traders spend most of their time researching setups for trade entry, using fundamental analysis, chart patterns, signals from technical indicators, or some combination of these.
Yes, no doubt about it, finding entries is vitally important, because the entry is the foundation upon which a trade is built. However, if finding good entries is the most difficult thing, finding good exits is the most emotionally challenging part of the trading process!
Winning or losing, deciding on the exact time to close your trade can drive you nuts.
Common exits occur when traders get stopped out at a stop loss level, close the trade into high volume spikes, or attain predefined targets.
All trades should have a stop loss in place. Some traders hold a...
In order to be a successful trader - and not fall into the trap of so many - it is important to take good advice and remember that, sometimes, others do know best! Here are the Top 10 tips for successful trading. Follow them closely (or at least to an extent) and you should stand a good chance of becoming an accomplished spread bettor.
ALWAYS stay in control
Winners are always in control; both mentally and emotionally.
Losers aren't. Losers are sometimes guided by emotions - This will lead to you making bad decisions!
'Plan the trade, trade the plan'. Always stick to the original plan. Deviations will invariably lead to an error.
Take responsibility for results
Winners are can sometimes lose! But most of the time they win and...
The title of this article alone is likely to raise the hairs on the back of many necks. The thought of pushing away concepts and ideas used for decades may sound ludicrous to you, but allow me to elaborate.
Old and proven ideas should never be pushed aside. Rather, the old ideas that have not proven effective and have prevented many from progressing towards a positive goal, these need to be shed. And there are plenty of them.
Some of these old ideas are that the futures and commodity markets cannot be forecasted because the patterns are random. Other old ideas are that you cannot make a success at trading unless you know the fundamentals of the market you wish to trade. And there is the old ideas that to make a success you must depend...
Commodities Fundamental Analysis Getting Started The History of Gold and its relationship with Currencies
Much has been written about the current bull market in gold and how it compares to previous moves, in particular during the 1970s when the metal soared to at the time unimaginable heights.
On this basis it is worth looking at the background to the value story on gold, and this may shed some light on why its bull market may have significantly further to go for CFD traders in coming years.
The Gold Standard
The UK, which at the time was the world's dominant economic powerhouse, adopted a gold standard in the early 19th century. Other currencies then looked to have gold backing, and towards the end of the century, various European countries joined the standard, though some chose for a time use a joint gold and silver standard.
The...
Recently I showed some students a chart of the XLF which is the ETF for the financial service sector. I showed a demand (support) level and suggested this would be a low risk area to buy the XLF for a bounce, not a long term trade. After receiving many questions on this trading opportunity from people who bought the XLF as planned and from those who didn't, I thought it would be a good idea to revisit the chart as the questions in the emails were all the same.
As you can see below, price in the XLF touched our level on 10th January 2008. For those who bought it then, the trade had a gain of $2.00 in the past two days, congrats. You can certainly move your stop to breakeven at this point and consider exiting some or all of the position...
Paper trading is widely discussed regarding its merits, and whether it is of value to a trader as they try to make the transition to real money trader. One viewpoint is that since paper trading is not real, the profits are meaningless, and are no indication of real money profitability. An opposite viewpoint would state that paper trading is an important step in the trader's learning progression, and regardless of whether it is real, if the trader cannot "properly" paper trade, then they will not be able to real money trade.
I began trading in early 1995, with the intentions of becoming an options trader; my first trading education was through an oex options teaching service. Besides options training, the service included "tape"...
In this article I will explain to you how to develop a profitable day trading system in five steps:
Let's take a closer look at these steps.
Step 1: Select a market and a timeframe
Every market and every timeframe can be traded with a day trading system. But if you want to look at 50 different futures markets and 6 major timeframes (e.g. 5min, 10min, 15min, 30min, 60min and daily), then you need to evaluate 300 possible options. Here are some hints on how to limit your choices:
Though you can trade every futures markets, we recommend that you stick to the electronic markets (e.g. e-mini S&P and other indices, Treasury Bonds and Notes, Currencies, etc). Usually these markets are very liquid, and you won't have a problem entering and...
Does your trading lack the "trader's edge" needed to be a consistent winner in the markets? Do you find yourself entering and exiting positions at the very wrong time? If the answer is yes, you're not alone. The good news is that there is a very specific reason why the majority of traders enter and exit trades with very poor timing. Also, the answers needed to fix this problem are far simpler than you may think. To gain the edge and learn how to stack the odds in our favor, we will go back to the school of basics, not just to review the basic concepts but more importantly to look at them very differently than we have before. We know that if we look at charts, indicators, and any other tools used to perform market analysis the same way...