You’re a trader, right, not a shopkeeper and there can’t possibly be any common ground between the two can there? Just a minute, though, both are trying to make a profit from the transactions they undertake and both are concerned about their bottom line and their overall and continued profitability. In short, both are in business.
As a trader it is quite likely that your Trading Plan will concentrate its focus on how you will approach individual trades. It will probably have quite a lot about how and when you will enter a trade, rather less about how you will guard against excessive loss and less again about how and when you will take your gains. Your bottom line probably won’t rate much of a mention at all. A Business Plan, however...
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Articles
Scalping, a subset of day trading, is a strategy that involves frequent entry and exit in a trade in order to realize small but multiple gains from the intra-day movement during the trading session. Traders who employ the scalping technique are called scalpers. Scalpers indulge in numerous trades during a day’s trading session with each position held for a very short span of time, ranging from few seconds to minutes. Scalping is not only used with stocks, but also with futures and forex.
With low barriers to entry in the trading world, the number of people trying their hands at day trading and related strategies such as scalping has increased. Scalping is not the best trading strategy for rookies as it involves fast decision-making...
Tape readers have an advantage over chartists because they can interpret intraday data in real time, filtering pages of numbers into surprisingly accurate predictions on short-term price movement. This near-legendary market skill has additional perks, allowing them to measure emotional intensity of participants while they uncover the day’s leaders and laggards. In turn, these generate a broad trading edge that adds firepower to longer-term market strategies.
The basics of tape reading can be learned in a few minutes but the practice takes a lifetime to master, for three reasons. First, the market is enormously complex, requiring many years of observation to understand how individual parts affect the whole. Second, macro forces that...
You don't need to look to other traders, books, videos or courses to find a day trading strategy as with a bit of guidance you can develop day trading strategies of your own. One of the ways to journey into day trading strategy development is by using technical price or chart patterns. Price patterns are recurring themes you see day in and day out, which more often than not can lead to a certain defined outcome which you can capitalize on. Finding these pattern and ultimately developing a strategy for trading them will require five broad steps.
Money Management
Most successful trade traders risk less than one or two percent of their account on each trade. Your first step in developing a strategy is assessing how much capital you're...
Movement in price is based simply on supply, demand and the human behavior relationship that exists in any market. And, clearly, opportunity always arises when this equation is out of balance. Whether trading the S&P, buying a house, a car or a Michael Jordan rookie card, how we make money buying and selling never changes.
My Path
Let me begin by saying that I have never read a trading book from cover to cover. Also, I started my career on the floor of the Chicago Mercantile Exchange (CME), not looking at a screen-based chart for the first year. On top of that, from an early age I was always taught not to accept something as true just because someone says so. What I do is apply simple logic to everything that presents a challenge, and...
Computer applications have made it easy to automate trading, especially for short term intensive activities like day trading, making the usage of trading software very popular. The debate continues on the profit potential which can be realistically derived from day trading activities, as brokerage and commissions are said to take away the major portion of available profit potential. It thus becomes very important to select the right day trading software with a cost benefit analysis, assessment of its applicability to individual trading needs/ strategies, as well as the features and functions you need.
Day trading is a time bound trading activity where buy or sell positions are taken and closed on the same trading day, with an aim to...
The prospect of making quick money lures many to the world of day trading. The participants in this game, besides professional traders, can be retirees, executives, teachers, small business owners, housewives, etc. who try and make a fortune through their computer screens. Remember, the profits which may draw you to day trading are virtual and it’s your trading style that can transform them into real gains--a daunting task, especially as a rookie.
There are rules for every game, even day trading! If you are a new player, it’s important that you are mindful of the basic set of rules. These rules are certainly not binding, but they can help you to make some crucial decisions and give broader guidelines.
1. Knowledge
“Knowledge is...
Traders attempt to isolate and extract profit from trends. There are multiple ways to do this. No single indicator will punch your ticket to market riches, as trading involves other factors such as risk management and trading psychology as well. But certain indicators have stood the test of time and remain popular amongst trend traders. Here we provide general guidelines and prospective strategies are provided for each; use these or tweak them to create your own personal strategy.
Moving Averages
Moving averages "smooth" price data by creating a single flowing line. The line represents the average price over a period of time. Which moving average the trader decides to use is determined by the time frame on which he/she trades. For...
On the afternoon of May 6, 2010, the Dow Jones Industrial Average (DJIA) plunged 800 points in less than 20 minutes before recovering most of its losses, creating a new term in the financial lexicon – the “flash crash.” The Dow’s intraday drop of 998.5 points or 9.2% was its largest points decline on record, while its intraday swing of 1,010 points was the second-largest in the history of the index, exceeded only by a 1,018-point swing on October 10, 2008. While the Dow’s temporary swoon during the flash crash was a harrowing reminder of the market collapse after the bankruptcy of Lehman Brothers in September 2008, the culprit this time was not overwhelmingly bearish sentiment but something altogether different – program trading.
What...
Firstly back-testing should be done as accurately as possible. This means that all the best practices of back-testing should be implemented. Some examples are:
Including reasonable spreads
Avoiding look forward bias
Including any possible forms of commissions if applicable
Using historical data which is as accurate and complete as possible
Ensuring trade logic tested is reasonable and practicable in actual trading
Reducing slippage (although this is normally not a problem with Forex due to its immense liquidity)
With accurate back-testing, characteristics of the trading strategy can be observed and analysed reliably. What this means is the risk and returns profile of the strategy is statistically reliable, and any performance...
I have found that traders usually fail for five primary reasons:-
1. Lack of trading skill
2. Lack of risk capital
3. Improper trading psychology
4. Lack of support
5. Lack of experience
1. Lack of Trading Skill
Usually new traders are so eager to make a killing in the market that they are just too impatient to learn how to trade before trying to trade. Basically, they either wing it, or think they know what they are doing without objectively determining their skill level.
If new traders can get the dollar signs out of their eyes and focus on developing their trading skills in a stress free, fun environment, they will be off to a good start. I encourage new traders to ‘paper trade’ first, so that they can practice their trading...
During my time on the floor of the Chicago Mercantile Exchange, I noticed many things that helped shape my thought process and strategy that I still employ today. I started on a very busy trading desk right next to the trading pits and my job was to facilitate institutional order flow. One of the many things I noticed was that most of the trading action happened very early in the day. Furthermore, institutional profits and retail trader losses happened at that same time, very early in the day. I realized that most of the time, when an institution was buying, there was a retail sell order on the other side of that trade and vice versa when the institution was selling, it would be to a retail buy order. This was clear insight into the...
It’s common knowledge that no market moves in one direction for an extended period without ‘pulling back’. There are many methods of analysis that try to make sense of these moves and counter-moves, these methods mostly rely on price data alone to guess the start and/or end point of a pullback. In this section, we will look at the liquidity model and how liquidity makes pullbacks inevitable. This isn’t an exercise in market theory; this knowledge will help you jump on board moves at the right time. It is not easy to sell into a rising market but if you understand the liquidity model, you will understand that at times, the market is rising because of a lack of sell side liquidity and NOT because buyers are jumping into the market.
In...
Day trading involves isolating the current trend from market noise and then capitalizing on that trend through well-timed entries and profit taking. These factors play a crucial role in managing potential profit expectations and risk. Trading has many challenges, but by sticking to certain guidelines success is more likely. Since the market always moves in waves, on all time frames, rules can be created for exploiting this phenomenon. The following five rules will help traders find high profit potential, low risk, intra-day trades.
1. Trade only with the current intra-day trend
Trading with the trend allows for low risk entries and high profit potential if the trend continues. Intra-day trends do not continue indefinitely, reversals do...
Trading is hard work. Becoming a profitable trader is even harder. So how can traders move from average to successful? I’ve found the best way to help those completely new to trading is to explain the amount of time and dedication required to become a profitable trader with sports analogies. For instance, in baseball if it’s the first time you experience a 100mph fast ball, you’re going to swing and miss. But if you’re dedicated, work hard and practice, you’ll be able to anticipate the 100mph pitch and knock it out of the park. The most successful athletes work hard and constantly seek out ways to improve their performance, and those same principles apply to successful traders.
As a trader with more than 10 years of experience on the...
Not long ago, I was spending time with a friend of mine who I have been close with since we were children. For years, anytime my career comes up in conversation, he insists that trading is nothing more than gambling. I actually get this question from others at trading events as well. It is a very hard question for me to answer because I think the whole question is wrong.
Whether you are a trader, gambler in a casino, Pepsi buying advertising space on a network, retail store owner, casino, car dealer, franchise owner, street vender, someone who buys and sells things on eBay, and so on, YOU ARE A SPECULATOR at some level. The trader takes on risk in a market for a potential reward. The gambler risks a $5.00 chip on the black jack table...
9:30 AM New York Time. The US equity market just opened. Orders start flying through the time and sales window. The first candlestick is forming on the 5 minute chart. You are sitting there, anxious to place a trade, with your finger on the trigger ready to grab that $50,000 position.
In the background, CNBC is on and it just so happens that they are talking about the stock you want to trade. They just mentioned an analyst upgrade, which you think explains the large green candle that just closed. You have your news source open on one of your other monitors, and you glance over to see positive news coming out from the company in pre-market. You notice that the stock is soaring higher, up about 1.5% already today.
As if this wasn't...
Most commodity futures markets will tip their hand when it's time to reverse direction. Knowing how to read its language is the challenge. It's not easy. This is important information, since this is all you really need to know! Volatility is a clue as well as price synchronization. Read on about these unique observations. This information can be applied to most any freely traded market of any time frame.
Observation Trading Notes:
Keep watching the five minute futures chart with the horizontal line tool to see price support and resistance. Then confirm this action on the one-minute charts.
We have all seen the stair step action of a trending commodity futures market. Sometimes you can keep buying those corrective spike dips into the...
Getting Started Swing & Position Trading Day Trading & Scalping Different Types of Market Orders: Using Each for the Best Fills
I was recently asked about stops and different types of market orders. They were good questions and they reiterated to me the fact that I work with people that range from seasoned trading professionals to those testing the futures trading waters for the first time.
One thing I always like to point out to the less-experienced traders: There are no "dumb" questions and there is no shame in being inexperienced. Every single futures trader that ever walked the face of the earth has been inexperienced at one point.
This section on types of market orders, including stops, may be a "refresher" feature for the more experienced traders, and will likely be a more valuable feature for the traders newer to this fascinating field.
Market Order...
The decision to trade online or through a full service broker will undoubtedly make a large impact on your bottom line. However, the impact may or may not be what you had in mind. If you aren't ready to begin placing your orders online on your own, despite saving money on commission it may be the most costly mistake that you ever make.
While commission is baggage, a slightly higher rate it may be worth every penny assuming that your broker is truly giving you what you are paying for - reliable and efficient execution along with quality guidance in strategy and analysis.
Hopefully this article will open your eyes to the realities of transaction costs. While experienced traders should look for low rates with quality service, novice...
So why do I trade US shares intra-day?
The prime mover market in the world is in the US. Here in the UK we are essentially influenced by the US economy and its stock market. How many times, for example, have you seen the London market open at a level dictated by what happened in the US the previous evening after London closed? Of course, the Far Eastern and European markets have an influence, but although they, like the UK, do have substantial domestic and local factors, they are also largely driven by the United States.
Clearly there are advantages to trading the principal world stock market rather than the others. For example, you are in at the beginning of a move, seeing the immediate reaction to changing dynamics and trading...
So you want to work in the City?
There is no shortage of ambitious young individuals who dream of, and aspire to, a successful career in the City. Images of Rolex-wearing, Porsche-driving twenty-somethings living in their Docklands bachelor pads does nothing to stop the swell of wannabe City Slickers.
But just how real are these images? More importantly, how can I get to work in the City, and where do I start? What are the upsides to a career in high finance? What are the downsides? Which are the best markets to work in? What qualifications do I need?
Those images born from the movie which made the slick-haired Gordon Gecko famous have undoubtedly created one major drawback for any ambitious young individual wanting to work in the...
Swing & Position Trading Trading Systems Day Trading & Scalping What You Need to Know About Choosing a Broker
Aside from charting tools and market research, there are two important but often overlooked decisions for a trader to make; choosing a brokerage firm and a specific broker. Each of these decisions are capable in having a profound impact in your overall trading results and you owe it to yourself to take the time to make an educated judgment.
Choosing a brokerage firm
Deciding on a brokerage firm is a significant decision and shouldn't be taken lightly. Before committing to a firm it is imperative that you research their services, experience, trading platforms and commission structure but more importantly whether your trading style and personality will be compatible. For example, a beginning trader shouldn't look to a deep discount...
PM: = Paul Mullen (Interviewer)
BT: = Ben Tippen (US Stock Scalp Trader)
PM: What is a stock scalp trader and what you do?
BT: A stock scalp trader is someone who takes small moves out of the market but with bigger size.
PM: Okay, and when you say small moves in the market with bigger size, what kind of size move are you talking about?
BT: One to three cents.
PM: What kind of size would be involved in that?
BT: That obviously varies, depending on the skill of the scalper, but I would say once you get into a situation to where you make a living out of it, I would say 10,000 shares and then once you've become a bigger player you'd be up to 50,000 to 100,000 shares.
PM: What you said there is a 10,000 share move would be something...
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...
PM: = Paul Mullen (Interviewer)
AR: = Alan Rich (Stock Trader, Coach & Mentor)
You can listen or download this interview by clicking this link:
Alan Rich Interview mp3
PM: Hello to everyone from Trade2Win, this is Paul Mullen. I've today got Alan Rich with me and we're going to be talking about trading, probably NASDAQ stocks more than anything else. Alan is a coach and a mentor and has been trading a long time. He has his own website and you can contact him there, at www.alanrichtrading.com. We'll be talking today about what's going on. A warm welcome to Alan. I'm glad that you've agreed to do this and I'd just probably like to ask you the first question, and that is why is it you trade NASDAQ stocks?
AR: I think I've been trading...
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...
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...
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...
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...