The author looks at ways of protecting your capital when trading commodities.
The commodities / futures markets empty the accounts of thousands of traders every year. For most entering trading, and this is true for over 90%, trading commodities means a very certain financial death.
The markets are ruthless and will send people home empty-handed without a care.
The opportunities for making money are numerous, and the leverage entices so many people to jump in head first, that it is unreal. It is the ultimate, white collar get-rich-quick arena.
Unfortunately, like all other areas that the get-rich-quick opportunities are being sold, the ratio of losers to winners is absolutely horrific.
First thing to do to avoid being one of the...
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The author looks at ways of profiting from trends by using Moving Averages.
Identifying and profiting from trends can be at times divergent topics and this dissociation can easily translate to losing trades. While trend analysis, as defined by trend and channel lines, ratio and extension analysis is vital, traders should also go beyond pattern recognition and employ quantitative methods of analysis. One of the most popular tools is moving averages.
What Is a Moving Average?
A moving average smoothes market swings, as some traders prefer to keep the statistical noise at a low level. To calculate a simple average, simply determine the arithmetic mean. To make an average move, just add the last price of the period of you choice, while...
So you want to trade for a living? In this article Geoff Turnbull looks at what you need to consider before you take the plunge.
There can't be many traders who haven't at least considered the idea of telling the boss what they think of him, throwing it all in and going off to trade the stock market for a living. It's a big risk financially, and that uncertainty is what stops most from jumping ship. Is it really possible to trade for a living?
The Dream
You know how it is, you're sitting in a traffic jam at some unearthly hour of a particularly wet and miserable morning, on the way to the same office you have sat in for too long to remember, and you're thinking - there must be a better way - life shouldn't have to be like this. Your...
In this article the author looks at the Seven 'Sins' of Trading and what action we can take to avoid them.
By studying at the most frequent reasons for failure, we can avoid making the same mistakes as the crowd, and thus turn these negative points into positives. In this article, I will be looking at the seven most common mistakes I see made by traders.
Mistake Number One - Switching Strategies
or "The Hunt For The Holy Grail"
The holy grail of trading - we've all looked for it - the super system that never loses. We've searched forums, read books, been to seminars, discussed in chatrooms, but the secret system that wins every time continues to elude us.
Why do we waste so much time and effort searching for something that doesn't...
As a new trader, you are probably impatient to get to the study of charts and evaluation of various trading strategies. Surely, winning involves predicting future market direction using sophisticated technical analysis to identify the best entry and exit points for our trades? So why delay discussion of all that stuff for a look at a bit of mundane statistics?
The reason is simple. If you regard the trading game as some kind of super intelligence test where you are pitching your skills against the rest of the world, you are unlikely to play the game with the right attitude and expectations. On the other hand, if you see trading as a numbers game, then you are more likely to approach it correctly.
So, if it is a numbers game (which it...
The rules that should be 'Utterley Simple Rules of Trading' but which we all seems to find 'Utterley Difficult!'
The world of investing/treading, even at the very highest levels, where we are supposed to believe that wisdom prevails and profits abound, is littered with the wreckage of wealth that has hit the various myriad rocks that exist just beneath the tranquil surface of the global economy. It matters not what level of supposed wisdom, or education, that the money managers or individuals in question have. We can make a list of wondrously large financial failures that have come to flounder upon these rocks for the very same reasons. Let us, for a bit, have a moment of collective silence for Long Term Capital Management; for...
Candlestick charts are widely used by traders around the world, as superficial demarcations between East and West are thankfully fading away. While bar charts are still more popular because of sheer inertia, there is little doubt that candles provide much more information, even though both types of charts are based on the same prices. Let's take a look at the advantages of using candles when gauging the validity of intersections.
Traders make a big deal about prices breaking support and resistance lines, trendlines, moving averages and retracement or extension levels. However, intersecting these lines on an intraday basis and closing outside them are two very different ball games.
Benefits for Using Candlesticks
Let's quickly...
As a Short-term trader do you ever look at longer term time frames? If not, then this article will explain why the longer term time frames can influence the shorter intraday ones.
Most independent Short-term Traders tend to ignore the Long-Term technical condition of the Market because they believe it is not important in their trading. Few things are further from the truth, that is, if you want to survive the market over a long period of time, and still be trading years, even decades from now.
In the same manner that the tides can raise or sink all ships, the larger trends, behavior and technical design of the markets greatly affects ALL independent traders, regardless of trading style. You can have an independent short-term trader...
A brief look at three important principles that no trader should overlook, if they intend to be successful.
It is a given that traders cannot win 100 percent of the time, because with reward comes risk, and losses are as much a fact of life as taxes and death. But there are highly valuable lessons to be learned about the trading process that go far beyond the dollar signs. How traders put reliable steps in place to ensure that their performance may be enhanced on the road to success is critical. For most success is dependent not only on what is done correctly but also on what potentially havoc-wreaking mistakes can be avoided and/or corrected.
There are three principles that can aid in anticipating and possibly avoiding mistakes, they...
Dr Doug "The Head Coach" discusses the psychology of trading and the similarities between coaching the top athletes and the top traders.
How did it all start? (How did you get into trader coaching?)
I played baseball my whole life and through college (I was a catcher). When I graduated, I got a job on trading floor for a proprietary trading firm at the Chicago Mercantile Exchange. They used to hire athletes almost exclusively because they believed athlete's made better traders. Anyways, I worked there for a few years and then a herniated disc in my lower back forced me to leave the floor and trade equities electronically. I did that for about 9 months and then realized I wanted more out life so I left the trading world to go coach...
Trader education has become a hot topic in recent years. Everywhere you look there is someone offering some course, seminar, training program, or whatever. Many are very pricey, and we can certainly debate the real value of quite a few. The proliferation of the products and such can't help but bring up some of the commonly debated topics related to whether traders can be taught or just have some innate talent which allows them to succeed. This article makes its own contribution to that discussion.
In the interest of openness, my personal view is that anyone can learn to trade effectively. By that, I mean we are all capable of trading toward a reasonable and rational set of goals and/or objectives determined by our own personal...
So you want to be a day trader huh?, really???, hmmm, well isn’t that special!!!! Think you have what it takes to make a living trading the Markets??? Do ya Bunkie???? I wouldn’t quit my day job pal. In fact unless you’ve done your homework first and foremost, don’t do this until you’ve at least tried it on a part time basis. Otherwise if you try to dive into the abyss without a net, you're doomed right from the get go! Doing it on a part time basis just for the feel of it is fine. Never would work otherwise.
Oh and pardon me for asking, but what makes YOU think you're smart enough, stable enough, and mechanical enough to do this? You read about it in a book right? Seemed kinda easy to ya? Did it? You figured heck this doesn’t seem so...
A large number of traders that I work with express the feeling that they are somehow sabotaging themselves: repeating the same mistakes day after day, giving back valuable profits in a fraction of the time it took to earn them. Their intuition is that there is some kind of pattern to what they're doing; they're repeating the same mistakes again and again. They realize that they're not mentally ill and don't have a history of out-of-control behavior, so they are understandably confused as to why they can't stop shooting themselves in the foot.
In this article, I will summarize a few ideas central to brief therapy, a discipline which uses very active techniques to accelerate change processes that might otherwise take months or years...
Achieving success in trading requires avoiding numerous pitfalls as much, or more, than it does seeking out and executing winning trades. In fact, most professional traders will tell you that it's not any specific trading methodologies that make traders successful, but instead it's the overall rules to which those traders strictly adhere that keep them "in the game" long enough to achieve success. Following are 10 of the more prevalent mistakes traders make.
This list is in no particular order of importance.
1. Failure to have a trading plan in place before a trade is executed.
A trader with no specific plan of action in place upon entry into a trade does not know, among other things, when or where he or she will exit the trade, or...
Take a look at the nice up-trend on the chart below. There are plenty of reasons to have entered around £10 and sat comfortably in your armchair until some warning signs and an exit around £14, or even higher. A 40% rise and an easy 400 or so points - easy in hindsight that is. We can't trade hindsight, of course, but a simple swing trading technique would have served you well in real time.
Good trends like this develop by taking a run forward followed by a few paces back (retracement) followed by another run forward and a few paces back and so on. Simple swing trading seeks to take advantage of trend continuations by identifying those significant retracements in order to provide points of entry and a level of exit for ongoing...
Psychology Getting Started Improving Your Trading Performance: The Single Most Important Step You Can Take
A chess player analyzing the board for the next move; fighter pilots maneuvering their planes to get a lock on enemy aircraft; a baseball player tracking the release of the ball from the pitcher's arm; ballet dancers executing their leaps; an oncologist diagnosing a rare form of cancer; a bodybuilder sculpting a small muscle group to achieve symmetry: all of these are examples of performance activities. They are also examples of fields that have been widely researched in the past two decades, uncovering important clues as to the factors that create successful performance.
This research raises fascinating questions: What makes expert performers different from less successful ones? Is expert performance a function of inherited...
Perhaps the greatest luxury I have in this business is the ability to observe the experiences of many traders with different personalities, life schedules and risk capital, each trading in a variety of markets. What most astute brokers realize is that, over time, as some individuals prematurely exit winners while others desperately cling to losers, it becomes quite possible to match different "blood types" of those traders with their correct "trading diets." Clearly, we're not talking the medical blood type here, but in the figurative sense it makes the right point. With practice, it's not too hard to determine blood types (type of trading best suited to the individual) based on the personality of the trader, and then prescribe a diet...
In my last article, I covered some of the pitfalls of trading journals. In this piece I'd like to cover some of the features of trading journals that I have found helpful in my work with new and experienced professional traders. My goal as a trading psychologist is to do all that I can to accelerate traders' learning curves. Sometimes this means helping traders with emotional problems, but just as often such problems are the result of trading difficulties and not their cause. A journal, properly constructed, is a powerful tool for learning - and relearning - markets and cultivating exemplary trading behaviors. Here are some of the principals that have guided my journal-based work with traders:
Make journals a part of the daily...
One of the most common pieces of advice trading mentors give to their students is the keeping of a trading journal. By documenting your trading, the common wisdom holds, you can learn what you're doing right and wrong and speed your learning curve. I happen to be quite a fan of trading journals; indeed, I made journals a mandatory part of the training program at a Chicago-based proprietary trading firm. All too many times, however, I found that the journals did not accomplish their purpose. They became rote exercises that did not get to the heart of either trading problems or solutions. So I thought in this article I'd outline the five most frequent shortcomings with journals and how these can be addressed.
The journal lacks...
Being English (although I am now a Naturalised Aussie too) I am a huge soccer fan. This season my club Liverpool have enjoyed a wonderful run of success in the European Champions League, the most prestigious club competition in the world and they will play in the final which takes place before this edition hits the newsagents. Imagine my glee therefore when I was sent the following statistics in an email before the Quarter-finals which took place a few weeks ago:
LIVERPOOL FC ** Too much of a coincidence?? You decide.
1978 - Welsh Grand Slam. Pope Dies. Liverpool win European Cup
2005 - Welsh Grand Slam. Pope Dies. ???
1981 - Prince Charles gets married. Ken and Deirdre marry on Coronation Street. A new Dr Who is appointed...
This article is essentially for anyone starting out in the markets, but the question of why one is trading is relevant at all times.
The question as to what motivates the individual to start trading or continue trading is very important because many reasons are poor reasons and the so-called "motivators" can contain hidden traps.
Often people trade for a number of reasons, not just the obvious one of wanting to make money, and frequently these other reasons are at a sub-conscious level, and would not normally be disclosed if someone asked the question "Why do you trade?"
Below is a list of motivators. This is designed to be fairly comprehensive and typically three or four from the list will apply to each individual. Clearly not...
There are many good penny stock investments available, which could turn a small amount of capital into a small fortune very quickly. However, to discover these you need to know what to look for and what to avoid. When searching for that one big payoff, steer clear of the following examples.
The Phone Salesman - Anyone who is attempting to sell you investments over the phone should be considered an enemy. They have high-pressure sales tactics, and effective, believable arguments. However, they are not doing you any favors, no matter how good they make an investment sound.
They are operating in their best interest to dump over-the-counter stock on you, and the money you pay in will go into their own pockets, or the pockets of their...
Most traders tend to use technical analysis to pick their entry and exit points when trading, and swear by those methods, but if it were really that good why are there so many variations? More importantly, why do so many technical traders lose money? The answer is quite simply that they are using charts to predict the probable future price movement, based on patterns. Now that is okay but it is only slightly different from a gambler who might say that, based on the fact that there are 36 number cards and 16 face cards (excluding the 10s), there is a 9/13 chance of drawing a numerical card and as such he will place his money on that.
Now that is acceptable if one were to view the accumulation of wealth as a gamble, but for the serious...
Traders go to great lengths optimising market strategies and trading systems to obtain good profitability. Unfortunately, those profits often deteriorate substantially after factoring in order fees. This article examines the effect of various broker commissions on portfolio performance and determines the optimal investment size needed depending on broker fees. The choice of broker greatly determines if a trader survives successfully in this business or quickly gives up in frustration.
Brokers use various methods to determine their pricing structures. They are often based on either block pricing (i.e. number of stocks per trade, investment amount, trading activity) or fixed pricing, better known as flat rates (fees independent of number...
Are you a beginner? Before you start, have you got what it takes?
It is apparent that when starting out in the adventurous worlds of financial trading, that the complete novice and beginner can, within minutes of his first post on T2W, trot down the wrong road, due in no small part to the advice so readily given by enthusiastic members imparting their own beliefs and experiences. Just today a newcomer posed the question: I'm new, what trading platform should I have? Within minutes a reply was posted by a prolific poster, buy XYZ platform it's only ££s and you can get data feed at only ££ per month!
The thread continued, try this, and try that, and I imagined this person already starting to think that if they can get a great trading...
At Rockwell Trading we develop and test up to 25 trading systems a month. The 10 Power Principles for Successful Trading Systems is a set of rules we established and refined to help us effectively evaluate a trading system. Using these Power Principles you too can find solid trading systems - whether they be those you develop yourself or those you obtain from other sources. You can be assured of a high probability of success by applying these simple principles.
Principle #1: Few rules - easy to understand
It may surprise you that the best trading systems have less than 10 rules. The more rules you have, the more likely you "curve-fitted" your trading system to the past, and such an over-optimized system is very unlikely to produce...
In order to succeed as a professional trader, it is often said that the aspirant must treat trading "like a business". As with many of the clichéd phrases that litter the metaphorical trading floor, the importance of this statement is often overlooked, or the meaning misunderstood.
The following article by Tim Wilcox aims to address these problems by examining some of the ways in which a trader might go about achieving this vital goal.
It is divided into two sections: a general overview of what constitutes a trading plan and why it is prudent to have one, followed by a detailed analysis of the various aspects that should be considered during its creation, for example, the importance of self-awareness, discipline and risk management...
My last article, the Hardware Guide, covered the basic requirements for a capable, reliable hardware setup to trade the markets effectively. Some of you may also be aware of my Techies Corner Guide, which provides some basic information about PC security, and links to a variety of downloadable programs and tests to use for the security-conscious amongst us. Some of the information in both may be duplicated here, but this article brings everything together as a "one-stop shop", and provides a valuable reference point for future use.
There are many problems that we, as internet-intensive users can come across during our daily work. Most of us use ADSL connections, and whilst this type of connection is more often than not essential for...
Mechanical systems do not work.
Let me rephrase that. Backtested over several years of data, mechanical systems do not show a sufficiently consistent profit and an acceptably low drawdown for the small trader to trade consistently, comfortably, effectively and economically.
To expand on that further, the results of a coded mechanical system might well show periods of excellent profits but, virtually without exception, they will also have draw-downs that most small traders would not be able to tolerate. In addition, most systems tested over several years invariably have considerable periods of losses, usually running over months if not years, plus long runs of losing trades.
If you start trading a mechanical system at the wrong time...
In life, we are each ultimately responsible for our own actions. The markets are no different. We are responsible for our own success and / or failure and the degree to which we are successful.
Winning at a career in trading is no different. To ensure a profitable future, one must be proactive. Preventing failure is an important part of that process. If you find yourself saying:
...or any number of negative mental messages, you are heading down the path that leads to failure.
Having been a successful business consultant and having traded for many many years, I have found several recurring characteristics and traits of people who thought they would hit a home run but who struck out in their attempt. Many of them stood with their bats...