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Price Action Day Trading

Wednesday, December 30th, 2009

Today is Tuesday, December 29th and today we saw a mild pull back in the Index’s.

As day traders, one important question always comes up, which indicators are the best and which time frame should I use. Let me address the first one here today in this post.

Price Action Day Trading is going to be your best indicator. The reason why, is price always proceeds first and is in my estimation the best indicator to use. Support and Resistance goes along with price and is used to establish boundaries for price. Once those trading boundaries have been broken, market participants will look to establish new boundaries of support and resistance. Area’s of struggle are established and become our road markers in establishing new direction.

All a trader needs to do is learn how to read the signs, but most often we rely on indicators that interpret the price action for us. It is similar to reading cliff notes from a book as opposed to reading the book itself. You will only get a portion of the benefit when you read a summary as opposed to the real thing. The same is true when glossing over the actual price movements of what it is we trade. For me, it is the S&P 500 emini futures.

Learning how the price action is taken up, only to later to be taken down, is something we all need to get familiar with. “Price Is King” when it comes to getting your points and daily goal for the day.

When traders rely on indicators only, it sends them a message that there is a short cut to the end result, that will bypass the work that is needed to understand how price action comes into play, while day trading. The truth is, there is no easy way out.

To become excellent in our field, we need to draw near to those things that we fear. For some it is the fear of more work and involvement. That is the wrong attitude and will eventually catch up to you. As I commented, embrace that which you currently don’t understand and in time, it will become your friend, not something to shy away from.

Try and ask yourself as you look at your indicators, why is this indicator giving me a signal at this time?   What just happened within the price action to make it give a signal long or short?  Look at it again and again. Keep asking yourself the question why.  What is going on at this level of support or resistance that produced a move up or gave you that price rejection?

If you do that, I believe you will be learning far more than you ever would by just following indicators. Don’t get me wrong, I use them myself in my own trading every day, but I understand why and how they work. I understand the reasoning and outcome of the corresponding signals and they are all based on the price first.

They can be a guide for many, but I warn those who solely look and follow indicators as their personal road map. More on this and other topic’s as I am inspired to write over the next few days. For your review, I have the turns posted in a couple of screens. My scalp screen and a higher time frame chart that I use to give me my T-2 turning point signals. You can use this video as your guide and future ones to help you do this exercise.

In the charts I have everything stripped off and only show the basic bar chart. I don’t often show how, what or why my method works so consistently because that is reserved for partners. You can still learn a lot here through my posts and by addressing common real life trading struggles that most traders go through, so stay tuned and good trading.

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A Sniper Who Day Trades

Monday, December 28th, 2009

Today is Monday December 28th a.m. and the market is in slow motion.

Have you ever thought of what a Sniper does. He waits patiently for the right moment to hit his mark. In the battle field of war, it is never an easy thing to do. You have so many distractions, but your training has called for you to mentally train your mind to block everything out that is not relevent to your task, hitting your mark, what ever that may be.

Just like a Sniper, the window is very small, with little room for error. The same is true when day trading the emini futures market. You should strive for precision entries, exhibiting the least amount of drawdown against your position.

Lowering and controlling risk is the key, but how do you do that. I believe, all traders need to be able to identify if they are in an up-trending market, down-trending market or choppy sideways market. Approaching the current price action in this fashion will give you an advantage by maximizing your potential returns.

Many traders do not like to trade counter trend and that is understandable. There is going to be larger moves in the direction of the predominant trend by definition. The problem is, that the market does not wave a flag announcing its intentions.

Another issue with that, is you need to have patients to sit through the pull back and it could be a long time. As frustration can often become your enemy, you can be tempted to take non-method trades and suffer a loss.

I feel it is better to be skilled in having the ability and training of a ”Sniper”.  If he is called on, he can exercise his skills in a moments notice and engage.   

If you have the time to trade all day, have the discipline and patients that will constantly be tested, then yes, you could have a better risk reward ratio when you pull the trigger. When you go to the bank, you don’t deposit ratio’s, you deposit currency.

Currently it is not my plan, intention or method to trade all day. I could and have the time, but I enjoy keeping the battle down to small skirmishes, instead of a ragging war.

These are all questions that traders across the globe need to ask themselves. It is fine, if someone wants to trade all day, but that is not for me. In a later post, I will go over the different stages and times it is best to trade. The benefits and advantages to trade during certain times. This has proven to be very consistent market behavior and will point it out for all to see in a future post.

The market is in post holiday trading mode and will take this slow time to post some thought-provoking questions in preparation for the new trading year.

Enjoy!

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Market Insight from Sniper Trading

Monday, December 28th, 2009

It is currently Sunday evening December 27th as I write this post.

I thought I would comment on the pre-market moves in the S&P 500 futures markets. Today, when we opened up for trading, the market sold off 4.50 S&P points. Currently at 10 p.m. West Coast time, the market has rallied 7 S&P points off that low and currently at 1125 on the March contract futures. It is too soon to say, but someone is bidding this market up for a strong open come Monday morning. Earlier today I posted a U-Tube video showing the weekly, daily and 120 minute chart of the S&P 500, NASDAQ and Dow Jones Industrials. I will post that video here below, so you can try to gain some insight into what is happening.

Often times we think the market will do one thing or another, but what it actually does is what counts. We have remained in a uptrend since the March 6th S&P 500 lows at 666. Until something changes that, you need to continue to ride the price action wave higher or step aside.

The NASDAQ has broken out very clearly and with some conviction, which is nice to see. The Dow Industrials seems to be the laggard of the bunch. Monday will be very interesting since there are very few institutional traders to propel the market higher with any conviction. I believe it very well may close higher in Monday’s session December 28, but the thing to watch is the market volume. The level of market participation is very important for a sustainable rally.

The market may be bid up on very thin trading volume and susceptible to sharp corrections come after the New Year. There is an enormous amount of profit built-in at these prices and it never really becomes a profit unless you sell it. I think this just may be on the minds of many large institutional players. In addition postponing the taxes on those gains will be put off another year after January 1st 2010.

Tax’s are really never a good reason to hold onto a position or not. It should be separate, but I can not help but think it may have an effect this time around.

Good Trading to all !

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Time Management – Enhances Day Trading Goals

Saturday, December 26th, 2009

Today is Friday, Christmas Day and this post is for Thursdays session December 24th where we had a shortened trading day.

No personal trading for me, but the market did have a good day, posting some gains against some pretty stiff resistance.

If the market was going to go up, it now has a green light to do so. The momentum on the 120 minutes chart is still up, but more important, the daily has turned up for the first time since December 2nd. That is pretty important for the bulls.

The numbers on market sentiment came out yesterday and I would say it is good news for the bulls. With the market showing strength all week it could have influenced the bulls to get a bit excited, but it did not move. The current numbers are still 52% bullish and bearish at a 5+ year record low of 16.7% for now several weeks.

The bullish number is the more important number and at 52%, says that there is still room for a rally. With the daily just turning up, it is very possible that we could see a spike in prices. If it happens, I would say to be cautious into the rally. The bullish percent is going to give you a clue if we are going to run out of gas, so look for it.

Taking the two together, posted as bull/bear ratio, today we are matching a 5 year high as of today. Below is the link that I use to see the numbers that I am talking about. As mentioned it is two days delayed but it is still good information. If you subscribe I am sure on time delivery would be yours on Tuesday. The delayed is OK for me, I just use it as a reference to give me some insight as to the, “Pulse On Wall Street”. So here is the link, and by the way, I have no affiliation to the site;  http://www.market-harmonics.com/free-charts/sentiment/investors_intelligence.htm .

So, let me recap. Currently all of the momentum gauges that I look at when it comes to analyzing long-term direction is now pointing up. The monthly is up, the weekly is up, the daily is now up, the 120 minute chart is up. I can not say for sure that the market is going to go up on Monday, but the direction is pointing that way as of now. Just reading the current price action.

Below is something that may be helpful for planning and using your time effectively. Learning to trade can be time-consuming and things can get overlooked. The following can help you keep perspective and utilize the time you have to the fullest while still accomplishing your goals.

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Time Management

Factors To Include in Your Time Plan – There are some basic factors that all schedules need in order for them to be realistic and effective:

  1. PRIORITIZE. Write down all your tasks. Sort them into three groups: 1’s, 2’s, and 3’s. The 1’s are essential: do them first. The lower level priorities can usually wait.
  2. WORK TIME. Decide how much time the task requires, and how much energy. You may wish to include the task’s priority level to help make this decision.
  3. RELAX. Regularly plan time to relax and get it together. This time may range in units of 10 minutes to whole days according to your needs. You’ve earned this time off.
  4. EXERCISE. Exercise is essential for superior performance. Your brain would not function well if your body is tired. Stress reduces performance. Workout regularly.
  5. FLEXIBILITY. Allow extra time for UnForeseen Obstacles (UFO’s) that are bound to arise. Something almost always comes up to derail your efforts. Allow for it.
  6. FLOATING TASKS. Floating tasks can be done anywhere, anytime. Carry around a book that you need to read, some cards to review, or a letter that you need to write etc.

 Compromise – Sometimes drastic change isn’t necessary. Learning to compromise can make your life more effective. Try the following suggestions:

  1. RE-PRIORITIZE. Change the importance of various tasks. Reconsider the number of hours of work you’re willing to spend per week, the number of hours you want with the family, and the number of hours for yourself and pursuing your trading goals.  Are you trying to do too much?
  2. POSTPONE. Determine the priority of each activity or task and postpone lower level tasks.
  3. DELEGATE. Get someone else to do it. If it is a task that is not essential for you to accomplish, then this may be an option. Don’t forget to respect other peoples time before pursuing this option.
  4. SPEED UP. Sacrifice excellence for expediency. Get it done. Often, this may be your best option.

I hope this helps, when looking at the coming New Year approaching. Get a jump on things this week and be prepared for new beginnings. If you are organized in your personal affairs, you will have tilted the odds of success in your favor when pursuing ultimate goals and objectives.

Merry Christmas to all my readers,

Vince

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Institutional Day Traders not Participating During Christmas Week

Thursday, December 24th, 2009

Today is Wednesday December 23rd and we sure are in Holiday trading mode with light volume.

The institutional traders are not in this market, very low participation because of the Christmas Holiday. The price action is reflective of that as well, with very little opportunity to put anything together.

If you are trying to trade this market, I would advise caution. It can tear you up, because it is not reacting and moving as other typical days. Today there was really only two directional changes all day, down and up and they took hours to complete.

Price action like that can eat at you if you are not prepared or aware of the changes. That is why many traders just don’t trade this week and even next week as well. The whole mood and energy is different during this time.

If you can wait, it would be to your benefit. What I recommend is getting ready for January. You don’t have to make New Year trading resolutions, because most people don’t keep them and if they do, it is only for a very short time.

If you have a deep passion to make changes and determine in your mind that you will create a routine and stick to it, you may have a chance to effect lasting change, but it all depends how bad you want it. If you set goals for yourself, and I think everyone should, now is the time to preparing your mind to follow through with those goals.

It is not going to happen by itself, but only if you plan for it, with a focused determination to succeed at accomplishing it. You must have a plan and it must be in writing. If not, you are not that serious about meeting those goals.

If those goals are trading related you need to start working out now by exercising your mind and preparing yourself to hit it running. Often, people wait until January and find that they need to do so much to get up to speed that they lose weeks just trying to get themselves together. Much of this is in your mind, so you can start right now.

Don’t get over consumed as this is an important Holiday to reflect on the past year, meet with family, friends and for some reflect on their spiritual well-being.  Doing so, only helps put everything I just mentioned above in its proper perspective and makes that job a lot easier to carve out.

I personally have not traded but one day, I think that was Monday, this week and very little last week. I am not in a hurry. I really don’t like the slow volume. I don’t like to trade unless there is some volume to market. I can get tripped up waiting to long and it is not worth it. Mondays session was really still pretty good, but the last two days were terrible. If anyone did trade the these days and struggled, the price action had something to do with it. We are all still responsible for our own trades and are not under any obligation to trade.

If you feel compelled to follow the market tomorrow and next week, just keep in your mind that you will only take a trade by exception. If it jumps out at you with a strong buy or sell, other wise, just let it go. This is and can be one of those important exercises. Following the market but not taking any trades. It can be hard to do for a lot of people. You must maintain control at all times of your trading account. No compulsive behavior. If you find yourself doing that and you don’t seem to be able to get a handle on it, you may be a candidate for a trading buddy.

A trading buddy can be anyone you know with a similar interest. You back each other up while you try to capture your trading goals. You support each other if you get off chores and so on. It can help if you know of someone with similar interests. This may help you stay accountable to yourself by watching and helping each other. You can do this remotely by tieing your computers together so you can communicate.

If anyone is interested I can help you with the software you will need and tell you how to do it all for free.  I won’t charge anyone for the information and time and the way you can do it does not cost anything from the vendors.  You can consider it a Christmas present from me. I won’t try to sell you anything either. Just good old-fashioned neighborly help. email me at www.sniperdaytrading.com if you want more information.

The S&P is outperforming right now, the Dow is lagging. The 120 minute cash chart is point up, the daily is just about to go up if we have one more positive day. The futures are right back at the top and do mean the top of the range. The moment of truth is about to be unfolded very soon. Be careful. I think everyone knows what I am looking for, but I can not be taken off guard by a break out to the upside.

Tomorrow’s blog post will include what the sentiment numbers are that I have talked about, until then, Enjoy!

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December Santa Clause Rally, Boom or Bust

Tuesday, December 22nd, 2009

This post is for Mondays session, December 21st, posting a little late.

Mondays trading turned out to be a mover, to the upside. The market has pushed itself back up to the top of its range and in fact hit that all elusive number I had called for so many months ago, 1120. Mondays we hit 1120.25 on the cash market S&P a full 50% fibonaci retracement of the full trading move over the past two years.

 The momentum did turn rather quickly with the size of the move and currently is up on the 120 minute chart. As I write this post it is currently Tuesday a.m. and today happens to be the day that the new investors sentiment numbers come out. I will not see them until Thursday, but the price action that takes place today is reflective of those numbers. So today’s close on Tuesday, is going to be very important.

I am anticipating the numbers to turn more positive which in-fact will be more negative in reality, but we will have to see how it turns out, first with todays close and then with the numbers themselves.

The month of December has traditionally been a positive one and some have even called it “The Santa Clause rally”.  In the last 20 years, Decembers trading has shown a gain 16 out of the last 20 years. At this level, it would be 17, but we are not finished yet. It is noteworthy and that is why I point it out.

Below, I have posted the trades I took for Monday. I have not traded for several days, but thought I would squeeze a little in. The market was just coming off a big rally up and then I come in. Well, I knew better, to try to play the trend, because we were coming into overhead resistance and coming off a large move up already, which started in the pre-market. That is why I have a different model to trade out of, based on price action conditions. It is not rocket science for me to switch to “Scalp Mode” and pick up a few trades and points in both directions. All I do is follow my “Turning Points” as I have shown you before. In-fact I mentioned it in my last post. The thing to do is just follow it. If you do, the trades work out, if you don’t, they don’t, pretty simple. I did an OK job in following my signals, I could have done better. You can see where I came in and compare that to the signal turns in the link below.

If I was trading earlier, I am sure I would have had those break outs to the upside. Starting January, I will definitely be trading the open and getting my points for the day will be easier and quicker for me. The pace is faster and I like it. Trading after the market has slowed, is not what I prefer, but as I have said before, I have to take what the market gives at the time I decide to trade. A trader can not impose there will on the markets, so you learn to take what it offers at that time.

I absolutely love the way I approach the market. I could always stay in “Scalp Mode” if I want to, but I would at times miss out when the market shows signs of life and has legs. I have my other screen set up to accomodate this type of run away condition and can easily take advantage of it, if it presents itself. It is not really hard to switch into this screen, one click of the mouse at the bottom of my Trade Station Platform and I am there. A screen set up to accomodate large moves that are very clearly defined that only require you to follow it. It always boils down to that, can you follow signs to get to your destination, they are clearly marked.

In my blog, I often talk about things that hold traders back from following their signals. If you can get a handle on the trading discipline that is required to execute, you will make it. You first need the method or plan and some may call it system, but what ever it is you follow, it needs to be clearly defined and show consistency. Then you need to exercise your mind and build your character to follow through with it. If you don’t have the first one, the second one will not help you and if you have the first one without the second, you will still be in trouble, the two go hand in hand.

Start the rebuilding process now, start exercising your mind, write out your plans on paper in your trading journal, hopefully you have one. Start exercising your body as well, this will get your endorphins kicking in and give you some blood flow and hopefully motivation, be consistent. Get going now, see the picture in your mind of how it all comes together, but it takes action. It is not going to happen only by thinking about it. Once you see the big picture, break it down into small bit size pieces. What is it going to take to get step one finished or started, then on to step two. Break each one of the steps down as well, if it requires more work. If you write it out and take this approach, you will be moving forward towards your goal and dreams. This takes you out of the dream state and puts you in the driver seat. Do you know where you are going? When will you get there? What will it be like when you arrive? Taking charge of your life is up to you and all it really requires is one small word “DECIDE”. Have you?

http://www.screencast.com/t/YTRiM2U3Y

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Keep your Day Trading Struggle to a Minimum, Trade for Income !

Monday, December 21st, 2009

This post is for Fridays session December 18th. 

 The market rallied a bit on Friday as it came off-key support. The momentum on the 120 minute chart is still down and will remain that way even if we get a modest rally on Monday. If it were then to back fill and rally again, it would probably turn up. I don’t want to get ahead of ourselves, so we will just wait. I do sense something brewing here very soon.

 The Sentiment numbers will be coming out on Tuesday, just two sessions from now. If the market rallies even a little, it may be enough to influence the balance of power to the long side and get the bulls to finally bit. This last weeks numbers of 52% are the highest since the rally started back in March. That is significant,  one more push to the upside and the trap will have been laid. Meaning the Bulls bit and take the bait for a continued rally. That is just what I potentially see.

 The Bears are at their lowest numbers in 5 plus years, around 17% bearish. That is not very much. There are many in the middle and they may soon be persuaded to join the bulls, a sure sign we will see a sell off. I have been following these numbers for over 25 years and at key turning points in the market it has just been amazing. It has called every turn that I can remember. When you combine that with how I approach the market, you have something.

 When you have a prolonged sell off or rallies these numbers can linger for a while before you see a turn, but we are not in one of those situations right now. I think, once you see the bullish extreme post, it will only be a matter of days before you start to see the sell off start in full swing. We are not there yet, but I will let you know as it develops.

 I will be able to see the current numbers as of Thursday. This is delayed by two days, I do not subscribe to the service.

 With all the gains locked into the market, I do think there is some validity to January being a sell off month, as I wrote about last week. Stay on your toes, I think the volatility will be back pretty soon. Until then, I may be lying low and enjoying the Holiday’s.

 Last week, I did post some turning points in what I call “Scalp Mode”. Those turns are what my method gave me as signal points or turning points as I call them. There is a difference in my T-2 screen turning points, but not by a lot. The point for bringing it up is, these were the signals my method gave as the long and short trades. Two things remain. Actually taking the trades at those points and managing the trade after you get in. I need to have the discipline to follow my own signals and manage the trade well myself, most often, I am right on. It is always up to the individual to follow the method and trade according to the plan.

 Anyone who does not do that is off on their own, sailing in uncharted waters, why do that, when you have a map, GPS satellite and all the latest navigational equipment to get you where you want to go.

 That is what I say, when I deviate and quickly remember what it is I have. So, when I post those turning points again, just remember, that is what is possible. Any trader just needs to follow the signs and learn how to navigate through the waters and he or she can catch there points for the day as well, with very little draw down, a key for me.

 Any trader interested, to learn more, now is the time to inquire, before the volatility come back into the market. Be ready and able to start the year with the right plan to approach your trading. I teach all of this in my course and follow-up with all students, one on one, to equip them for the journey. I provide the full explanation of the method with all the rational and back up which gives me those exact turning points. You will see each day’s turns explained and identified and why. After getting a steady diet of this on a daily basis, you should be able to get the same turning points on your own. I work with students until they understand the method and are able to apply it to the markets. I take as much time with each student as he or she needs. I primarily trade the S&P but it can be applied to other markets.

I teach trading for a modest goal 2-4 points per day, as the market provides. Once you have your goal for the day, I strongly encourage students to close it up and do something else. My motto is “Keep the struggle to a minimum”, don’t fight it. If you have an apple orchard and you like apples, you don’t need to go and pick them all at once, just pick what you can eat for today and get some fresh ones tomorrow. If you picked them all at once, they would go bad after a while and you won’t be able to enjoy them anymore. Maybe that is a corny example but I think you get the point. Trade for daily income as opposed to getting rich all at once. The first may happen the latter probably not.

 I will following up with my Thursday post sometime this coming week.

Until then, Good Trading.

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Importance of Keeping a Day Trading Journal

Friday, December 18th, 2009

Today is Thursday December 17th and the market had a little selloff, down to an important trend line support area, 1096.

The price action was a little better today, a little more volume and the movement looked a little better as well. It has been a bit different than normal, the last week or so and with today’s action, I hope things will be getting back to business as usual. The thing about it is, you have the holiday period upon us and that usually throws a wrench into things. Institutional traders usually take this time off, it is to be expected.

This is really not the best time to trade the markets. If you have modest goals, I believe you can still obtain those goals, but the movement has not been present like it has before and to expect something from nothing is only going to lead you to frustration and mistakes. Tone down your expectations of the market. It will change and the price action movements will come back as well, but we will have to wait.

Being patient is part of the game, if you can’t, then you will be blowing through your account at a time when you should be taming down your expectations. Traders really need to hear this right now. The reason I know this is, because I am talking to myself. Part of the reason I write this blog and do what I do, is to give myself an outlet to express what is going on in myself. Those that want to follow, great. Other reasons are to help keep me accountable to myself.

Trading is a very private endeavor, with no-one usually watching you. I try to expose my trading and what I do, to better hold myself accountable and possibly help others along the way. While doing so, I do have the benefit of getting to know traders who were where I was years ago. Sharing my method, skills and experiences allows them a similar opportunity to excel and me the added benefit to have helped someone. The funny thing is when I help someone else, it really comes back to me, helping myself. So, I end up winning all the way around and I do thank God for the opportunity that I find myself in. It has been a blessing to me and now as I share to others.

Back to the market; I did not take any trades again today, but it was encouraging to get a nice email from one of my students from Switzerland, that said, he enjoyed the private session we had, going over the method and strategy. Today he was able to apply some of that insight to his trading where he has had one of his best days. I believe he said that he took 14 trades, which he knew was a lot and I agree, but fine if he has control, and he only had one small loss. He was just trading small, but booked 800 profit out of a pool of 875 before commission.

I was happy to hear it and it makes me feel like I am doing my job, sharing what I know to others to help them meet and beat their trading goals.

To be able to trade for a living, you need to have discipline, it is so important. I have talked about controlling your thoughts and screening what you allow to come to you. If it is not apart of you and your plan, throw it out. If you write it down, then you will remember what it is you are dealing with. All of the idea’s and thoughts that travel through our minds need to have a filter on it. The same reason why some people buy a water filter. They want to take out the bad and only leave the good, to enjoy and add benefits to the body. We need to do the same thing with our mind. Screen out the bad, unproductive, negative, discouraging, thoughts as they come to us. If you write those thoughts down quickly as it comes to you, you will know what it is you are battling against. Far to often, we forget, and are not even aware that we have these kinds of thoughts.

This is the reason why I encourage having a trading journal. You need to be able to identify the thoughts that you have, to first even know if there is a problem. So, start working on it. Keep a journal and write your thoughts down as you are looking at taking a trade,  record your thoughts. If it is easier, get a digital recorder and talk out what you see and why you see it. Tell yourself, why you are going take the trade, if in fact you should take it at all.

This kind of exercises will give you feedback that is invaluable to help yourself discover where you are strong and where you are weak. This is very good information. Those that are serious about their trading future will think about adopting this as a regular exercise.

Trading successfully has two main dimensions, the actual doing or executing the strategies and the mental side of the game which can often prevent you from doing the first one at all. If you know how to trade and what to do, that is great. There is still no guarantee that you will be consistent and make it as a day trader. You need to exercise control over which trades to take and what are you going to do when you have a loss and then again, another loose. Do you know how to handle a situation like that or are you going to do what most traders do, focus on the loose and how you can get it back.

This area, goes so deep, that I can not even begin to cover it in one post, but would need weeks, just on this one subject. Maybe I will expand on the subject, I don’t know. I never know what I am going to talk about any given day. I never plan it and or even think about it until my fingers start typing. So we will see. I will give it some thought and go from there. The subject matter, I know will help many, if I go deeper. Until the next time, over and out!

P.S. I just checked the sentiment numbers, +4% bulls to 52%. That is not good for the bulls, 55% is usually the tipping point, but it could go from here? We are at the highest bull/bear ratio since October 2007, taking the two together bearish sentiment + bullish sentiment. The bearish side is 16.7, smallest number in 5 years +.

Looking more like this market is going to roll over, we will see, but be ready for it, no surprises.

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Controlling Your Mind, Controls Your Day Trading Success

Thursday, December 17th, 2009

Today is Wednesday, December 16th and “Fed Day” turned out to be a flop.

You would hardly have known that today was Fed Day, if you did not know, other than the initial swings that you often get after the interest rate decision was released. Everything as far as movement was minimal. It was no different from a normal day after the announcement. There was no break as far as direction and we are still locked in a mode of indecision. But that day will be coming to a close sometime soon, that you can be assured.

As I mentioned, if the market is able to hold on to its gains without any major drop and I say, “if”, then we have a very good chance that you will see some of that selling after January 1st. The gains are to large for the institutions to just leave them their on the table without locking in some of it so that they look good in front of their people. The temptation will be too great. It is never a good idea to let taxes determine your investment decisions but it happens all the time. This year it may be a bigger factor than other years as I mentioned, because of the large gains booked by the S&P, around 66% from the lows set on March 6th, 09.

I don’t want to make more of it than it is, but I only want to point it out so you may be aware of it, that is all. That is part of the reason why I think you may read this blog, to get insight that others are not seeing or talking about.

Today I did not trade again and may not for a little while, I don’t like the price action much this last week. Although after the fed announcement it did get a little better and could have gotten involved, but I was working with someone and did not feel like I needed to trade.

That is always a good idea, you don’t have to trade every day. There is no law that says you must trade, or you will lose your status as a day-trader. The reason why I say this is also because, it is always a good exercise to show yourself that you are in-control. That is one of the deep essential ingredients needed to come out as a consistent earner. Don’t gloss over that statement, it is more powerful and meaningful than meets the eye at first glance.

If you lose control, you can just forget about ever being able to count on day trading the emini’s for daily income, it just is not going to happen. I don’t mean to pop anyones bubble, but the more honest you are with yourself, the closer you will get to achieving your goals. You must and I say, must leave your ego at the door. There is no room for it in this business. We all learn something new and should have a teachable spirit about us. The day you lose that, is the day, you will fall. Your ability to get back up will depend on how soon you realize that you need to stay humble while trading and never get cocky.

Let me give you an example. If you look back or think back in your own trading, when you booked your biggest gains you will see just following those gains will be some of your biggest loses. Now, ask yourself, “why is that true”?  Here, let me answer it for you. When you experience your largest gains or good gains, you will almost always see it followed by large loses and the reason is human nature is as such, to get cocky and think more highly about your ability than you should. The loses are just a reminder that you are ahead of yourself and you will not be able to go farther until your thinking is adjusted to allow yourself to hold onto those gains and add more.

It goes back to last weeks posts, on the way you think determines your outcome. Unless you monitor your thoughts and write them down quickly, they will just blow past you like the wind and you will have lost a valuable opportunity to learn and grow from your mistakes. Change your thinking and you will change your results. It should go as deep as possible so that is it not just mental assertion, but let it turn into core beliefs, values, disciplines, combined with execution.

All of that takes work and guidance from someone who has been there and done that. I am still learning everyday and will continue to learn probably until I die because I have trained myself to have a teachable spirit which allows me to continue to absorb what I need to accomplish my highest goals.

If you settle for average, that is what you will get. If your goals are to just get by and make a modest living, you will never allow yourself to achieve more. Why put restraints on progress and I don’t only mean monetary progress.

It has been said that, the average person has 30,000 thoughts that run through his or her head in an average day. Don’t know if that is exactly true, but the point is, a lot of thoughts come inside our mind every day. We need to learn how to control those thoughts and direct them for good, our good and others. By doing this, you take charge and self direct how you want things to go. If you don’t, you will be pulled in every direction with little purpose and fulfillment.

This directly relates to trading, as it does many other area’s of life. While trading if you get thoughts that tempt you to get in to early because of thoughts about making a ton of money, your timing will be compromises and you will have allowed greed to take over as a controlling emotion. Your results will suffer and often times a domino effect can take place just from one bad move. Cut it off at the pass, don’t let that first thought take root, write it down and counter it with the truth as per your trading method.

Well, I am out of time and was on a roll, but maybe I can pick it up from here tomorrow. Below a video showing where we are and the challenges we face.

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Federal Reserve Interest Rate decision tomorrow

Wednesday, December 16th, 2009

Today is Tuesday December 15th and the markets backed off a little today.

The S&P was off about 6 points and the Dow around 49 before it was all said and done.

The range of movement was terrible again today. I saw from around 10 to 12:30 there was so little movement you might have wondered if the markets were even open. You could expect more of that tomorrow as the Federal Reserve Open Market Committee meets tomorrow on interest rates. They will decide if the rates need to go up and the answer to that is probably NOT. The producer price index came out today if I heard right on the radio and it may have shown that prices increased, but what can the Fed do. With the economy on the still on the edge, they do not want to raise rates, that may coke off any hopes of a recovery, or that is how the argument goes.

This economy is messed up, it is hard to see how it is ever going to get fixed. With the way things are being done at the top, there is a lot of work to do, let me just leave it like that.

If you want to see how things really are, go to my website, www.sniperdaytrading.com and scroll down to middle of the front page and look on the right side. You will see a debt clock and under that you will see, something that says “click here at your own risk”, a little humor goes a long way when you look at this stuff. If you click on that link, you will see one picture of the whole U.S. economy. If you look and Think about what you are seeing, it won’t take long to see how things really are. It may take you some time, but don’t forget to look at “The Bottom Line”, as some on Wall Street have said. You will see how things really are. Some may really not want to know and if thats you, don’t look, no kidding. The last line of that page is unreal.

Anyway, back to the markets, I guess I got on a sort of rant there. Well, the Fed is going to decide what to do about rates and at 11:15 West Coast time, the news will be out and the trading will begin. You will see volume and movement, a lot of it. It is not exactly like it used to be in the past, but when you compare it to the movement we have been seeing these days it will look like a lot.

Typically, you will see movement in several directions as the market does its typical shake out of position traders. You will usually get a mixed interpretation of the news as prices go up and down wildly. It won’t be until a few misdirection take place that the real direction will emerge.

caution is in order. I mean it. Anyone who attempts to trade the news at this time had better know what they are doing or you will be sorry, that is for sure. If you trade it at all and I will probably not, traders should wait a little bit until the dust settles before trying to participate. Occasionally, it will take off in one direction and not look back, but that is not the rule. Be sure you have your stop in place at the moment of order entry or you will be sorry.

You can expect price movement possibly the first hour and after that, it is going to slowly go down and down to nothing. Around 11:00 am, it is going to perk up and the it is going to get wild after 11:15 am West Coast.

That is the best advise I could give you. Other than that, we are up against the brick wall. Resistance looks stiff at current prices but anything can happen. I always say that and this time is no different. We won’t be able to see the sentiment numbers until Thursday and so will have to wait on that.

The daily momentum is still down, with the weekly and monthly up. The 120 minute chart is still pointing up even with todays drop. The hourly has just turned down, which is much more sensitive than the 120 minute. This setting smooths out a lot of the false breaks and keeps the momentum alive for a long time until it really turns.

I did not trade today, I saw the price action was similar to yesterday and did not want to have a repeat. The early morning open had a bit of a twist today. I did see that the price action was choppy and going nowhere on the open, what a twist. That is just like the market to do that, when you think you will get movement, you get nothing but chop.

Taking the pulse of the market is essential, and could have kept you waiting until a little after 7 am when we saw a solid break out up, in two waves. That is all the market had to the upside and experienced draw downs throughout the rest of the session.

One last observation and I will talk more about it tomorrow. The end of the year is approaching and we have not had any meaningful sell off as of yet and it is possible the sellers are waiting until January 1st to sell. We have a 66% return from the March 6 bottom of 666 ( 3/6/09) that is a little weird. To many 6’s there for me, but I didn’t do it. It is what it is. The thing about it is, if the selling takes place after the 1st the taxes on any of those big gains will be postponed for another year. Someone out there is thinking about it, more than normal because of the large returns, much bigger than normal. Just food for thought.

Until tomorrow, “Good Trading” and be careful!

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