Archive for December, 2009

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Listen to Price Action while Day Trading

Monday, December 14th, 2009

Today is Monday December 14th and the market moved a bit higher across the board

The Nasdaq saw the biggest increase with a gain of 29 points or 1% followed by the S&P with + 7 points and the Dow comes up with +30 points or +.28%. 

The market is being so pinched and squeezed here at the very top of the range, something is about to give one way or another. I mentioned this yesterday with no great need to carry on. Time is going to expose its real intentions and so everyone is going to have to wait.

I personally would like to see the trend continue for everyone’s sake, but my personal wishes have zero effects on the outcome. As day traders, we only really need be concerned with the direction of the short-term moves of the market. I cover the larger direction because a lot of people follow it and it does help a bit in getting large direction in your favor, but I use my own method for telling me where prices are likely to go.

Yesterday, I was saying that it would be best to trade early and hang it up. That turned out to be good advise. The last 2 and half hours of the day today only saw a total swing from high to low of 2 whole points. That is it. I mean, that is sad. It has been a while since I have seen such little movement in the afternoon session, but that is normal and that is why I said anyone wishing to trade this market should look to the early morning session to get there points.

Now, I would be the one who really needed to take my own advise today and I mean it. Guess what, I got caught in that 2 1/2 hour churning, going nowhere fast. To be honest, I know I could have still turn it out if I had done a little different. Scalping in the chop zone would have served me well today, but no, I had other things in mind. My first daily lose in quiet some time.

I was not listening to the market and wanted, what I wanted. Too bad for me, I didn’t get it. Today, I had a net loss for the day of -2 points. I took 7 trades and thought about stopping earlier, but I tried to come back with no avail.

I was looking for a break out after some of that consolidation and we did not get it. I had many chances to do much better and actually hit my goal, but if I would have just scalped my way there, I would have had it. You could say, I had a touch of greed in me. The price action said, to take the profit, I said no. The price action said to get out at even, I said, no. I had 10 minutes to get out of one trade at even, but said no and it cost me 2 or 3 ticks.

It was a funny day, but I have 100% total confidence in my method and my approach. Losing days are going to happen, but you need to cap the loses to a minimum. Never let yourself have huge loosing days. It does damage to your confidence and sends a message that you are not in control. That is a definite no-no. Don’t do that. You always have tomorrow to come back. You don’t even have to have it your mind that you are going to get your loses back in a hurry. Do it slowly and don’t think about it much. Just take the trades as they come to you and you could do the “Trade by exception” approach, so you don’t feel compelled to trade every wiggle.

Today’s early morning saw, beautiful price swings with sufficient volume for some easy turns. Lets try this again tomorrow and see how it goes, but lets all start early or not at all.

Until tomorrow.

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“Day Trading S&P Emini By Exception”

Monday, December 14th, 2009

This post is for Fridays session December 11th where we saw slight gains across the board.

The market has been floundering for some time now and will break out of this range pretty soon. Which way is the question? The sentiment has gone a bit to the neutral side as far as bullish percent, which can give some additional room for a rally if it chooses and we have moved sideways for an extended period of time, which is and can be a way of correcting itself, by rotating from week hands to stronger hands. The problem at times with that is, the new buyers don’t have built-in profit like the previous owners did and will not be willing to take as much heat if things start selling off. That being said, the trend by all measures still remains solid and in-tack at this moment.

In the daily charts, the momentum is pointing down, with the weekly and monthly pointing up. With the momentum on the 120 minute chart pointing up, you will have to give the current edge to the weekly chart unless conditions change. So the current bias for the short-term is up, watching for the daily momentum to get in sync. We shall see.

My trading on Friday went well, it is not fresh in my mind right now, since I am writing this on Sunday evening, but I remember it was good. I think I only had one loss for two or three ticks but had several gains on the day. Many were in what I call scalp mode, since that was what the market gave me.

I remember looking at the open seeing that the first two hours of the day had more action and movement than the next 4 hours combined. The benefits and rewards for the early risers on the West Coast. I will get there.

I will be cutting my posts down in size for a little while because of the Christmas season. Maybe until after the New Year. The trading volume will be starting to slow pretty soon, sometime this week as well. It is standard operating procedure for this time of year. Anyone looking to get a few trades off and have the day pretty open, will need to trade the 1st hour of the day, after that, it is going to get slow. If you are not used to that and still working on trading discipline, take it easy. Trade early and leave, like everyone else. You will have more opportunities without putting your account at risk as a slow-moving market can do to you.

Traders will start to look for trades, never a good idea. You need to let the trades come to you. When in doubt, I always say, “Trade by exception”. That means don’t even think about taking a trade, just forget it, only and unless it is jumping out at you with a screaming “Buy or Sell”. That way, you will not have as many mind games to deal with, trying to make or will something to happen, where and when it does not exist.

That is good advise to those who can find it within themselves to take it. This is especially true if you find that you are struggling to get it together, maybe after a drawdown and you are looking to come back. Take a deep breath and relax. Then follow the above advise.

Well, that is it for now. I will be back on Monday with an early post. I will be doing some visiting this week and plan to hit it as early as I can and keep moving, stick and move. Well, thats the plan?

Good Trading !

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Part Two; “Mental Day-Trading Exercise”

Friday, December 11th, 2009

Today is Thursday, December 10th and the Index’s recaptured the other half of Tuesdays drop.

The sentiment numbers just came in and I would call it good news for the bulls. The bullish sentiment currently stands at 48.4% that is down from 50% even and 50.6% before that. The extreme numbers to watch for are 55% plus, we are not there yet on this side. Looks like room for a potential rally, it is possible.

Over the last 5 days, the market has retraced exactly 62% from the last high hit on December 4th. After hitting that today, the market looks like it just went flat. On top of that, today was roll over day, meaning today the new contract month becomes the front month in the E-Mini Futures. For the S&P the new symbol is esh10. The “H” stands for March and the “10″ stands for next year, 2010.

Roll over day is usually a little strange in that you have half of the days volume in the old contract and half in the new contract. It makes for a slow day if you use tick charts. I feel, it was a slow day anyway you look at it today, not much movement. After the open, we only saw a 6 point range for the whole day. That is not very much and would call it a range bound day of consolidation. The thing is we did have a move up in the pre-market trading of about 8 points and the market basically close in that exact same spot, 1102 on the S&P December contract.

I will probably be looking at the new symbol tomorrow, esh10, as it will have more volume in it then. Today it was about 50/50, even. Tomorrow should be different.

The S&P’s current momentum on the hourly cash chart is up and the 120 minute chart that I also look at is just about to go positive, but hasn’t yet. Lastly, the daily is currently pointing down, so we still have a struggle going on here. If you get all of them pointing up, it could be like Christmas for many, we shall see. The main thing here is, don’t be surprised either way, break out or break down, and hold any opinion about larger direction to a minimum, that way you won’t feel like you have any long-term commitments. I know that thinking is popular with  single people, but while trading the markets, that is the correct philosophy to hold.

 Any follow through after todays move is going to have to be viewed as bullish. I checked the news front and I don’t see any releases scheduled for tomorrow, so the market is going to have to make its own news.

In todays trading, I started late in the day, around 10:30 West Coast, tail end of the New York lunch hours and traded a touch over an hour. I had three trades, + 3 ticks, +4 ticks, and +2 ticks for a total of 2.25 points. It adds up just the same if it was just one trade, minus a little commission and the .25 covers it.

Yesterday I said I was going to give you a small exercise to do and so here it is.

Re-read the second half of yesterdays post to get refreshed from where I left off,

Make a list of single words, about the way that you see yourself. This list is for no-one else to see or know about, so try and be honest with yourself. This really could help your trading, even if you currently don’t think it will. Take a deep breath and ask yourself the question, write down what comes to your mind and keep writing, don’t think about it too much and again, no-one will see it, just you.

OK, I will bet that was interesting. Your actions will be determined by the way that you see yourself, it’s just the way it is. If you have negative thought and attitudes about not only your trading or your results, but life in general, it will spill over into your trading. If it doesn’t, then you are probably from another planet, “Cripton”, maybe.  This is real, so give it a try, what do you have to lose.

If on your list you see things that you would like to change or think you should change, then, you know what it is you need to do. It needs to go a little deeper than a mental assertion that you will alter something. The reason why is, it probably will not stick if it is just mental recognition.

Let me give you an example. Have you ever made a “New Years Resolution” before? Sure you have, we all have done that. If you think back about some of those resolutions you made, I am sure, if you are like most people, that you may have only kept them for a week, two at best. The reason is you only let it go to the surface of your mind and then again, you may not have really wanted to change those things deep down.

If you make a commitment to yourself to do something, don’t take it lightly, follow through and be consistent. The reason is, it provides mental strength that you will need when you are trading. I can tell you that most of my trading mistakes occur when I try and take non-method trades, or going beyond my method. There is really no need for me to do that, but I do at times feel stronger than other times mentally and I do feel at times, the pull to take non-method trades, especially when I know I should not. When I am feeling mentally strong, I can resist the temptation to enter to soon and wait for things to better come together. The opposite is true as well.

Going back to the original point, if you see yourself as successful, disciplined, patient, determined and do things in your everyday life to match up with beliefs or soon to be beliefs, then you will be on your way to achieving it. Your actions will follow your beliefs and play itself out in pretty much all area’s of your life, with trading being just one of them. So now your know what you need to do. Prepare for “Battle” and the “Victory”.  You can “Do It”.

http://www.screencast.com/t/NzBmMTI3ZD     Todays trades

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Trading Lesson Today ! “Thinking Your Way to Succuss”

Wednesday, December 9th, 2009

Today is Wednesday December 9th and the markets get back half of what they lost from yesterday.

It was a pretty interesting day in that the market showed weakness early on, followed by strength, followed by weakness and finally strength into the close. Do you know what pattern was formed in todays trading?  Take a look and think about it.

I call it a “W” pattern and if you look closely you will see it pretty clearly. The market is struggling to give up ground, trying to hold above 1085, past support. I can see the bounce I mentioned from yesterdays post coming in at this level instead of the 1080 level I previously mentioned (trend-line support), but we will still need to see if todays late rally has any follow through to it and by how much. There is room for a continued move up, if the short-term momentum stays intact with this bounce, but how the market reacts when its done is going to say a lot.

It has been three weeks of sideways action and long-term position players can get chopped up inside these big swings. You have to have deep pockets to remain inside this range. The pressure cooking continues to cook and the positions are built on both sides. Tomorrow I will post the sentiment numbers and we will see if there is any movement.

Today I will give you another thought-provoking day to help those traders identify any blockage they may be facing in their trading results. This is really important stuff and not something many traders think of, so that is why I am going to write about it here today.

Thinking your way to success, I imagine, is what you could call todays thoughts. Our mind is the organ of our thoughts. With it we think, know, remember, imagine and understand everything we see, it all begins with a thought.

Our thoughts determine whether we succeed or fail in life and in our trading. Put another way, the way we think determines the decisions we make. You could say that our mind is the steering wheel of our life and we are going to be governed by how we think. Our thought impulses are very powerful and are the sum total of how we are going to live and trade. The two go together, living and trading. You can try and separate them, but when it’s all said and done, you will see how you live and think about yourself will have a 100% reflection on your trading results. I know it is a little heavy, but do we want to be the best that we possibly can or are we looking for the easy way out. Unfortunately there is no easy way, trading successfully is not easy and is not natural for most people. You really need to work in all area’s to master it in as short of a period as possible, hopefully quick enough while your account is still alive.

Our decisions are a compilation of past experiences which come from thoughts. Who decides how you see or think about yourself ?  You do!   We are responsible for the way we think about ourselves, we have the choice, good or bad. We can think ourselves well or sick. I totally remember doing this when I was in grade school and wanting to stay home. I was fine, but acting, thinking, talking like a sick kid, to convince my mom so I could stay home from school, actually got me totally sick. I never forgot that and it was 40 years ago.

Don’t allow other people to think on your behalf, if you do, they will try and control you and often bring you down. All of this does get played out in our trading, I know, because I lived it and experienced it first hand. Often we allow other people’s negative thoughts and idea’s to decide for us subconsciously and it is possible for us to parrot there idea’s and adopt them as our own. Negative influences and idea’s are powerful and can bring us down, the end result is your trading will suffer.

If you see yourself a certain way you are going to act it out. Our attitudes and our actions are a product of our thoughts. If you see yourself as a struggling trader, who never seems to be able to get it right, that is exactly what you will see as your results. Self sabotage often come from this type of thinking.

The best news is we have the privilege of choosing how we see ourselves. When you have and think of a very definite goal, mixed with a burning desire to achieve that and you mix that with persistance and you are willing to work at it and (lastly for me and others who think like-minded) ask for God’s help, you will be able to accomplish your goal no doubt. This is not a formula, but it is what works. It is based on principles that have existed from the beginning of time.

This is not new age thinking or mind over matter, it is what it is. I did not come up with this myself and as I said, it has been around forever, literally.  The apostle Paul, was quoted as saying “as a man thinks in his heart, so is he”. How you see yourself is going to be reflected in everything you do and that means trading as well, especially trading. This business is very emotional and so many traders success or failure, can be determined by how we see ourselves.

Again, I can only really talk about this because I have lived it all, to the last detail and my results were and are a reflection of the way I saw and currently see things.

Once you have a solid approach to trading and you know how to do what needs to get done in order to capture your gains, every trader needs to work on these hidden things like I talk about in today’s post. It can make all the difference in the world. This is in my opinion one of the biggest reasons traders who know how to trade, just can not book there gains and hold on to it. It can be buried in a negative self-image and that will get transferred to the markets and the market has a way to purge all excess. Don’t let that be you. See yourself as a winner.

Tomorrow part two, one simple exercise you can do to improve in this area, so you can achieve all your long-term goals. I hope you all enjoyed it.

 http://www.screencast.com/t/MDM2MGZjZ

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“What is it about Day-Trading that appeals to you” ?

Wednesday, December 9th, 2009

Today is Tuesday, December 8th and we finally see a crack in the armor.

It is really still a little early in the game to call for a sell off from here, but the momentum in all the short-term index’s are now still currently down. Will it continue, we will have to see? There is some support around the 1080 S&P number that I can see. It may be that we hit it and bounce. If that happens, we will have to see what happens after the bounce, that is going to tell us a lot more. I will be looking for the sentiment number that came out today, but won’t be able to see until Thursday. I will report.

In today’s trading, I did not have too much time to trade today which was fine for me. I find that I am not yet trading on the open, but I will be some time soon, I can only hope. The price action is very fast paced during the first hour and I really like it. It actually fits my style and I take it like a duck to water. The thing is, I find that I rarely trade it. I know, what is it going to take. I am working on it. I am going to have to break out some of that discipline that I talk about here pretty soon.

To capture two points during the market open, can happen so fast, I used to find myself finished almost what seems like before I really started. There is much more opportunity during this time, but you have to know how to sift through all the noise. Well, I can trade noise and I teach how to do it and for how much to do it for.

Often, the first move or so is not the real trend. The market is looking for anyone it can hook, before it takes you down. Market psychology play a big role in the trading markets and you need to know how to maneuver in the turbulent waters. You can get whip sawed extremely fast if you are not able to flow with the market rhythm.

The markets have a rhythm or some have called it a vibration. I can relate, because that is what you need to feel to get in sync with the order flow. Don’t get stuck on one direction or, if you truly see a down day and only want to take trades in that direction, work on excellent timing. That is going to be the two or three days per month that the market basically only trades in one direction. Often there is some catalyst to push the market in one direction during these days and it often pays not to go against it.

Barring that, you will usually see trades on both sides of the fence. Some people can only trade from the long side, it is easier for them and seems more natural. I would say, that as a futures trader, I have a little bit of a problem with that. If that is what you do better, OK, but I believe you should be working on seeing the same trades as you take on the long side, in the opposite direction. I will give you, it does take time to spot the reverse side of a long and have it look as good of a formation as you are used to taking.

We all need to continue to work on timing, price action formation, order flow, what constitutes a trend and what is considered counter trend? Are you skilled to spot counter trend trades, or do you have to sit out for long periods of time for everything to line up?

Just today, I heard an interview of a trader who takes a 6 point stop when she enters a trade and she has a 12 point target. I am not criticizing her for doing so, that probably fits her situation and that is why she does it, I would guess. But to have a target that large, you will have to sit and watch the market all day long for things to come together. If you take a 6 point stop, you may have to wait two days for a trade to come your way and you don’t even know if it will hit your targe. The ranges are not that large everyday and if you miss one, you may have to chace it which only adds to your risk.

If it works for her that is great, but you need to find a style that is going to not only fit your personality, but fit your time horizon. If it takes 6.5 hours a day to watch the markets x 5 days per week = 32.5 hours per week and divide that into your net return for the week/month you will see that if you value time, as I do, you end up investing a lot more.

I value time pretty highly and what I can do with more available time. I look at the big picture as a form of leverage, I know we can all relate to that. Limited Time x Resources = More available time x Expanded resources = Investments in lasting relationships and people. Money is not the ultimate goal for me, it is a means to an end. I know we have all heard that, but it’s what makes up me.

Have you ever asked yourself the question, “What is it about Day-Trading that appeal to us”?  That is a good question and if you answer it honestly, it could actually help you in your trading. If you really know why you like the business and many people say, “for the money”, and that is OK, it is an individual thing, but maybe try and go a little deeper.

If it is for the money, than you should not have a problem to close up your computer for the day after you have hit your goal for the day. See what I mean? We all trade for different reasons and it is good to really break that down as far as you can to better understand the decision you make while trading. Food For Thought.

Until next time…..

http://www.screencast.com/t/ZGMxMTE2Nz

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A Bad Trading Day, Turned Good !

Tuesday, December 8th, 2009

Today is Monday December 7th and the major market index’s close down slightly.

We will soon see resolve in market direction one way or another. The volume in the S&P futures was very slow today. We only had a few points of movement in both directions and it lasted 4 1/2 hours. Nothing was going on and I am sure it was killing a lot of impatient traders.

The current condition of the S&P cash market is that the hourly momentum is pointing down and the 120 minute chart as well. I do look at both for longer, bigger reads. The daily chart has turned down slightly as well, with the weekly and monthly both up. There are many variables for this market right now and it is better to trade off of what you see.

I can not say for sure at this time where the next move is coming in at, currently it looks like it is down, but that could change. A move to 1080 could come quickly, current trend-line support. On the other hand a break out above 1016 should bring in a lot of short covering and could spark a rally.

The market will make up its mind and I will listen to it. That is good advise right now. In addition, I need to leave that possibility open that the market blasts off through the solid overhead resistance, it could happen? The bullish sentiment numbers are not yet at an extreme and that is really the more important number as opposed to the extremely low bearish readings now being posted. So we what.

As far as just reading the market, that was what I did today. I am still sick, but I thought not sick enough to miss the trading day. I can see that my judgement is a little off and I am not firing on all cylinders, but with a Big V-8, if one plug or wire is bad, you still have 7 good cylinders and enough to run and get up a hill or two, but no long distance drives please.

That is what went down today. I came very close to my daily stop out target of -4 points, close but not that close. I went to -2.75 points down. That is the worst that I can remember for quite some time. I saw a big move brewing and thought it would be better to take less trades and go for the bigger move. It was going to be easier for me.

Well, I really have to work on the first trade, 1/2 point loss. I came back with a 1/2 point gain which should have been for more. Here the loss on the first trade did affect my decision to just trade back to break even. That cost me an additional 1/2 point, because I did see a solid 1 point on the trade.

The next trade was -1/2 point followed up by -1 point. The next trade was really bad, I did not like it one bit and after I placed it  knew right away I was too early. I went outside my method and did have a chance to get out at break even after taking on some heat, but I didn’t .

 My saving grace was I knew what I was trading for and it was big, to get the larger trade I did rationalize a bigger stop and placed it at the time of order entry. I still don’t like doing it, because I don’t want to set a precedent for doing it often. It is usually never a good idea to move your stops. If you do, your entry was not right and often you only make it worst.

So, I had 3 losses in a row and for me that is bad. The first -.50 second -1.00 third -1.50. That is usually my trigger point for taking a break. I was down 2.75 points so far at that point, really not that bad but I always know that if I go to -4 points on the session, I stop, period. I don’t mess around with that one. If you are off, you are off. If you are sick it can affect your trading. If you don’t have a point in the session that you stop trading, what is going to stop you from being down 8 points or more. The answer to that is, nothing and it happens all to often while trading the E-Mini’s.

I only have a limited amount of pressure on myself. The worst that can happen is, down 4 points for the day. I always ask myself, can you live with a 4 point loss for the day? My answer is always the same, yes I can, no problem. I can always make it up in the next couple of sessions. That is another good point. You don’t have to try and make up your losses all in one day, once you start again. If two points is the minimum base daily target and it is for me, then I only need 4 points for two days in a row and I have the loss covered. So there you have it.

The last part of the story is the next trade. I have been trading a little more the last couple of days and put on a double position of 4 contracts and scaled out of the first contract at +9 points, the next two at +8 points and the last one at +7.50 for a very healthy gain overall. 

I saw the trade coming in the bigger time frames and originally got excited, that is why the last loss was not cool. I needed to control my emotions and didn’t. I can try and excuse myself and say that I am sick and that is true, but I would only have myself to blame if I got stopped out for the day. I was not 100% and in reality I should be when I trade. As day traders, we can not get cocky or overly confident at anytime. If you let your guard down you will get hit, plain and simple. The market does not care who you are, it will take your money just the same.

There are some important lessons in this post, think about your own trading and compare the thought process.

Todays trades are below in the video. Tomorrow I will try and continue on from Fridays ending post.

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Do You Have What It Takes To Be a “Day Trader” !

Sunday, December 6th, 2009

This post is for Friday, December 4th and what a reaction from the unemployment numbers.

Friday’s session started out strong, reacting off of the strong unemployment numbers, only loosing 11,000 jobs for the month. This was a lot better than the street expected, bringing in the buyers. The thing about it is, that it did not last. It sure did make for some nice trades to the upside, but the market stalled and the smart money used the rally to get out with the gains in hand. We did get within a point or two of that 1120 number that I have been eyeing for a long time now. I would call it a HIT, seeing that it has come so close.

This market has been trading very light volume as per the NYSE. The last few month, the volume has been slowing. September was lower than August, October was slower than September and November was slower than October. A growing trend or the calm before the storm?  With the kind of top we are putting in, broadening, with very little price movement, it could be considered worrisome for the bulls.

What has been forming for some time, is called a rising wedge, which is in a up-trend. That traditionally is considered a bearish chart pattern with the resolve being, a break to the downside. The characteristic’s of the formation is a broadening top, one that has slowed and has clear overhead resistance established, yet still making new highs. On the other side of the chart, the bottom side, you will see rising bottoms that seem to accelerate at a much faster pace, forming what appears to be a “Rising Wedge”. The movement is getting squeezed off.

The interesting thing about this formation is, that it is running out of room and something is going to give. As I mentioned, the give, is usually to the downside and often it breaks hard and fast. The reason is, all of the built up sell stop positions under each critical low. Traders and investors have been riding this market move up steady now for 8 months and they have consistently moved their stops up under each one of these critical lows to protect their profits.

We got a taste of how fast and quick the market can move with this type of setup building. Last week, after Thanksgiving as I may have mentioned in an earlier post, the futures market sold off around 45 S&P points in the night trading alone before recovering. That is equivalent to about 450 Dow points. What I believe was also happening, was a  shake out of the shorts. Those traders that tried to position themselves for this expected big selloff, were pulled in and thrown out, with a big fat loss.

The market never likes to make it easy for those traders who are trying to capitalize on any expected move. It will do what it has to in order to incur losses and build frustration before a big move. The next time the trader tries to enter on the real move down, he will hesitate and thinks that the market is just tricking  him again, but this time the move is real and he is “Left Behind”.  As he realizes that the move is real, he jumps in, just as the market is now ready for a reaction rally back up and he looses again.

This is typical market behavior and it happens in every time frame a would be trader engages with the markets. Successful traders have come to understand the natural rhythm and flow of the market. They use the above scenario to their advantage and are able to take money out of the market, where the struggling trader is just trying to make sence of it all.

There are many reasons why the markets tend to flow the way that they do. There is always a great deal of emotion behind buy and sell decisions, which then get released into a sort of herd mentality. As traders, what ever time frame you trade, your job is to minimize your risk first by pre-defining it and exploit the opportunities that favor a move in your direction. You always look to get the edge before you put on the position. No edge, no trade. If you do place a trade and you don’t see your advantage, then you are gambling, straight up.

As professional traders, there is no room for that sort of behavior. A gambler will never have the advantage, but hangs his future on hope and that is never where you want to find yourself. The market will do its job in purging the undisciplined trader from the ranks by leaving him with nothing but losses to show for his action. With this, even stronger emotions set in and self sabotage is too often the end result. It is very sad, that this happens day in and day out, but everyone on Wall Street who trades can not come out on top, even though they all think they will.

What are you going to do to make sure that you are not one of the undisciplined. How are you going to be sure that you have the edge and what will you do if you start to lose that edge? These are all questions that need to be addressed before you start trading.

One thing I caution any trader just getting started and that is, be humble. Don’t be overconfident and think that you are going to make a killing. Usually, it only works against you and makes your goal toward profitability that much harder and or impossible. The second thing is, be conservative and realistic with your performance. Having a goal of 8-10 points for each session is not realistic, especially for a new trader. A goal of 2 to 4 points is more practical.

All that being said, you must have a solid approach to trading or you will never see the light of day. I will try and pick up where I left off in my next posting.

Fridays trading, I did something a little different. I started a little earlier and finally saw some volume and movement, hurrah. Secondly, I played the move for a bigger point return. The first trade was stopped out for -1 point, the next was staggered for several points and I was done. See the video below.

Have a great weekend

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Stock Market Showing Weakness before Unemployment Numbers

Thursday, December 3rd, 2009

Today is Thursday, December 3rd and the markets are now starting to show its hand.

It seems pretty clear now, that the market is ready for a pull back. Over the next few days, I would expect the market to pull back to support, around 1077.  At that point, we will have to see, but the short-term momentum is down. I believe there is important unemployment numbers coming out tomorrow. I don’t know how or what that is going to do to the current momentum, but I would suspect that it isn’t going to change anything much, still down.

The daily charts on the Dow and S&P have been broadening, as I mentioned lately. It is getting strung out with a slight upwards bias, but that appears to be changing at least for now. Early in today’s session, we hit a new high in the index and backed off from there. We did close at the low of the day, which is really a bad sign. We will just wait and see how it plays out, but this is just what I am seeing.

On the sentiment front, I was waiting for the new numbers to come out and today they did. The bearish percent dropped again, by 1% to now 16%. That is low, very low. It has not been at that low of a level in the past 5 years or longer, I can only see the last 5 years. The bullish sentiment went down a little, from 50.6% to 50%.  We will just keep watching the bullish sentiment for changes.

With all that being said, the market can make its move down now if it wants to. You never want to place overly strict conditions on market flow. Reading the price action is the key and will always remain that way. Identifying sentiment conditions only gives occasional insight into major market moves, it is not full proof, but it has shown itself to be very accurate for the over 20 years I have been following it.

In todays trading I started trading again during the slow period of the day. That would not have been really to bad in and of itself, since that seems to be when I start most days, but I was feeling sick today. That was not fun. I should have taken the day off, but I didn’t. I hate getting the first trade of the day wrong, but that was how it went. I saw a move short that I was sure was going to pop, but I could not get into it fast enough and it threw my timing off. I did recover with a nice 7 tick trade a moment later, after that the market just stopped. It took forever to move a couple of ticks. I remember one small little momentum move took 30 minutes and it only moved a few ticks. I was dieing there, waiting through all of that and not feeling good to boot.

When I looked at all the real nice moves from the early morning trading I felt worse. If I would be trading the open, I would quickly have gotten my goal and could have ended it. When I feel better, I will be trading the early morning open, thats it. I have been trading OK, but it has been more work and taking longer because of when I start trading and am limiting myself because the moves are just not their.

The smart thing is to trade the open and take off the rest of the day, like everyone else. Enough about that.

I am going to have to end it here for today. Below is a video of my trades for the day.  

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Free Mental Exercises in Updated Website for Current Readers !

Wednesday, December 2nd, 2009

Today is Wednesday, December 2nd and the market saw a new high in the S&P futures just after 7 am West Coast time this morning.

The high was 1115.50 and just 4.50 points off that all important number of 1120 which represents that 50% retracement point for this whole move of 2 years past. The market is not making it easy for anyone at these levels to figure out what its real intentions are.

Today is now Wednesday and yesterday the new numbers came out which update the market sentiment from the professional new letter writers. This may give us more insight into the next move. I have been waiting to see the last few % of these writers bit on the bullish argument, which would likely put the numbers into the extreme category. The numbers are there for the bearish side already, only 17% are bearish, which is an extreme minority position. I can see what the new numbers are sometime tomorrow Thursday. If they turn more bullish and it is very possible, the momentum has been leaning that way, it would be a strong signal that the next major move will likely be down. The last I looked we were at 51% and 55% + is usually the “Tipping Point”.

I believe there is some important unemployment news coming out in the next day or so, which could be the catalyst for the market to get going again. Time will tell us. In fact time is a very important component to the next move. You tend to get the “Pressure Cooker Effect”, as prices stay locked into a trading range. Positions are built up on both sides of the fence waiting for things to pop. That is what usually happens when the lid is blow off.

We did see some of this built up anxiety for the shorts last week. During that Dubia credit scare, the futures market bit hard on the sell-off and the market cleaned out all of the position stops along the way to minus 40 S&P points, a clear wipe-out of short positions. As the market moved back up before the open, the cash market never saw those losses and forced traders to cover and buy the market back at a loss, which helped to push us all the way back up. 

I am sure there were a lot of angry traders last week after “Turkey Day” Friday, having to see themselves cover a short rally that had no legs. There may be traders out there still in the short, with deep pockets suffering heavy paper losses.  That is the sort of thing that can break a traders account, when you are so sure that the market is going to do something and it does not. You are not willing to admit that you are or were wrong so you hold on, hoping, wishing and many times praying that the price will come back down as in the case I just mentioned.

unfortunately, this is not the circumstances we should find ourselves in when it comes to praying the market in your direction. If you find yourself doing that, something is wrong. You only need to learn how to properly trade the markets and you will not have to resort to these kinds of mental tactic’s. The market is not going to listen to or care about how you feel. If by some chance you think it did and you got the reaction you were looking for only builds for things to get worst the time you find yourself in that awkward position.

These are all signs telling you that you need help. The question is will you listen to the voice inside of you or continue to try and go it alone and figure it out by yourself. There is no easy answer to this question, but I can tell you one thing. The market has a way of making all of its participants pay the entrance fee and the tuition. You may be asking yourself, what am I talking about?

There is a cost of doing business that all traders have to pay. I have never heard of anyone getting around it, ever. If it does happen, it is as rare as hitting the lottery, not likely.

The cost of becoming a participant is and can be broken down in many ways, but all will have to commit funds. No one is born knowing how to trade, in-fact it is counter intuitive and not natural to human nature. So the potential participant has to learn how to trade. In learning you will make mistakes, for sure. Those mistakes can add up to large dollar losses and you may still not know how to trade. Reaching out for help is a way to cut down on the losses and shorten the time it takes to become profitable, but that cost money too.

So in the above scenario, you will pay one, the other, or both, before you have a chance to find the road to profitably, but rarely if ever will you get away without paying and that is the entire point. How far will you allow your trading funds to draw down before you find a solid way to stop the bleeding, recover and move forward to fulfilling your dreams.

All of this being said, you do not have to partner with me, but you should consider getting help if you are like most people. You can only learn so much in books and it is usually very different when you apply it to real world trading.

If you need a little encouragement, I have updated my website for now and have on the left side of the main screen a couple of audio scripts that I made. One is, “Holding your Concentration While Trading” and the other is “Attaining your Goals”.

I have included in my program package 12 titles, eight of which are currently finished 4 additional to be released soon, and have posted two of them for free. It is not rocket science but it can help you get focused and maintain your discipline along your journey, listen often and believe it is possible.

What ever my readers decide to do, I wish them only the very best in reaching and attaining all of your goals and dreams. Until next time !

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Do you have a Daily Trading Loss Limit ?

Wednesday, December 2nd, 2009

Today is Tuesday December 1st, and the market is showing strength.

This is a good example of the lesson I talked about a couple of weeks ago. Stay open-minded and let the market work.

I have been saying for the past 3 sessions,  that the market needed to stay above the 1085 level on a closing basis to stay alive and so far, through all the news good and bad it has. I would rather see it that way, because it is a barometer of future growth in the economy and the job picture. The market does not listen to me, so it really does not matter what I or anyone else wants, but is a collection of mass emotions reflecting the economic standing of our country.

With the new month now here, the monthly chart as far as my work is concerned has just turned up finally, the weekly charts are up, the daily charts are up and the 120 minute chart just turned back up today. So the monthly, weekly, daily, and 2 hour bar chart are now all up. That being said, be careful, but it is looking like market wants to break out. We have been here about 5 times now and every time it fails. If it can’t go down, it may just be building for a break out up. I was looking for it about a week ago and it did not come and am not making any more calls on major direction because it is all to conditional right now. The only thing I know is that if the support at 1085 gets broken, that will spell trouble and we will have lost momentum and lower prices may be inevitable. That has not happened yet, so we are really still good to go as of now. As I have said, things change fast, so be on your toes if daily price moves are that important to you.

Yesterday, in the night trading we broke above the 1101 resistance pretty easily and continued higher today to close to the high of the day, a good sign at 11o9. It is going to be pretty significant if this market breaks out to the upside. We will just wait and see how it all shapes up, but stay open-minded and let’s have the market decide for us, it’s easier that way. If it does break derisively up, a short covering rally will add fuel to the fire, so the move can easily be explosive.

Today I took a few trades, the first was for -1 point, +3 ticks, +13 ticks & +8 ticks on a split trade, followed by +1 tick and -1 tick.  I picked up my daily goal in a little more than an hour, but I was not to happy with how it went down. I talk about it in the video below.

It does go to show you, that if you do the right thing, the right things will happen. To me, the most important thing is to trade correctly and not so much about the money. If you trade correctly and follow your trading model, over time, you will come out on top, if you have a good formula, method, system or what ever or how ever you trade. If you take “Non-Method” trades, that actually work out for you, it can be to your overall detriment.

Successful trading should really be pretty boring. You keep doing the same thing over and over again. You also keep getting the same boring results week after week, month after month. That is just what the “Doctor Ordered”. If you do the wrong thing and get the right results, it can build negative reinforcement and create bad habits that you will soon be forced to deal with and break.  So the moral of the story is, stay with your trading plan and only take trades that meet your criteria.

Yesterday I was talking about having a limit on your losses. Have you given that some thought as of yet. Every trader trades differently and rarely do you find traders that trade exactly the same. That being said, if you trade the S&P’s and carry a larger stop, say 2 or 3 points, you will need to have targets that are at least close to that if not much more. That is not me, but it could be you and you may be successful at it?  The other thing with that is you will have to be more selective in the process and you may only find 2 or 3 trades for the day that meets your criteria. So, you have to wait and sit for hours for your set up to develop. Question. Do you have the patience to do that? Do you have the time to do that? If you get antsy and take a less than desirable trade, you are now underwater by say 3 points and you only put on one trade. Can you see where this leads. A struggling trader who gets frustrated with his or her results.

These are the reason’s why I trade with small stops and work on precision entries. My target are often small as well, but I do have on average a minimum one to one Risk/Reward ratio on my smallest of trades and much higher on my larger ones. The other benefit is, you have so many more trades that can be taken, without waiting for hours at times for conditions to come together. Your wait is usually only minutes for the next potential method trade.

I will talk more about this tomorrow or very soon. Until then, see you next time.

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