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Trading Dreams Can Come True

Friday, April 24th, 2009

Today is Friday, April 24th and the Indexes continue to hold on.

Yesterday just before the close, the Dow shot up about 60 points in the last 30 minutes of trading, closing at its high for the day. Nice. Today, there was some follow through to that late rally and the Dow pushed up another 120 points and the S&P 14 points. The market is almost back to where it was last Friday before Monday’s big sell off. I did not see any news today, but you can be sure that Wall Street is talking about something, earnings or what have ya.

News is not the only thing that I don’t usually watch during market hours. I have come to eliminate anything that can give me a bias, one way or another. For instance, I know a lot of people look at the TICK (NYSE tick count) and TICKI (Dow tick count). I don’t.  Many look at the TRIN, and the ADV/DEC. I don’t.

There was a time that I did, but I have come to realize that they are distractions to the one and only thing that counts, PRICE ACTION. I remember saying to myself, the TRIN is posting some high numbers and came to a conclusion that the market should do this or that. Even when you look at all of them, sometimes that is worse because it reinforces that sometimes wrong opinion.

When you see price action telling you one thing and you form and opinion based on a collection of readings, you now have a conflict. It creates indecision and you may have a tendency to rely too heavily on them to tell you what is happening, when all you need to do is LOOK AND READ it.

The problem is most people do not know how to read the markets. It has a language of its own and unless you know how to read that language, you are going to misinterpret what it is saying. I know that very successful traders do look at those things and it may work well for them But we are not them. They may have a way to discipline themselves to not be swayed by other interpretations of these readings and to that, I say bravo. I have found for me, that it is too many things to process and need the time and focus to just read the price action.

In today’s trading, I had a very quick day, 15 minutes. I only put on a few trades and closed it up. I had 5 trades and only had a 1 tick loss on one of the trades, bringing in a modest $550. I’m still feeling crummy – headache, a little dizzy. Oh well, you don’t want to hear about that. Me either. Monday, I would like to see if I can find a nice pyramid trade setup and ride it out for what ever it will give me. I need to be selective and cautious and you know I will.

MENTAL EXERCISE AND CHALLENGE: Here is a challenge for any trader who wants to exercise his or her self control. Pick something that you have a hard time saying No to. It could be anything at all, big or small. If you are able to say No and exercise self control in that area, you are and will be exercising your mind and willpower.

You may want to do it with a couple of things and try and do it for more than a couple of days or long enough so that you feel a little pain. You know, “NO PAIN, NO GAIN”.  If you do decide to take the challenge, make sure it is something that you are sure you will overcome. This can be a double edge sword, so don’t do it unless you are sure you will not fail yourself.

If you do fail, after you gave your word to yourself, it can have a reverse effect. This is mental reinforcement so that you can be sure that when you are in the pit, you will only do the things that are going to advance you in your overall goals and objectives. All of this is for you to show yourself that you are in control. You do not have to do anything that you do not want to do. But prove it – to yourself.

This little exercise will carry over into your trading and when you get the urge to take a less than perfect trade setup, ”JUST SAY NO”.  You would be surprised what this can do for your bottom line. Trading downfalls come from losing control and if you can show yourself that you can maintain control in the face of adversity, then you will be exercising your Trading Discipline. This is a follow up from last week and I will get back into this subject in the coming week.

I just took some of my own advice. I thought about not writing this last piece because of the headache that I have right now, but I exercised some self discipline and wrote it, because I know it very well may help someone out there prepare for the battle that they will soon begin. (W.C.)  Believe me, it is a battle, but its one that you can win, if you are willing to do things like I just mentioned above, which is small and just a start in the right direction.  If you wait until you are faced with making heavy decisions, you may be tempted to go beyond what your trading plan calls for and that is something that cannot happen for the person who sees himself on top.

JUST DO IT. Believe in yourself and your dreams.

Have a great week end.

http://www.screencast.com/t/Hl1CcIkzDXs Today’s equity chart

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Strategy: Big Gains With Low Risk

Wednesday, April 22nd, 2009

Today is Wednesday, April 22nd and I had a very nice day today after a wobbly start.

In today’s trading I did not split any of my trades but just took single entries with single exits. I missed a real big move to the upside and the strategy I wanted to implement would have worked great on that, but it passed me by. Since I did not get in it early on, I just let it go.

Once it reached the top of the range, it started in with the CHOP. I had a few gains and a few losses, up to 500, back down to zero, or little less. I got stopped out of a few times in a row and had to take a break. I came back and the formation changed up just enough for me to get a good read on what was happening. The move I was trying to short earlier, just took a little longer to build and it was now ready for a move back to the middle, which was a big 10 point move down.  I picked that whole move up, but built into the position and pyramided myself a very, very large gain.

This is what I had in my mind from this morning’s open, and the move I was expecting was to the downside. Each entry has its own stop and can be treated as a separate order.

The idea is, once you put the first order on and the move starts to go in your direction, it will slow up and build a little support until in breaks down again. When it breaks down for the second time, you add a new position on and pull your stop down to match your new entry stop point. If the second entry gets stopped out for a one point loss,  the first order made you 2 points, so you net 1 point on the trade.

That is not what happened. Instead, it dropped in the desired direction – down. Now I have two positions on of 5 each, but no additional risk. The process happened  three additional times, with each order as a new position and continuing to drag all my other stops down to match the stop from the last order.

That is a way to build a very large stake without any additional risk. Each order placed is standing on its own. You really need to use the triple screen, to make sure you are inside the larger trends which will carry you forward to your desired direction – in this case, short.

The move started at 9:20 and lasted about 45 minutes. I have done this before, but never this big in size. These are the Mother Load Trades that are nice to capture now and then. I just wanted to prove to myself, that if I want to, I could trade for larger returns and keep my RISK  still to a very minimum.

If it had not worked out like I experienced the trade before, I was only going to be out $250 plus commission. But once you see the potential of a big mover and you play it right as I explained, you are looking at thousands, without any additional risk other than your first trade. Very interesting, isn’t it. I will be looking for more of these trades as they come up and will try and record one of them for you to look at. Don’t know when, but I will be looking.

After all is said and done, I took 21 trades with 15 gains and 6 losses and came in around $7,700 for the day. A big one.

As I write this blog, it is just before the close and I see that there is a 20 point drop in the works and upon inspecting the potential add on shorts there, I see 5 possible low risk entries on that move. In fact, that was the move I was really expecting.

After the one I was in, the market rallied back up to new session highs, which I am sure caught tons of people off guard. It caused them to cover their shorts and buy back their contracts, thus pushing prices up. Once all the shorts covered and a very nice pivot point established at the top, LOOK OUT BELOW, for a 20 point drop. Again, that is the one I thought I was in originally. With that kind of move, I wonder what that would have yielded to the bottom line.

There sure is merit to getting large gainers and I see that played out here today.  The big moves are available, but they do not come that often. The key is, can you position yourself to take advantage of moves like that, but only risk 4 or 5 ticks on the trade.

Most people need a three or four point stop to do that and most of the trading day. I am able to take what the market gives me, sometimes it will allow me to take more, but I may not be ready to receive it. Until I am, I will continue to squeeze out a few points a day and hit a minimum daily goal for myself.

Today was a nice warm up. The very last thing I will say is, if you know how to position yourself to take advantage of Low Risk Entry Points and work that into  bigger time frames, you will have the skill to trade any kind of market on demand. How cool is that?

http://www.screencast.com/t/txJ1iBrLC Today’s equity chart

http://www.screencast.com/t/iXjXif3RH Decided to include today’s video of 1600 tick chart

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Trading Discipline, Part 5

Saturday, April 18th, 2009

Today is Friday April 18th and another lesson on trading discipline is below.

First, the markets put in another session of higher prices from their reactionary low of a few weeks ago. Very nice. The daily momentum is still up, so be careful on fighting the overall trend, for those who swing trade the S&P’s. I am not too concerned with the larger direction, because I trade a much smaller time frame and take trades in both directions, but look to identify the stronger side of the market so as not to fight it, somewhat relative.

In today’s trading I only traded for 12 minutes, start to finish. It was later in the day and was  just trying to get back on my feet. I came into the trading market during the last 30 minutes of the day. It worked out fine. I took 4 trade entries, the first was a loss and the next three were gains, which included a few small runners of a couple of points each. I separated my exits today and took some off early and let the other half run a little. I picked up an even $ 1,000 dollars and shut it down. No struggles today, just picked it up and moved right along. The signals were very clear and the market had volume to push it around in my direction.

Today’s Trading lesson will continue in the area of “Trading Discipline”. This is an area that very few people tend to focus on, but is one of the most important. I could not say which one is more important. If you don’t know how to trade, trading discipline is not going to do you a lot of good, but once you have a solid approach and you know what you are doing, which is really not that easy for most people, you need to spend a lot of time in this area.

If you cut back in this area of training and spend more time in perfecting your method or trading style, it is not really going to make a difference, because you are going to add yourself to the ranks of people who thought they could, but couldn’t. I am just stating the facts on this one and trying to get your attention as well, because you need to spend as much time, or even more, in this area as you are spending right now in getting your actual trading execution in order.

Believe me on this one. All of your hard work can be lost if you cannot handle all of the outside factors that will be presented to you, regardless of trading know how, so that is why I feel so strongly about this. It was always my intention to start my blog and website with trading know how, then switch over to trading psychology and it’s related issues. There is a wealth of information that I will be discussing in the weeks ahead regarding this area. So stay tuned.

Yesterday, I discussed practical ways to slow down the sometimes impossible situations that we as traders find ourselves in – multiple losses in a row.  I say it this way because slowing down the destructive mind set of self sabotage is sometimes the best we can do.

Others will truly see how dangerous this situation can really be and take very strong measures to stop it. It is the cause for most trading failures, in my opinion. Many people will have a fairly good idea on how to capture trading profits, but it is that one or two days a month that they give it all back and then some. This is really a fixable situation for the person who is willing to do what it takes to become successful on a monthly basis.

If you find that this is you, there is hope. If you still struggle in putting winning days together, then you have more work to do. But for the trader who finds himself in the above situation, you need to look for the answers in trading psychology and trading discipline. There are reasons for everything and nothing happens by its own merit. This is where you need to look within yourself and either self-analyze your trading problems or find a trading coach or mentor to help you through the unseen issues you face. If you see yourself as a winner and have always found the solution to whatever it was that was holding you back, then you have a great chance to make it.

Having the right mind set is one of the first things you can do to put yourself over the hump to profitable consistent day trading.

* How do you see yourself ?

* How and when do you see your future becoming a reality?

* What are the things in your control that are holding you back ?

* Are you willing to pay the price to overcome your stumbling block ?

If you are not sure what it is that causes you to lose control and have large losing days, then I would recommend you take some time off from trading altogether and explore deep into the root cause. You may not be able to do this on your own. If you do attempt this on your own, you need to be brutally honest with yourself. It is not going to do you any good if you don’t pull down all the barriers you may have put up. This is the only way to attack the problem and that is exactly what you need to do.

If you take a passive approach and say, “It will just eventually work itself out”, you are only kidding yourself. Very rarely do these things fix themselves, even if you seem to be doing better for a while, you can have a relapse and find yourself no better off than before. The key is, are you willing to change and pay the price?  I will tell you right now, most people are not. That is the reason so few people are profitable on a consistent monthly basis, to the point where trading is their main source of income. This does not have to eventually be where you spend the majority of your time, but it produces the majority of your income.

If you see it, live it, work hard for it, you can have it. DO YOU BELIEVE ?

http://www.screencast.com/t/3avuzSBLQW Today’s equity chart

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Trading Discipline, Part 4

Friday, April 17th, 2009

Today is Thursday April 16th, and I have a valuable trading lesson below.

I started my day on the wrong foot, that was for sure. I know the potential always exists to mess up a bit, but I also know that I have enough discipline to stop trading if I am having a bad day. We all need to know at what point you will stop trading for the day if you hit your daily loss limit.

This is a discipline question that needs to be known before you start the trading session. I always know what that point is and I feel other traders in the business should also, but everyone trades differently and there are almost no two styles alike. You may mirror yourself after a successful trader and that can work well, but you will eventually need to OWN IT for long term success to take hold.

This would be whatever you learn that seems to work and slowly adopt it as your own, because everyone will see things at least a little differently. The bottom line is, did you follow the “base method setups” to get your points. If you did, then your results are duplicatable for future profits and that is what we want – daily positive results.

Today, I came up to my daily loss limit, which for me is always two times my minimum daily goal. My daily goal has been one thousand dollars, so my maximum loss for the day can be no larger than two thousand dollars. My first couple of trades were small, then went to double positions. If I click 5 contracts twice, that is a double position, but it shows up as two separate orders when taking losses and gains.

I was using double positions and not hitting my targets – not a good thing. I usually lighten up until I get a better footing for the day, but I did not, which pushed me down right above my limit. Funny thing is, when the chips were really down, I know I had to hit the next trade or I was going to have my first losing day in months.

I finally got it together and waited for a very good runner and followed it up with another one almost just like it. I put one last trade on to top off those two large gains for a total profit for the day of $ 2,600 dollars – over double daily goal. WOW, that was close.

I was not feeling well this whole week and it finally showed up. I noticed I did not have any focus and patience to wait and look for my basic trade setups and it showed. I almost was not going to trade this morning, but I reasoned with myself and went ahead.  I did not like the feeling of having a string of losses like I did (remember I took several double positions, which makes it look worst), but how I handled the emotions is what I am going to talk about today. This is the exact topic I had planned to discuss, no kidding. Is that not ironic?

Trading Discipline: Part 4

Trading Discipline has many aspects to it and I could write many more articles on the subject, but the one I will discuss today is how to handle your emotions after having multiple losses in a row. The easy answer is to just tell yourself not to get anxious and wait the move out for a directional change.

Easier said than done. We have all been there and will likely be there again at some point, but you really need to rehearse this scenario in your mind to pre-plan how you are going to deal with it when it happens. If you don’t do the work now, you will certainly do it later, but under different circumstances, which could cost you big dollars.

This is a very serious matter, more than you may realize, because it is at this point that many traders can just LOSE IT.  What I mean is, you get to a point where you can no longer handle the pain of loss and if you don’t pull it together quickly, you will self destruct. No kidding. Everything you do will be wrong, not matter what. Your trading plan will get tossed right out the window and you will go into survival mode, which is better classified as SELF DESTRUCT MODE and you really don’t want that.  So the very first thing is:

* Take a deep breath, get some oxygen in your body, so you can think clearly and take at least 30 minutes off.

* Go back over your contingency plans you thought of before this whole thing started.

* Imagine what you did when you rehearsed this scenario in your mind, see yourself confidently putting on a positive trade, while imagining hitting your target or your expected outcome.

* Be sure you do not trade past your daily loss limit.

* If you still have room to trade, plan it out, just like a sniper would pick his target. You may only have 1 or 2 bullets. Make it count.

* Have next to your computer a script of positive self talk, that will help you change your negative state of mind, this should be something you read often for this scenario.

If after doing the above, you still have a loss or even hit your daily loss limit, don’t beat yourself up. One of the reasons for a daily loss limit is it takes the pressure off. If you already know ahead of time that this is the very worst that can happen today and you accept that, how much easier can it be in relieving the stress and pressure.

One double daily goal loss is not bad, when you consider that there will eventually be days that you hit double daily goals. I do it all the time. In fact, most days are at least double daily goal. That gives me plenty of room to come back the very next day and still stay on target of at least hitting a daily goal average for the week.

Never let your trading account losses get away from you. As “Day Traders”, we need to stay alive and our life blood is trading capital. Keep the trading capital in your account, so you can trade again. If we lose our blood, we die. Don’t let this happen to you!

http://www.screencast.com/t/qortOnHL Today’s equity chart

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Trading Discipline, Part 3

Wednesday, April 15th, 2009

Today is Wednesday April15th, and all is well.

I had a fairly easy day on the board today. It could have been better, but the opposite is also true. I had one loss that totally could have been avoided, but I had to get over it and move forward. If I were to beat myself up over that, it could effect future trades. Knowing that, I saw my mistake very easily and learned something from it. It’s always important to go over your trades, especially after the trading day, to see anything that you might have missed. If you make mistakes, its OK, we all do, but we need to learn from them so we can minimize the damage and not repeat it if possible.

Today’s trading I had 12 gains 4 losses and came right up to $1,000 dollars and stopped. I turned my data feed off and did other things today. I traded for about one hour from 8:45 to 9:45 am West Coast time. There was not a lot of movement and it was a bit choppy, but I was still able to squeeze out my daily goal. I was only trading 5 contracts for all orders, so I had the equivalent of capturing 4 points net after commission. I came in to today’s market with low volume, not a great deal of direction, not a lot of overall movement and still captured my points. I am pleased when ever I get good results with less than ideal conditions.

Yesterday, I went over a new idea that portrays discipline in the life of a trader. Last week I pointed out another idea and will give a short recap now.

1) Your trading environment has an effect on your trading performance, so keep it neat and organized, it makes a difference. (last week)

2) A balanced home life and priorities that are a reflection of your personal long term goals and values, a key ingredient for long term success. (yesterday)

3) Exercises that you can take to expand your general level of self-control in any area, which will spill over into greater control while trading. (today)

Point number three is what I will briefly discuss now. Maintaining control while trading is going to be one of your best friends, if you can find a way to harness it’s benefits. One of the hardest things to do is to act when you need to, not before, and not after.

If you discipline yourself in small areas of life, it will send a message to your brain that you do what you say, when you say it. If you procrastinate in putting things off and then scramble to get it done at the last minute, like finishing your Taxes on the deadline day, you may not be as in control as you would like.

The good news is, we can all get better at improving in this area. Find something small, that you know you can overcome. It may take some thought and it can be just about anything that can effect positive change. If you resolve to overcome whatever that is, and get some desired benefit, you are now exercising your mind, will power, self control and gaining greater self esteem.  There are many benefits that can spill over into your trading session. You will come to trust yourself more over time as you exercise yourself in these areas. That will give you added self control when you need to stay out of the market because your trade setups are not yet present and a whole host of other benefits as well.

Back to trading technicals. Before you put a trade on, your TIMING is going to be critical.  When you see the trade setup that will yield you an easy point, you need to have the discipline to take the trade at that moment. If you wait for confirmation, you will either overpay and risk getting stopped out, thus also hurting your chances of getting filled at your target.

This kind of discipline and confidence can only come from getting a good handle on what you are looking for, but once you know that, the thing to do is execute. If you hesitate and are not sure, when a perfect trade setup presents itself, you have a problem. You will eventually get frustrated and your next few trades may become losses, when you finally get the courage to take the trade.

You need to not let that happen, by envisioning the whole process ahead of time, you can train your mind to jump on the trade, the moment you are sure it meets all the qualifications of a legitimate trade setup. With short term trading, you need to put it on only when your timing tells you to, but do not hesitate. Whatever time you take to examine your strategy for what constitutes a trade setup, that is what you need to get familiar with. You know what it looks likes before and have seen it hundreds of times, so when you see it in live trading action, that memory recall is what you will need to draw on.

Seeing the trade set itself up and developing in a live environment is critical. As the trade develops you see what has happened so many times before when the conditions are met, you come to expect the same outcome this time and place the trade with a high level of confidence and capture the  intended outcome.

http://www.screencast.com/t/YGyzRfgT Today’s equity chart

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Trading Discipline, Part 2

Tuesday, April 14th, 2009

Today is Tuesday April 14th and another large gain for the day.

I had a nice return on my time invested today for solid gains. I will get right to it with the stats. I had 20 gains, 3 break even trades and 3 loses. One of the losses was rather large, with a double position and a little larger stop than I usually take. That was early on, but came right back to forge forward into new equity highs. I ended the day at + $3,000 with very little draw down except that early trade.

Very happy with the results overall. I missed the large swings in the early trading. That makes it a lot easier to get the hit and run trades that I like to put on. It is harder to trade a slow moving market because it keeps you in the trade longer. Any time you are in the actual trade, there are forces working against you, straight up. You cannot get away from adversity, but it is how you handle it. A very large part of success is between your ears and we all need to remember that. Every other trader across the globe is having to deal with the same issues on a daily basis. The difference is going to be, who is going to handle the pressure and come out on top?

Having targets and stops built in, is a way to cut down the adversity that takes place. Many people argue that if you have small targets, it is not enough to make up for your inevitable losses. That can be true, if you have more losses than you have gains. In addition, if you stay too long, you may lose your concentration and give back your hard earned equity. All things to remember, especially if you are fairly new to the game.

I have heard it said that when you start and open a trading account, don’t deposit too much into it, because you are going to lose it ALL. This is actually not too far off and it’s really true if you try and go it alone. The world is full of S&P day traders who think it won’t happen to them. That’s the kind of thing that happens to the other guys, but not me. Well, I hate to break the bad news to would be traders who think they have a handle on this, work on your discipline after you know how to trade and what your looking for.

If you have one without the other, you are doomed. You will need to exercise discipline, just like a group of muscles at the gym. If you zero in on that quality, you can improve it and get stronger. This may be a foreign idea to you, but it is totally necessary to your success.

Here are a couple of ideas. I stated before that your environment has an effect on your trading results and that is true. A clean, neat work space, that is organized and in place, makes and has an effect on you mentally. It can have a reflection to your inner world, which translates into clear thinking, patience, focus, etc, resulting in better trading performance.

Now just think about other elements in your life that can have a similar effect. I don’t mean to get personal, and maybe I can just talk about myself to make my point. My goal is to create a home life that is balanced and also in order. By tending to the things in my life that have real true meaning, it helps establish a foundation of stability which gives me a sense of well being. This may not be for everyone, although I feel what everyone needs to know is “Why are we here on this earth?”

I ask myself this question often and it reminds me of what is really important. It is a way of centering myself with the busy lifestyles we all tend to live. The answer to that question is going to be different for everyone and I cannot answer that but for myself only. I get a great deal of peace when I reflect on this question, which then helps me to become a better husband and father to my grown children. It also provides the balance I need in my life to help me compartmentalize my trading goals and pursuits. If I do not exercise balance in that area, I may devote too much time into trading and letting other responsibilities get away from me – the ones that really mean the most. So it all boils down to discipline and remaining in control of your emotions and leaving your trading EGO at the door.

As a trader we will have those trades that bring us nice returns, but always need to remember that this is not easy to master and you need to remain Humble. That too is a form of discipline, to hold yourself back from becoming emotional after a nice gain. It is normal to be excited, but you need to see it as just one trade in the path of many that will eventually take you where you really want to go. That may be spending more time with your family, vacations, helping your neighbor with a project. These are all the things that a successful trading career can give you.

Just remember it’s not all about “us”.  What can we do for others?  You may be surprised, but that attitude will have an effect on your trading results and all for the better. It may say, “I have enough in me to give some away, whatever it is.” With that approach, you open the door for additional resources to find their way into your life, i.e., a growing trading account that seems to always expand.

This is what I find to be true in my life, anyway. I hope it helps someone out there to better handle and exercise discipline in their trading ventures. More to come on this subject. It’s a big one.

http://www.screencast.com/t/72VlG1w2 Today’s equity chart

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Success continues in trading the S&P’s

Tuesday, March 31st, 2009

Today is Tuesday March 31st and the trading success continues in the S&P’s.

I did not trade very much today after yesterday’s killing. I did not post in writing the stats for yesterday’s trading, only in the equity charts below, when I saw that there was a problem in getting the link hooked up properly. I fixed it, but I would like to say that yesterday’s trading produced over 40 winning trades with only one loss and three break even trades.  In fact, I had 50 plus pieces of profit, because I had multiple exits on a few trades. I posted over $9,000 dollars in profits, again with only 1 small loss. I traded a bit larger size and remembered saying to myself that if I post 1 more loss, that I was going to hang it up for the day. Like I said yesterday, it never came, so I kept on going.

Today, I had to balance things out a little. I only had 3 trades, the first was for a solid 2 points and the next couple, a little smaller, for $1,200 profit. I finished in less than 15 minutes and turned it off.

That is what you have to do some days, which I learned yesterday. It was not a bad thing, but I still have to maintain discipline even if it is going in my favor. Who is in control? The only saving point from yesterday was I made a deal with myself that I was going to stop trading when I took my next loss. So I really did not go past what I told myself.

That made me feel better. I should not be complaining when you have a day like yesterday. It does good things for your confidence. What can happen when you have big winning days, is that you let your guard down, get complacent and think this is too easy. If you ever get that attitude running through your mind, squash it quickly.

If you do not maintain discipline while trading, you are going to feel the pain. So remember, if you do the right things, the right things will happen to you. If you do not get greedy and overshoot your targets, and take what the market wants to give you, you will be rewarded. Not everyone is going to be able to maintain discipline for several hours. This is another reason to get your points and get out.

http://www.screencast.com/t/fB5xshXA            Today’s equity chart

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Day Trading Requires Focus and Discipline

Saturday, March 21st, 2009

Today is Friday, March 20th and the major indexes continued to back off.

The Dow was down 122 points and the S&P was off by 15. We will likely continue the retracement over the next few days as the market posted a back to back weekly gain, something it has not done since May of 2008. I have a daily chart below of the Dow and S&P and you can see that after redrawing the outside line, which I was off by a little originally, it is now lined up straight and the market traded right up to it. It also happens to be the broken support of a few months ago. I mentioned it yesterday, but you can see it today in the chart below. Support when broken will then become resistance when tested. That is what we have seen the last 2 days. The Dow also lines up, the same way.

I had a good day trading today. It was slow going in the beginning. I started late, during the slow volume time of day, and could not get any traction. I was splitting my trades when I would have done better with, all contracts in, all contracts out. After a slight draw down and the passing of a little time, the volume came back and I got myself on the right side of the trend and started putting it together. My equity had very little draw down after that, almost straight up. I settled the day out with $+1629 dollars after commission costs and had over 20 entry trades.  Still traded small for the most part and have not yet made any changes, like I was talking about yesterday.

I have one small video of a trade I put on and a still shot of the trades just after that. I backed off on the size again at the end, which is really a good idea. If you have solid gains and you decide to keep trading, you have to have a point where you will lock in your profits for the day and give no more back, if you fall below that point. If you start to over trade and make mistakes, you can give back what you worked hard to get. That is the reason for backing off on size at the end of the day when you already have your daily goal and good profits. You will be a conservative trader with this approach.  This is about money management as well.

Do not let greed creep into your mind and find yourself shooting for the stars. More is fine when it is the appropriate time. I would say that if any one is just starting out and you do not have anyone helping you through the process, you should only be trading for a small daily target. I recommend about 2 points and not really any more than that.  The reason is, you do not have enough experience to deal with all of the changes the market will throw at you. Eventually you will get taken out. That is the hard cold facts.

We all like to think it won’t happen to us, but that is presumptuous on on our part. Being honest with yourself is the first step to victory and that victory can come in the form of two points a day. If you can pick that up, consider it a big victory and try and do it again tomorrow.  A common scenario is, you will pick up a few points and think it is easy, then let your guard down.  The market then gives you a read that you have not seen, or are not familiar with, and the gains are gone. You then say, “Iwill get that back,” and don’t exercise patience having already lost your focus, because you are thinking about the money and your losses increase.

You have to be able to stop yourself, if this is happening and walk away. Clear your mind and when you take your next trade, don’t be thinking about anything else, other than the process. Are you doing the right thing based on the method? Don’t be thinking about getting even with the markets. That has been called, REVENGE TRADING and it can do a lot of damage, not only to your account, but more importantly to your ability to have confidence in what you are doing.

By losing your focus and discipline, trading like this, you only join the ranks of so many others who thought they could. The battle is greatly in your mind. That is why I have some very good books on my web site to help you with the process. If you have not read any of them, I recommend that you do. Some of them are not even related to trading, but it sure does apply and can help with many other areas of your life as a bonus.

http://www.screencast.com/t/MHjVQ0SI8L              Today’s equity chart

http://www.screencast.com/t/qBfXqtoGBXq             Live trade video

http://www.screencast.com/t/ITUh0ylJ                      Still shot of some trades, end of the day             

http://www.screencast.com/t/M4FpJW2M8kx          Still shot of Daily S&P

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Consistent Day Trading Success

Thursday, March 12th, 2009

(more…)

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Daily goal met 20 minutes today

Tuesday, February 24th, 2009

Today is Tuesday February 24th, and I had a nice smooth day today.

The early market had some nice swings that I missed, but that is just fine. I came in at the top of a market run and picked a few points off here and there. Charts are posted below. If I have time later, I will post some additional information. Have a good day.

I have a little more time right now, to comment on today’s action. We did get the start of that bounce I was expecting in the overall market. There should be some additional follow through in the days to come as well. It is hard to say, but the retracement should take us up to 810 to 820  on the S&P. That would be a 10% move for the whole market. That is a lot, let me tell you, but it would represent the natural flow back to the middle, even if the market drops again after that. We don’t know if it will make it past that point, but we will just have to read market action as it happens to give us greater insight, we shall see. The Dow recovered all of yesterdays losses and then some with a gain of 236 points, a nice move.

Trading Lesson: 

Here, is a short trading lesson that you can build upon while trading. When you start out your day, you need to see yourself placing a trade and expecting that trade to work out with  positive results. So, what needs to happen is, you need to take the time to relax and see yourself identify the trend, identify in your mind everything lining up as the method calls for and placing the trade in a low risk area. With targets and stops already in place, you are set. When we get cold feet and become anxious about pulling the trigger, we begin to work against ourselves and create doubt. That doubt creates fear and when you have fear, you will inevitably do the wrong thing. That is why you need to build confidence in a method that is consistent over time and one that can adjust with changing market conditions. There are a lot of different ways to trade, that is for sure, but a trader who expects to come out on top on a regular basis needs to be exceptional in method and emotion. You need to control both and you can not have one without the other.

I came across a trader who says, ” I have a great deal of self control with my emotions and I can follow a trading plan to the letter, but my problem is that I have no method that seems to work with any regularity”. This is an interesting statement, because most people do not have either. A lot of times you may find that you have a good method but you can not execute it because you can not follow a trading plan. We all need to work on follow a trading plan, because this is what takes away the uncertainty and fear when placing a trade. Since we do not know the outcome of the trade, we have anxiety built up inside of us, again because of the unknown. How do we get past this so that we can keep moving forward? The answer is practice and practice some more. If you are able to get the desired results by seeing the expected move ahead of time, positioning yourself to capture a small piece of the move and get out, quickly. When you capture 1 point of profit in a few seconds and it’s over, the struggle is over as well. You do not have a lot of time to feel anxious about the trade, because you are no longer in it. If you are able to capture a few high probability trades and stop for the day, you built confidence in yourself and that is where it all begins.

Doing the same thing over and over again, entering the market in a low risk area and letting the natural flow and rhythm of the market to take you up and take you down, hitting your desired targets with the least amount of struggle. Then you get to do it again tomorrow, what a pleasure. It is not always like that and trading is very hard to learn, but once you have confidence in a trading method, you are on your way.

If you trade all day long, you are going to be feeling and dealing with a lot of emotions, that is for sure, because the market is going to be showing you so many different looks and reads, you will not know how to process all of that information. Knowing when to stay out of the market is very important and getting stopped out repeatedly will cause frustration and what I call, revenge trading. This is very destructive behavior and to keep all of this stuff to a minimum, you need to limit your trading to a smaller amount of time, so that your exposure to these dark events are kept to a minimum. Well, that’s it for now, more coming tomorrow.

Vince

http://www.screencast.com/t/qPLMj3VzouK         Today’s trades

http://www.screencast.com/t/muHvhyzv               Today’s equity chart

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