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Do you have a daily equity Stop Out Point

Wednesday, September 22nd, 2010

Today is Wednesday, September 22nd, 2010 and the market is trying to hold onto its gains and doing a pretty good job of it as the Dow was off 22 points and the S&P minus 4 points for today’s session.

The market has been running into that resistance I wrote about in Mondays blog. The last two days confirms that this area as stated is solid resistance as it is having trouble making continued headway.Two things, we are either building for pull back, just under today’s lows or we are regrouping for another assault. The night trading is showing some gains right now, but that does not really mean to much right now. Tomorrow we will know more about future direction. If we get over this area with conviction, we will continue the climb to the numbers I wrote about on Monday and a few weeks ago, so far so good.

I was on the road yesterday, but did trade on the open just before I left and lucky me, the one day I decide to get up for exact early open, I get a stop out day. I was down 3.25 points for the first part of the session and called it a day. I normally would have tried to wait a while, but I did not have time since I was leaving. That is not good in that when you have restraints, it can effect how you make decisions and it did for me. I would have been OK, if the market was more normal with its opening active price action, but it was slower than dirt, no movement. I got no follow through on my trades and was not in scalp mode so I kept getting stopped out with small losses.  Another mistake I did look at what news was coming out. If I did, I would have seen that Tuesday was Fed Day.  Many traders don’t even trade on that day, because the action is all very different, and it was. Usually you will see some activity in the early session and then it will grind to a halt as  the announcement gets closer to 11:15 A.M. West Coast.  It picked up nicely after that but I was done and gone for the day.

Today’s trading was back to normal and I was back too. I made up for yesterdays mishap and now, we go forward. My trades are below for the day.

I believe every trader needs to have a daily stop out point. It is essential for long term survival. If you don’t a 3 or 4 point daily loss, can turn into a 7-10 point daily loss, who knows. Don’t give it chance. Cut it off and come back tomorrow. That takes discipline and is what you need to survive. If you can’t do it, you need to find it within yourself to stay in control. It is easy to lose control while trading and it happens to traders all the time. Don’t you be one of them. Their are going to be losing days on occasion, that is a fact that we all have to deal with, but they don’t have to happen that often. If you are a big swing trader, you will at times close your session with more losing days because of lack of opportunity, with the hopes of big winners later on as the trades come together in future sessions.

I can’t handle that. I like to come out on top as often as I can for the day and that is why I trade the way I do. Their are so many opportunities during the course of a day, it is not to hard to snatch a few points and get out. You can see in today’s chart above, there were plenty of potential trades to take and things were not even that busy today, I would call it an OK day as far as price movement. If you try and trade all day, it is too easy to make mistakes and get sloppy. That is where traders make it in the morning and give it all back in the afternoon. It is because they are no longer fresh.  Traders need to take lots of breaks if you are going to trade all day. To keep that pace up, day after day, week after week is to much to expect and as stated, you will not usually make any more than if you traded for 2-4 points a day.

A trader who can average 4  S&P points a day will make 80 points a month. That is a lot. Three points a day is 60 points a month and even only 2 points a day is still 40 points a month. The key to that is average. That is why I do like to shoot for bigger days when the market is willing, to make up for a daily stop out day, like yesterday. In the end, maintaining a high monthly average is what you want and not getting greedy is the key.  For me 2-4 points a day makes the most sense, with the occasional windfall day 2-3 times a month. A trader could not ask for anything more than that in my estimation.  How about you?

Good Trading to all. Vince

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“Day Trading Support & Resistance”

Thursday, July 29th, 2010

Today is Thursday, July 29th and the market advanced and then retreated after the open to close down 5.25 points for the session.

Yesterday, I mentioned that the early morning move was likely a move to 1106 and at which time we would, ” pull back for a moment” and that is first what happened. The market pulled back 3 S&P points and then broke out over the 1106 area making a run for the 1110/ 1111 target area mentioned in yesterdays blog post. Unfortunately all of that happened in the pre-market before the open. We did go a couple of points higher than that, around 1113 before the pullback began. With such a large opening gap, it looked apparent that we were going to fill the gap and it did.

The market continued with the selling into the late morning session where it gained its footing at much lower levels and staged a good rally back up. Selling came in with a slight pull back and that is where we are now, 1096.75 on the S&P 500 emini futures.

I think we still have more of a pull back to go in early trading for tomorrow. I see some short term resistance at 1100 after which we could pull back with a break of 1095 triggering a continuation of the selling of which could take us to 1080 rather quickly in tomorrow session. Support should come in around that level if in fact the sell off takes hold.

On the other hand, if 1103 were to break to the upside, that will be the first sign that the selling has stopped and further sideways to up action could be expected. If 1110 gets taken out, that should spark a very good rally with legs behind it to continue with the overall advance.

By tomorrow mornings pre-market open, I could get a better idea of which way this is going to go. If I had to pick one now, I would say to the downside, but will be met with a lot of buying off that lower level back up rather quickly to continue the advance. At this point its a little hard to say, but I do think the advance will continue into next week after this correction.

Today’s trading went pretty quickly and I did OK picking up my daily goal in short order, about 35 minutes of trading. In-fact it came by way of a few Short trades in the markets second hour. I have my screen shot below and a few notes on it showing the good and the bad parts. I don’t show all of my screen but as I note on the chart, some is better than non. This consistent view of the market on a regular basis, hopefully can give you an idea of the timing that is available to those who see this as a value to there own trading. I don’t say what the tools are and or how I construct it, but the consistent view of price action moving off of the turning points as identified on the screen, as mentioned, may be a help to some traders who think that they could benefit from this.

There is a whole lot more to being successful at day trading, but showing what I do on a regular basis, can help you decide over time if this is something you could see yourself using. I have other time frame charts that work together with this as well as learning how to read the price moves themselves. Trading indicators are a reflection of the price itself as I have said many times, if you can find low risk area’s of interest at short term market turning points and trade with the natural rhythm and flow of the markets, you could do well. The only thing that can likely stop you, is “Yourself”.

We can be our worst enemy, when it comes to trading. Having unrealistic expectations of what we think the market can and should do for us, can be a problem. The first thing any trader needs to do is understand price structure. The market gets taken up, to only get taken down. It does this at key spots for many different reasons. An understanding of support and resistance is also a must. This is the way prices move. When there is a barrier of resistance overhead, prices can not advance. That resistance becomes re-enforced as it attempts to overcome the invisible barrier. As time passes, more resistance and market pressure has built up, and the barrier has now been over-run. A flood of orders hit the market tripping buy orders for different reasons. Some are buying to take advantage of the new move, while others are buying as a means of protection to limit there losses. The same action but for different reasons. I don’t care what the reasons are, but my job is to assess the pressure and see if it is adequate enough for a trade. The more pressure the greater the move.

Time comes into the picture as I mentioned yesterday, by allowing the market pressure to build. If the market has spent all of its energy on a one directional move, it will often need time, to bring in more pressure, trade positions, above and below the current market. Those orders are placed in time and space, which establishes the next level of advancement, long or short. Without the element of time, the process and positions are weak.

This is established on every time frame and with a level of unseen co-operation at every level. Time charts at the yearly, monthly, weekly, daily, hourly, minute, and down into tick and volume charts of every size. There is something for everyone at all levels. Your strategy and trading personality will determine what is best for you. Be sure you put the right peg in the right hole, which means, trade according to your strengths and dominant trading personality. Don’t hold positions overnight if you are a scalp trader and don’t scalp trade if you hold for longer swing trades.

More on the topic tomorrow from where I left off today…   Until then, Good Trading.

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“How To Trade The Futures Market”

Thursday, July 8th, 2010

Today is Thursday July 8th and we will be discussing how to trade the futures market.

There are many ways to trade the futures market. One of those ways is to swing trade key positions that you hold on to for a week or longer. This requires holding your positions over night and does increase your risk. Many traders prefer to day trade the futures market, where the opportunities are endless.

There are many styles of day trading, with position trading, trend trading, scalp trading and counter trend trading, just to name a few. Each style has it advantages and disadvantages.

Every trader needs to do personal analysis to see which style best suits there personality. If you are very impatient, you probably would not do best holding your positions for long periods of time. Trading for smaller moves more often can be the way to go, as long as your risk is controlled and proportionate to your gains.

Many traders will not put a trade on unless they have a 2:1 profit / loss ratio or higher with emphasis on higher. There is nothing wrong with that and may be the way to go for most people. If this is your desired way to go, you will need patients to wait for the trade to come together. This also may mean that you need to trade a good part of the day or all of it, to get the high quality trades to come to you.

This brings us into trading time frames. What is the best trading time frame to use. This goes back to finding out what type of trading best suits you. If you have a limited amount of time to trade, say 90 minutes off the opening bell. You will need to bring your time frame down to the point that you will have several trading opportunities to get in and get out. If you only have limited trading opportunities, you may find yourself in a session draw down with no time or trading opportunities to come back.

If you are like me, I am able to find many trading opportunities trading a combination of scalp trading and trend trading. Both of these terms are relative to my trading method (Sniper Day Trading) and may mean something different to other traders.

Learning how to trade the futures market does not have to be hard. A person almost has to think in the opposite fashion as conventional wisdom. I have heard it said and would agree that futures trading is simple, but it is never easy. If you have a strategy that is easy to understand and has clear visual guidelines to follow, with modest objectives, a trader can get and keep the upper hand over a long period of time.

There are other factors that many futures traders do not take into account. Traders are human, and such they all have a human nature which is predicable. This human nature can be used to our advantage or it can be the “kiss of death”. Being successful in my estimation will require that every individual take steps to overcome all personal weaknesses, what ever they may be. If you procrastinate, you will need to work on that. If you are lazy, you will need to address that. If you are impatient, you will certainly be tested, and so. What ever personal weaknesses you have, the market has a way of uncovering them and bring it to the light.

My suggestion for anyone who wants to trade the futures market, do not open an account larger than $5,000. Bring personal discipline into your life. Exercise regularly, eat a balanced diet and get plenty of rest. That is just to start. You will notice there is nothing in there that has to do with actual trading at this point. The reason, if you are not together, your mind will not be together and thus your trading efforts will suffer.

The reason for the small opening cash balance, is to bring a moment of pause. If you are just starting out, you will likely loose the funds, no matter how large, in your trading account, you will be fighting human nature as well as other traders.  That is just the way it is. Most people are not going to be mentally and physically prepared to do battle and will fall victim. If you take the preemptive  action you will have an advantage. Having to refund your account will bring as I mentioned “a moment of pause”, to the picture. Giving you extra time to make changes and adjust yourself for the consistent gains you strive for.

Trading the futures market successfully takes time. Let me say that again, because it is very important. Being successful takes time. Far to many traders rush into live trading with only a few weeks if that under there belt. It takes longer than that for most people. The reason, most traders do not have a tested trading method that they follow, one that actually works.  They have read a few books, look online at different websites to see what can be extracted and feel that they are qualified to consistently make money.

It takes more than that, a lot more. Every trader needs to have set guidelines and or rules to follow. If you don’t, human nature will take over and you know the rest of the story there. If you try and come up with them on your own, it would or could take years. I am not kidding about that. I know, because I created all my own rules and method and it takes that long. For many who go that way, your rules and or method may just not be any good, so you could have and will likely waist a lot of time and money.

The answer is not always buying systems or trading methods. Some are good, most are not. Some are very expensive, 5K and up and others not so much. It is hard to know who to trust in the trading education business. You should be able to see consistent patterns in what ever they are offering. Is this trad-able, is it easy to follow, is it something you can see yourself doing?  I will continue with part two of this in tomorrows blog postings.

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In today’s trading, I had a good profit day. I did take a few trades that could have been avoided, but I was able to overcome it as I usually do. I had a great trade towards the end of the day that can be seen in the U-Tub video gallery, top right hand corner website, first in line. Other than that, my call yesterday was for the market to trade up to 1066 where it would find temporary resistance and back off, but then attempt another run for up to 1080. So far that is exactly what happened. Yesterdays market closed at 1059 and we traded up to 1067 (1 point over) and backed off 13 S&P points and made a run to close at the high for day, 1069. We should see higher prices on the open which could include the 1080 forecast. I would not be surprised if we did see a reversal after 1080 is hit. This is just something I will be looking for. Good Trading, and be safe.

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Reduce Stress Associated with Trading Gains & Losses, Part 2

Saturday, May 22nd, 2010

This post is for Fridays market May 21st where the selling continued, but reversed at days end to close much higher.

The selling continued in the night trading Thursday evening and carried over into Fridays session where it started to pick up steam to the downside.  Buyers did come in before it got out of hand and salvaged the day for the bulls.

My last post I put up a single screen shot showing the support that was coming in from a couple of angles. That support if broken on a closing basis with conviction will likely kick in the next wave of selling to the area’s marked on the screen, 864 is the lower number. I do not rule out the possibility that it will keep going at some point, but one thing at a time. There will have to be some economic or world crisis to trip it into gear, but its to much to think about right now.

In my trading Friday I had a great day hitting another one of those mega days. I have a screen shot of my last trades of the day here. In this shot, I have only a striped down view of my screen only showing one chart of my main screen with only one indicator below.

By following the complete trading method, the timing of the buy and sell signals are really generated by something completely different, but the indicators do line up with trading method.  By learning how I trade, you will know why and when to go long or short, not only because an indicator says so. I use different models with different time frames for each model depending on the trading movement. With just a hint of a trending market, I will and can trade out out my T-2 screen of which I have a tiny portion shown above. If in a choppy market my T-1 screen works like a charm. You still need to know how to handle yourself on the board. You can have the best tools and still mess it up, if you act irrationally and become overly emotional.

One more point that I have been wanting to show for some time now, is how my trading method will work with stock trading. The only thing that you need in any trading instrument is movement. If it moves, it will work. It works in any time frame, as well as with tick charts,volume charts, range charts, minute charts, hourly charts, daily charts, weekly and monthly charts. There, I covered all of them. Not all traders are alike and each trader needs to find what time frame is best for there personality. For the trader who feels good about holding a position for several hours and even days at a time, may not be best suited for scalp trading where you may be in the move for only minutes. I have tried them all over the years and it took me a long time to find where I am best suited and that is scalp trading with my own version of trend trading tied to it.

The video below is on a stock, symbol FAZ in a 150 tick chart. This is fast especially on the open where the market gaps higher by a lot. You can always slow it down by just increasing the time frame to say 250 tick chart or higher.  It is a financial bear index and works in the opposite direction as the general market. This stock tracks the financial and banking stocks but will go up as the financial stocks go down. As a day trader, it really does not matter, as long as it moves and this one sure does. The point is, I am just showing one timing tool tied to this and how if you knew the complete trading method, you would be certainly be able to get in at or near these turning points and have a very small stop, .10 to .15 cents.

Continuing with Thursdays lesson: “Reduce Stress Associated with Trading Gains & Losses”

Continuing where I left off, I discussed reducing stress associated with trading gains and gave a few idea’s on how to bring that about. Most traders struggle with this one, “the losses”. There is usually an increased amount of stress as losses start to mount. To often, traders are thinking about the money and not trading there plan and trading method.

Try not to think about the money. I know that is easier said than done, but if you resolve in your mind the worst thing that is going to happen to me today is a loss of 3 S&P points and if you are trading stocks, say 30 cents. If you are trading one contract on the S&P’s, that is a $150 dollar total loss for the day and with stocks, trading 500 shares -.30 cents you are looking at about the same, -$150 dollars.  The idea is, you are not planing on losing for the day, but the stress associated with trading loses only add to the pressure you are under, so focus on following your plan of action. Expect and see yourself doing the right thing as called for and see the trade moving in your favor just after you enter. Don’t wish it or hope it moves, but let the stock do all the work. You are not going to help it along with your added emotions.

Ever heard the adage, less is more and more is less. That would apply here. Day trading is a mind strategy that gets played out on your trading screen. Do the right thing at the right time and you won’t have to try and help it along. It will  already know where to go, right to your target area or running as though it were in a marathon. Go along for the ride as a passenger but be sure you get off before it stops and goes the other way.

You will be reducing stress if you can accept your daily loss limit for which you should have. A maximum amount you will risk in any one trading day, (mine is 4 S&P points).  Then, don’t think or worry about the money and just trade with the rhythm of the market and let it tell you if you should be long or short.

Your feedback and comments are welcomed and appreciated. Enjoy the rest of the weekend, Vince.

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Reduce Stress Associated with Trading Gains and Losses

Wednesday, May 19th, 2010

Today is Wednesday May 19th, with the S&P futures were off 9 point and the Dow off -66.

Yesterday, at the close, the market was building a little trading opportunity that I mentioned. I did think that the break may come to the upside for the after market trading, but I left the call open for the market to decide. It broke down for an initial drop of 11 S&P points just after the session close, a clear break.

I never trade the after market but since I was writing at the end of yesterdays market I just thought I would point it out.

I did mention that if the market took out the lows from two days previous that we would see some pretty good selling. That number was 1112 on the S&P and today we traded down to 1098 before buyers came back in.

If the market was going to make a stand, tomorrow is going to have to be the day. There is a chance that we will see 1128 in tomorrow session. Today the S&P closed at 1109.75, just shy of its daily mid point trading range. The S&P emini futures traded 13 points off the high and 11 points off the low, a 62% daily retracement of its range.

Tomorrow the market could trade down to 1103-1106, but that level will need to hold if we are going to attempt a run to 1128. If I had to choose, is tomorrow an up or down day overall, I would have to say its an up-day. Will the rally follow through if it comes, that I don’t know and is to far out. I think that if the market was going to crack and really break down, I don’t seeing it being easy for the bears to get in early and get it right. Usually at key turning points, the market is tricky in revealing its true intentions. Its main goal is to get you to bit, in what seems like the obvious direction, only to stop you out and leave you behind.

Today I had only a three trades and picked up my daily goal. The first trade +1.25 , -1.25 on 2 contracts with the last trade scaling out on 3 contracts, +2.50 points, +4.25 points and  +3 points. It was an easy day and just left it at that. I had traded a lot more the two previous days and I was worn out. Yesterday I got up early for the open and traded the better part of the day. It takes a lot out of me and I am sure anyone who trades all or even most of the day. You need to have a very high level of concentration to stay sharp. If you get tired, you will make mistakes. That is why I was trading small.

The video above, shows part of the last trade and I go back over the day to show the turning points in my T-2 trending model. I am only showing a small portion of the screen and cover everything accept two timing indicators, one above and one below. There is a lot more to it as I have two trading manuals totaling over 150 pages that cover my method in detail as well many hours of DVD training material and several video’s of live trading each day that I send out explaining how to trade with “Price Action” while still using trading tools and indicators as a guide. With that said, the method is easy to understand and grasp but it does take time to get familiar with everything. Anything that is of value, will take work and dedication to master, no doubt, but what I have is real and can be duplicated for those who see its possibilities.

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“Reduce Stress Associated with Trading Gains and Losses”

Many times, a traders biggest losses will come just after he has had his best gains. That is why you will hear how traders make it and lose it right back. Being mentally stretched will not help but hurt your efforts. That is why it is a good idea to take the easy gains the market gives and walk away on most days. All of this said, leads me into the topic I mentioned I would cover yesterday.

All traders have expectations, with most of them very high. We all know that trading is a zero sum game. For every winner there is a looser. As traders and investors provide liquidity to the markets, there expectation is to come out ahead of other traders by positioning themselves properly to take advantage of price movement. Every trader can not come out on top and it is proven that most traders and investors loose money. They loose it to the those who better position themselves to capture a piece of the movement.

Notice how I said a piece of the movement. You can not have it all, but that is where part of the problem lies. Most traders are not able to walk away with several points of profit, whether it is in stocks or emini futures. Why is that true?

It has to do with “Greed” and not being satisfied with the easy and obvious trades the market gives you. So, you will be reducing trading stress on yourself when you have modest gains and walk away for the day. There is no more struggle, no more anxiety, no more wondering how you will end the day, its done, period. You booked your gains and you will come back tomorrow and do it again. As the opportunities show themselves to you, there are special days you can capture more, but that is not every day, 2-4 times a month. If you try and go for the fences every day, you create all to many problems for yourself and make the whole venture that much harder.

So far, I am talking about dealing with and booking your gains. Dealing with your losses is another area of stress where most of the focus is usually on. But before I do on to that, which will probably be a follow up in tomorrows post, accepting the gains that the market gives easily is what it is all about. Most traders dream of the day when they can put on a few trades, make money and then go do other things with the free time and now money that they have.

If you want that dream to come true, maintaining control over your emotions and taming your expectations of making a killing every day needs adjustment. I will continue in tomorrow’s posting………….  Until then, Good Trading.

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Trading to Win Mindset

Wednesday, May 12th, 2010

Today is Wednesday, May 12th and we saw a little follow through from last weeks sell off.

Just before the drop the market was showing clear support at S&P level 1177 and Dow 10,965. As those numbers broke, the flood  gates were opened and the institutions and Banks jumped on the short side of the market and exacerbated the situation. Some say it was engineered, but the point is, it did not happen when it was not supposed to, it happened right when it should have. The move just got overdone as it cleaned out all the stops that were just sitting there. If your stop was at the top, you don’t feel so bad, but if you were in the middle to lower end of sell off, you may be feeling violated right now. The reversal back up happened without you and as this market continues to push higher as in today 150 point plus Dow advance you are feeling worst. All I can say, those who had there stop in the middle or lower end of the sell off range needed to move it up closer to break. This is in regards to the daily charts and stock trading in general.

After saying all of that, I see two things right now. The support that broken is often times now the new resistance. That would be the numbers I mentioned above. If the market were to act in a typical fashion, we would push up either in the night trading or on the open tomorrow a little higher from where we are here and back off pretty hard. I could not say how far it would go down, but it will be significant. I would expect somewhere around S&P 1120. That is a 57 S&P point reversal off of that number if in fact it goes down like that.  The sell off  may only be short lived as then the market could make an attempt at the old high from that point, it is possible. I would like to see the sentiment numbers before I go out that far.   If you see the market blow past the two numbers I gave above 1177 S&P and Dow 10965 with conviction, I would have to consider that the it may move straight up to the old resistance at very top.

So, to recap, look at how the market handles the 1177 S&P number( in that area). If it is struggling with it, look for a selling opportunity based on your own criteria. If the market blasts past that number with ease, it may be on its way to the very top at S&P 1217.

This is just what I see at this point, but I will be reacting to the current conditions as it unfolds and you should to, if you are trading the market.

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Trading to Win Mindset:  This is the attitude that traders need. You need to feel confident with your skills as a day trader to come out on top at the end of the day. Trading has many facets to it. Money management is very important and it can not be overlooked. Many times if I am doing well and I want to keep trading, I will start to lower my contract size or if you are trading stock your share size. By doing this, you are scaling out on your equity profit. If you make a mistake or just get stopped out, it is not going to effect you as much because your size is smaller. The key is to end the day in the green.

Starting off with the right frame of mind is key. If your skills are refined and you know exactly what you are looking for, you will not feel like you have to hope or wish your trade into profitability, because it is just going to happen. You have come and or will come to expect that. That is having a wining mindset. You create your opportunity, if it is a small scalp trade or a larger runner. What ever the market does, you will come to expect that you will get what you need for the day. That is why having realistic goals are very important. It will continue to feed that wining mindset that will help you attract the next positive trade.

The opposite is true. If you feel like you are constantly on the ropes, always fearful of getting stopped out, you not only attract negative trading energy, you will create it. the results are what you dread and that makes it all even worst. If you currently don’t posses the skills to trade and maintain the edge with real money, don’t trade. I do not mean ever, but just until you find the wining mindset needed.

I think it is best to have a mirror to follow. If you can prove in practice trading that you know how to handle yourself and can come out on top most days, you now have a model to follow. If you can’t do it in practice, how are you going to do it in real live trading. Don’t lose money you don’t have to. Trade only if you have the advantage. That only makes sense, but that is not what always happens.

If you feel even a little uneasy about a position that you just put on, get out. Don’t wait to be stopped out, close it out and reevaluate the situation. Let the trade come to you. Don’t be anxious, that will only create hesitation to pull the trading trigger. Day trading need not be a struggle. I know it is for people and that is why I am saying to those who can hear me, to just relax and as I said, let the trade come to you. Don’t go searching for it to the ends of the earth. If you have to look that hard to see what it is that you need to do, you are probably not ready to trade. If you do it anyway, you will only be paying expensive tuition. Don’t do it. Keep your money safe until you feel comfortable with the process and you have “The Trading to Win Mindset”.      Today’s trades below.

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Trading Lesson and Live Trade on S&P Futures Video

Wednesday, May 5th, 2010

Today is Wednesday, May 5th and we saw a little follow through from yesterdays sell-off.

Today we saw some follow through to the downside from yesterday, it is certainly understandable. All the investors who did not get a chance to sell on on Tuesday, did so today. Did they make the right choice? Time will tell. I do see the market trying to shore itself up as the the S&P 500 futures came 10 points back up off its low today. It had a nice retest of the early lows late in the afternoon, followed by a pretty good rally. That too is pretty typical, as traders and investors like to buy double bottoms. It can be a risky move and I feel you need a little more market know how than to blindly buy because it is a double bottom. Some say it is a sucker play and under certain circumstances I would agree.

All to often, the market will bounce off a double bottom and you will see buying interest come in. That typically would be the sucker play, because just when you think you made the right move as the market starts to go your way, selling pressure comes back in very quickly, you suddenly get panicked as your profit is now gone and you are staring at Red. A few moments pass and you are hoping for a turn around, it does not come but goes down further and takes your stop out as well as most others who are right with you. When all the stops have been cleared out, large buying volume comes back in as the market has taken off without you, while it left you with some parting gifts, a stop loss.

I see that happen all the time on all kinds of time frames. What is a traders to do. It is best to learn how to read price moves and get very familiar with all of the tricks. Support and Resistance is really what it is all about. Without going into it to much, support shows itself in various ways as does resistance. Traders need to think like the traders who are trading there market. Don’t do what they do, but look for insight into what is happening and prepare to do the opposite. Often, patterns are developed to make you think that the market is going to go one way. Successful traders need to see the setups and or traps that are being laid out for them and do the opposite. Meaning don’t take the bait.

When you get familiar with these trade patterns and games, you too will be able to counter it by positioning yourself on the right side, the side everyone else does not see. If everyone saw it, there would not be a market to trade, so be thankful for that. We just need to know and feel comfortable with how the game is played. This takes time. To often, traders will blow out so fast and wonder, “what happened”, meaning to there account. They may reload and attempt again to recover as they feel sure, this time it will work. All the while very little time has past and they have virtually no additional knowledge or experience of how the market fleeces the unprepared. If you don’t want that to be you, you need a plan, method, time, experience, patience and of-course disciple. If you have limited funds, don’t rush in to live trading until you are ready. That is a difficult thing for most people, because to many times, traders always think they are ready far to soon before they actually are. If you are going it alone, who is going to tell you, “You are ready”.  We think more highly of our abilities before its time, is the point. To counter that, preserve your equity and learn to trade by following the markets price. I would say, use no indicators at first and look for price patterns that you can exploit.

If traders did that first, then look for indicators that line up with your new understanding of how to harness the power of support and resistance, they would be on there way. You can always build on this model. If you only rely on indicators, you are leaning on the secondary, not the primary. Learn the primary first and the secondary will make much more sense to you.

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In today’s trading, I took only one trade. I could have stayed in longer but got out with my daily goal. The momentum was clearly down and as far as indicators are concerned, one of my was saying relax go with the flow and ride it out. That could have gotten me about 2.50 or 3.00 additional points, but I just took what I could easily get. I was in the trade for about 10-12 minutes I think and the bottom of the move lasted for another 20 minutes.  I had a great couple of days last Friday and Monday and have just been on cruise control yesterday and today. I have a video of the trade below and most of it is a live trade if you care to watch. Again, if you don’t have time, sold short in the afternoon sell off as things started to turn down. I scaled out at several spots between 2-3 points or so and that was it. I did see the possibility for the market to just continue as I talk about in the video, but again, no struggle, no pain, no problem. We will see what tomorrow brings.

Lastly, I see the market trading up to 1166-1167 and catching some resistance there, if it can get above, 1168, there is a good chance there will be a lot more after that. On the other side, a break of 1158 could send us down yet again, I do see support trying to build in here and it is possible 1145 could be touched as I said a couple of days ago. I think we will again see trades on both sides of the market for tomorrows session.

Until then, good trading.

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A Few Pieces of Trading Wisdom

Tuesday, April 6th, 2010

This post is for Tuesday April 6th and the market is still trading at 10:30 am very slowly.

With Fridays market closed, the unemployment number were out and many took the news as a sign of hope, where we had two months back to back showing jobs being added. I remember seeing, that there were parts to the job report that showed a very negative side to the numbers, but you had to dig just a little to see it. I guess everyone is just looking on the surface and saw a reason to celebrate. Lets all hope for the best, but I am suspect that all is well.

No trading for me right now, the market is trending the last few days, but moving slowly on light volume. Its been a good break for me and am going to just play it by ear. If I can trade the early morning, I will see if I can make up a little ground one or two days this week?

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That being said, while trading, we are all best served to trade what we see and not what we think. I can go back and look at times when I had hung myself up in my own personal trading and saw that when I formed a very strong opinion about market direction, I lost the objectivity I needed to see the price without bias. I know for a fact that I am not alone. I am aware of my faults and always try and read the market as it is, not how I want to see it. Doing this has always served me well. I can still take a loss, no problem, but I will not take repeated full stop outs back to back. If I feel the urge to be right at what ever the cost, I will just walk away and take a walk. Our ego’s to often get in the way and can become difficult to take a lose, we don’t like being wrong. If that is YOU, take steps today to trade only what you know and if you don’t see it clearly, don’t trade it. There are so many good trades to take in the course of a week that we should not feel compelled to trade  anything less than what is crystal clear.

I am going to start applying this more directly to my own trading. At times I do exercise a bit of overconfidence, because I am most often able to capture my trading goal for the day and come back from previous losses if I have them. I at times make it more difficult than it has to be for myself, because I to often trade the slow time of the day, but that is something I am going to change. If traders are trading this slow time of day and looking for extended runs, it will not likely happen but on rare occasion. If you are trading that time of day, I feel, exercising trading wisdom, will say that you have to set very small targets and very small stops. If you can’t do that, do not trade this time of day. It is not worth it, not to mention it takes 3 to 4 times longer to get the same thing if you were to trade the early or after noon sessions.

Trading wisdom point number two; try and be profitable every day if you are a very short term trader and certainly at the end of the week. This will depend on your trading style, because if you are a scalp trader trading stocks or emini futures, you will have multiple opportunities in the course of a morning or afternoon session to pick up a few points, but if your trade targets are larger, you will have limited trades and opportunities to come back if you are wrong and so, being profitable every day is unrealistic.  That is where weekly profitability comes into play, your gains will be larger and over the course of time, moving towards your goals.

The way to ensure this type of goal, is to keep your losses small. That can not be overstated. If you allow yourself to take large draw-downs, you only dig a large hole for yourself and many times it becomes to hard to crawl out. One exercise to help with this is find what ever is within your trading method or system and start out practicing to take small profit target objectives. Everyone wants to go for the monster run and those will and can come, but it is still your timing on those trades and the small ones where it all starts out. If you work on your entries and get it so that you can take 2,3,4 ticks for the S&P emin, 6,8 or 10 points on the Dow and or .06, 08 or .10 cents on a stock and do it often and with confidence all while not risking more than your gains, you will be making progress.

Every 4 point S&P run starts out at being profitable with the first point. Every stock move of $1.00 starts out with a .10 cents move and so, if you can get your timing down to catch those small moves you will then be able to screen out some of the small moves when the time is right and turn those into the big moves everyone likes to talk about. The point is, going for the singles will train you to be able to eventually hit the home runs. You will be cutting your losses quickly if the trade does not work in your favor right away, a good habit.  This is just an exercise to help you work on better timing and get you to cut your losses if you start to loose the trading edge.

Trading wisdom point number three; take what the market gives you. This will work right in line with what I have already mentioned, in that as you get better in your timing and your ability to cut your losses quickly, you will soon  be better able to screen out what trades are likely to have more under the hood and those are the trades you want to ride out. It is a lot easier to ride out a trade once you have locked in some profit and moved up your stop. This gets into trade and money management and a topic for another day, but a successful trader, never lets a good trade go from green to red.

More on the topic tomorrow, but in the mean time, I hope this gives you some idea’s.

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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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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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