Posts Tagged ‘Trading Lesson’

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Trading Lesson; Part Two

Thursday, June 25th, 2009

Today is Wednesday June 24th and markets found a footing to mount a nice rally on the open.

Today’s market action was a nice reaction to a pattern that was setting itself up all day yesterday. I wanted to show it but I decided to write something else instead. I knew something was brewing there. We had a real nice controlled move back up to the middle of the range, moving right to a 62% retracement off of the last pivot high before the break.

For those interested to look at this market action a little closer, I have below a 10 minute bar chart of the S&P with some market comments and break points identified on it. You can see where the pressure points were and draw some comparison to how price action flows for the last few days. You need to know what it looks like, so that in the future when you see similar setups and patterns you can with some degree of accuracy draw some conclusions.

Do note that the price action over the last few days has with it some gap days in the cash market, meaning that the futures had moved out above and below some of these support and resistance areas before the general public could take advantage of the breaks. Trading in the premarket before the open could have placed you in the break out areas as shown Just thought I would point that out. The street is not letting the public take advantage of the full move by taking it up and down before them, a sort of front running. Again, just an observation.

The market is now forming a larger “Triangle” formation, with resistance above and support below. Again you can see this in the chart below. I was expecting the move back up to the middle of the range, big time, but where from here as I said yesterday. We seem to have found support right where I drew that parallel on Monday’s daily chart. There is no other logical reason for the market to stop where it did. It is not close to any support from the left side of the daily charts, but has stopped right in its tracks in a not so obvious place.

Why?  Well, I believe that is where the unseen support comes in. Not so easy to see with the naked eye, but another reason why you should learn how to plot and chart parallels. It’s not a science as I have said before, but it can be a useful tool if you know how to use it.

Maybe tomorrow I will show how the downside move over the last 10 trading days was confined to a parallel downside channel as well. This gave you the downside potential target and the upside resistance area that we hit today. If you are trading for large targets this information can give you the patience and staying power to wait out the move until the objectives have been met, as long as the price action supports it Price always rules.

I will continue where I left off  yesterday in pointing out common and critical trading struggles with the would be trader.

Point number two was, “Reaching for trades, trying to make up previous losses”.

*** There is a right way to go about making up lost ground and I will discuss that after I point out the problem. When you find yourself down a few trades and in negative territory, most traders get taken over by a swell of emotions that usually makes things worse for themselves.  You get overwhelmed by your loss and how the market just seems to know where you put your stop and it goes to it like a magnet, another loss.

As I said yesterday, you can not allow yourself to bleed out. Take each trade on its own merit and shake off the losses. Be mindful not to lose your nerve and confidence. If you do, it is only going to get worse. You cannot make rational trading decisions from this negative posture. If you have 3 losses in a row and it could even be two in a row, you are now in the “PENALTY BOX” for being bad. It is obvious that you are not in tune with the price action and need to walk away and take a break.

Look at each trade and see if it meets the qualifications you have previously set up for a buy and or sell decision. If it has not, DON’T TAKE THE TRADE. Let me tell you, not taking a trade is just as important as taking one and is in fact taking a trading position, a no trade position. You will be amazed what a little time will do in offering a whole new set of price action reads for you to consider. But if you rush in too quickly to try and prematurely recapture lost gains, you are only setting yourself up. “Just Say No”. Moments later, you will see what it is you were looking for, the perfect trade setup.

One additional solution is to use what I had pointed out yesterday, by doing something physical, to get your blood pumping and oxygen flowing to your brain. I suggested doing 10 push-ups or more when you find yourself in any difficult position. You could do something else, like push a little iron, whatever you think you can do to break the destructive pattern you find yourself in. Some traders get paralyzed and cannot leave the screen as they continue to frustrate themselves to no end. Many destroy their account so that the pain will somehow stop. Don’t let that be you.

One last thing on this and it will be a big help in taking the pressure off. I believe that all traders have bad days and we know that is the truth, but you need to draw a line in the sand well ahead of time as to where is your cut off point for the day. If you don’t do this, you and your trading account are going to have that real bad day that you do not want to think about. Well, you have nothing to stop you, because you have not set up in your mind where you are going to stop trading for the day.

I have what I call double my daily goal as my daily loss limit. It’s enough room to breath but not too bad to make up the next day if in fact you get there. Minimum daily goal is 2 net points a day, but often is 4, so your daily loss limit is 4 S&P points for the day. If you find yourself there, STOP.

I will pick it up tomorrow, out of time and space for today. Trade on!

http://www.screencast.com/t/HQWZvmnef6O 10 minute chart of S&P with notes and comments

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Trading Lesson: Part One

Wednesday, June 24th, 2009

Today is Tuesday June 23rd and the markets did have that follow through to the downside on the open, like I  said in yesterday’s post.

Just after the open the markets sold off, but nothing too outrageous. It was contained. The day’s trading action looked like a mess. If you were looking for another big trending day, it did not happen. We got a full blow CHOP SESSION, very contained on the upside and downside.

This is pretty typical after a previous large down day. Tomorrow will tell us a lot. The markets are finding a little support at the blue parallel line that I drew on yesterday’s charts. It will be interesting to see if in fact that area holds because it looks like it had hit it today and it held, so tomorrow will again tell us if that area is real or not. If it goes down any further it will look like a full blown “Head & Shoulders Top” and that would not go well for any further upside momentum and future break out above the latest highs.

We are already towards the end of June. Wow, time is going fast. I am looking for a market top somewhere in September/October. There is a chance it could come a little early, late August, but will not know until we get closer. I feel very strongly about another sell off of large proportions, so whatever my advice is worth, BE CAREFUL around that time. I have additional information on the subject, but I don’t want to publish it here. If anyone is interested to know more, send me an email and I will tell more.

I did not trade today and may take the rest of the week off to help settle some of my loose ends. This last week was very unsettling and I need to get back into the right frame of mind.

This may be a good time to give my readers a few things to think about if you are currently trading. This is very, very sound advice, so take it in and think about it. It is not rocket science but things not to forget, so here goes.

*** When you are trading one of the first things you need to remember is to protect your account. That is your Life Blood and if you bleed out, you die. So you need to be mentally alert at all times if you are potentially going to take a trade.

*** Some of the biggest problems traders face are as follows, I will number them and comment later.

1)  Place trades out of fear of missing a large move

2) Reach for trades, trying to make up previous losses

3) Create a mental directional position that makes it impossible to trade against when the market turns against you.

I believe those three things are I the biggest reasons why traders fail to put it all together consistently. When you place a trade after analyzing the market for direction, you see the possibilities and start clouding your judgment.

You don’t want to miss the trade because you have said it is going to be a big one and you jump in too early, STOPPED OUT. The trade looks good still, you convince yourself that you were just a little early and jump in again, stopped out again. The trade never does go and you may even go through this process a couple more times until it is clear that you were wrong. Bad idea.

If the market does not make the move after your second position attempt, let it go. Don’t chase it and don’t feel bad that you missed it. This is where the problems start, in your head, so keep it screwed on tight at all times.

Maintain control and discipline. You are trading against some of the best traders in the world and they are not going to make it easy for you, so be smart and stay in control. Let the move finish out and don’t be anxious about missing it, there are more moves coming, be patient. Think of yourself as a professional with complete confidence in overcoming all obstacles no matter how great or small.

One more idea on how to break this strangle hold. This may not be for everyone, but for those who can, I recommend that if you find yourself in a situation like the above or a similar situation of difficulty, that you do the following. If, after you take two stops in a row, you stop trading for a few minutes and do at least 10 push ups. I know this may sound funny to some of you but, there is a reason for this and I will explain only a point or two of the reasoning.

You need to break any mental block that you are forming and get rid of it quickly before it does you more damage. You are taking a positive action in response to a negative action that just took place, for starters. Second, you are getting the REAL BLOOD pumping and flowing through your body and with it, oxygen. With more oxygen the better your brain functions and with greater clarity. That is what trading is based on and many forget that.

Clarity, focus, and timing. If you are lacking any of those, your performance will suffer. You need to be at your peak in order to compete . These are just a few reasons for taking the action I mentioned above. I know that maybe only 2 out of 10 people (80/20 rule) who are reading this will take this advice, but I challenge all who are capable to do it. All I can say is give it a try, you will get therapeutic benefits from this none-the-less.  I could write a lot more about this subject alone but I will end it here for now.

I will comment on the other points in tomorrow’s posting, so come on back and see what I have to say. Until then, Trade On.

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Day Trading Lesson Today

Monday, June 8th, 2009

Today is Monday June 8th and the markets put in an impressive reversal in the last hour of trading today.

Nice move to close this morning’s gap down opening. It was very slow going after 9 am West Coast and I was glad to be out and done for the day. Daily goal met in only a few trades.

The trend had turned positive at exactly 10:11 am W.C. time and pushed itself higher just off the top for a sell and or reverse signal at 12:51 p.m.  Signal to signal for 13 points. This my larger time frame chart that catches bigger moves for those who have the patience to wait it out. I don’t usually stay with a trade that long, but there were many points along the way to safely get in and out along the way to the top. The three hours before this move is enough to test the discipline of many traders.

When the market is not moving, you can elect to just step aside, go have lunch, take a walk or go do something. When you come back, don’t worry about missing a move, if you know how to get in on a smaller time frame, there is not much to worry about. If you don’t, then you have work to do.

The worst thing you can do is try and look for moves where the market is not providing any. Remember, if you are trading short term stuff, you only have so much peak attention and focus and if you use it up on low volume action and good moves while you are looking you are just spinning your wheels. The volume was very light with summer just at our doors, that is understandable.

The end of the quarter is coming at the end of this month for money managers and I know I lot of them don’t want to under-perform during this period. That could be one reason the market is still holding up as well as it is. If they are not able to make up some of the lost ground that the market took from them by the end of this quarter, many of their jobs could be on the line. It is all about performance and understandably so. They have clients who want to see some of their equity come back up to help offset the dismal performance last year.

The Dow and S&P recently broke from a “W” formation that I had pointed out a couple of weeks ago. We had to give the benefit of the doubt to the bulls since they are still in control. They continue to push on higher highs. Again, you have to go with the current trend until you see something else that says different.

I thought that may be coming in today’s early sell off, but we took on a fierce rally to push the indexes back to even for the day. Look at both sides of the market for trades, but the edge has to go with the bulls at this time. I do see more room on the upside for the Dow, short term after today’s action, around 9,000 on the Dow. I have included a chart of this below. The Dow is working within a channel and it is pretty clearly defined. If we falter, you can see where the two support levels could come in at.

Trading Lesson:   When charting out a play, it is always important to look at different time frames. Start at the highest time frame and identify what that is. Next go to the intermediate time frame and notice it. When the intermediate time frame turns down, it is at that moment trading counter trend to the larger move at hand, so look for it to turn back up and take advantage of the bigger forces at work.

The same can be said about the next time frame down from the intermediate. That should be your magnifying glass to help you see inside the two higher time frames. When the smallest time frame is down and the intermediate time frame is up, look to the smallest time frame to put you back into the trade at a low risk point. Doing so will allow you to take advantage of the longer time frame momentum before you.

Today would be a perfect example. At 12:30 p.m today the larger trend was up, the intermediate down and the shortest just turning back up to continue the move. The shortest pushes you back into the trade and moments later confirmation comes with the intermediate turning back up as well. Now you can ride the intermediate trend up for all its worth and in this case that would be out at 12:36 / 12:37 p.m. for a 5 point move.

This is assuming you missed the 7-8 point move just before all of this. Once the markets start to move powerfully, you can be pretty sure that the volume will continue and the moves with them. After a long consolidation period and then a break out, there is usually at least two moves before you get a meaningful retracement. The first pause is just adjusting itself for the rapid rise, people getting out and new people getting in, the ones who missed the first big move. When it turns back up, no one wants to be left behind and that’s where the power comes to usually finish it off.

There is a time thing going on as well. If the first break out moves up sharply in a short period of time, that is an indication that the next move may be soon after it. You often see moves last 20 to 30 minutes and with it being only 5-8 minutes into it, time would say that there is possibly more because there is more time for a typical large move to complete.

One last thing, the longer the move is consolidating the bigger the move once is breaks out. That is why it can be very important to maintain your equity during the consolidation period and not be getting stopped out on moves that are not there. You may find yourself with several stops inside the zone and no more nerve to pull the trigger once the real move kicks in.

So, if you are cannot scalp for small targets inside of a small range, then save yourself for the meaningful move and wait for it. It did give you a nice early clue that it was going to go, from 12:00 to 12:17 today. Do you see it?

http://www.screencast.com/t/JK5MlWPD Today’s equity chart

http://www.screencast.com/t/mraaQLujSmw Chart of the Dow Jones Daily

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Technical Analysis: Video Trading Lesson Today

Thursday, June 4th, 2009

Today is Wednesday, June 3rd and we are starting to get a pull back in the markets.

Today the markets made a nice late rally to recover from a steeper sell off it was seeing earlier in the day. The Dow was only off around 65 points, not too bad. With a close up off the lows, it sets the tone for an early rally tomorrow, but we may not be done to the downside. I

have no predictions on where prices are going at this point. I will tell you that we did hit an upside objective with the 940 S&P number being hit and completed that I had called. We are still in an uptrend, there has not been any damage to the chart and until then, you have to give the benefit of the doubt to the bulls.

There is some heavy resistance at the 940-950 area so that is going to be a very critical area to watch. I previously had in my mind that we would see some kind of a pull back and a lot of people will think this is more of a correction than it really is and start shorting the market. That could be a mistake. A pull back would be normal from here, but everything about this market right now is not normal.

I do  think overall we will see higher prices over the summer, that I am pretty sure about, but be careful, I don’t think it is going to last. By this September and October, we are going to have problems holding on to any meaningful gains going into the end of the year. I am a bear long term and do think the lows on the S&P and Dow are going to get taken out in a very big way. For now enjoy the mini Bull and get some of that 401K money back.

I am a bit cynical about how things are run around the good old USA. I believe the powers that be know exactly what is going on and when any changes are taking place. If you ask yourself, did “THEY” know that the market was going to tank last year?  Here, let me answer that one for you, YES.  Did they know that it was going to turn and when?  I can’t help myself, let me answer that one too, YES.

Our leader came out on the airwaves three days before the bottom on the S&P at (interesting number, I did not pick it) 666. That would make him a pretty good market timer if you ask me. Just three days earlier everyone thought the very worst. After that third day people who took his advice have done really well. I don’t know if anyone knows that, but it’s true.

What if people put a lot of new money in the market and it did not work out? Mr. O would not be looking too good right now and he could not have that.  The reason he could come out and make a stock market call like he did was because, well, you make your own conclusions. We hear that things are getting better and I am all for that, Ya-Ya.  I always say to keep an open mind and think for yourself. This will be one of those times, even as I give my opinion. That is all it is, my opinion.

In today’s trading, I did well, had taken a few small trades early, some up and some down, but saw a very nice high probability trade to capture a big move to the downside. I put it on, took not one tick of heat and picked up 6 & 1/4 points on that trade. I held it for a while which was painful in and of itself. I am not usually in a trade for as long as I was, but I played it for the extended move out of a higher time frame and that is what it gave me. I got in just as the market told me and got out just as it said “get out”. I did give it a few extra ticks of room, just in case it was a fake out. I have a chart of it below.  All in all, 3 times my daily goal. A lot of early trades were split trades with different exits.

Trading Lesson: Below is a short video of how you can use support and resistance by plotting  parallel channels. I cover how you can use them in your trading to give you some possible insight on where prices can go before they get there. It is not a science but it is something that gets played out everyday. Take the insight that I give you here today and check it out on the markets. It may take some time to be able to spot these, but when up and down trends play out, you should be able to apply some of these ideas to give you an edge.

Technical analysis is the study of price movement through patterns, support and resistance, and general price fluctuations. You can draw conclusions as prices move from one area of support to another area of resistance and use that information to trade accordingly. Even if you spot these patterns, you still have to know how to play it, with low risk entries in mind.  Check back for more insight and ideas.   Anyone interested in learning more please feel free to email me. I will do my best to answer your questions.

http://www.screencast.com/t/LuSFBV59R Today’s equity chart

http://www.screencast.com/t/3bLxmtzYZI One of today’s trades

http://www.screencast.com/t/HMBxbNpJ7 Trading lesson, 5 minute video

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Day Trading Lesson, A Big One

Friday, May 22nd, 2009

Today is Thursday, May 21st and the market is reacting to yesterday’s call for a sell off.

So far so good on the call, but each day stands on its own. The S&P sold off about 24 points (equal to 240 Dow Points), straight down with a little come back at the end of the session. It went right to last Friday’s close and stopped dead in its tracks and moved back up about 9 S&P points, still off 15 points for the day.

I have said that Friday’s close was the line in the sand, and I am not the only one who realizes that represents a key turning point. That was why it stopped going down at that number. We will see how it reacts to that number again. A close below that, will usher in more selling.

Today’s trading was a short session. I traded smaller, only 3 contracts, and only traded up to my daily goal. A smooth morning.

Trading Lesson: I have always said that you have to look at both sides of the market and not get stuck on any one call. The reason, if conditions change, you will not be able to trade against your anchored opinion and you will not be able to see the changes taking place, because it does not match up with your pre-ordained views.

This is SO IMPORTANT, I cannot begin to tell you how much. It can mean the difference to your whole trading endeavor. That’s right, that is how important this point is. Things change fast during the day and you have to be able to change your position, long to short and vice-versa.

In a predominantly strong down day, it can pay off to only take the short trades and just leave the long ones alone. The same is true for a super strong up trending day. There is nothing wrong with that, but those days only come along about 2 to 3 days per month. That leaves about 17 other trading days that the market is grinding itself higher or lower, with plenty of ups and downs along the way.

Those 17 days are when we need to remain open minded to overall direction. You can have an opinion based on the next higher time frame you predominantly trade, but keeping an open mind basd on price action is again THE KEY to success.

Most people trade better from the long side of the market and that alone can be a stumbling block to overcome. Get it in your mind now, if you are going to day trade, you need to see both sides of the market and be able to handle yourself equally based on price action. Don’t gloss over this trading advice. If you take your trading venture seriously. I would like to see more small traders handle themselves proficiently while going up against the big boys on Wall Street.

Knowing how to read chart patterns is one of the key elements to understanding price action. Look at yesterday’s S&P 500 cash market on a 5 minute chart. You will see one of the most perfect HEAD & SHOULDERS patterns around. Look closely at the last 5 days from start to finish and you can clearly see a break on the right shoulder as clear as a bell The time is 12:10 or so and the price break is at 912.

By going short at that price and holding through to today at the same time, 12:10 or so, you would have picked up 29 S&P points, from signal entry to signal exit. I would not personally hold over night, but we are just looking at the pattern. If I traded options or some other instrument, I may consider holding it, but I don’t trade that way.

The point is, that is trading price action at its finest. Those moves happen in all time frames, down to the small micro moves of the 100 tick chart of the E-Mini. Understanding how prices ebb and flow is critical to coming out on top at the end of your trading day.

Many people think they get it, but I will tell you it takes time to see the patterns over and over again. When you see it, you will know what to do. Buy or Sell at the low risk entry points. It will not come to you by osmosis, or any other way. You will have to learn it.  There is no way of getting around it. The other option is to rely on indicators as a cheat sheet or cliff notes to help you through the endeavor. That can work to help you get started, but you should not depend on it. It could be your “Achilles heel” to trading. Say it isn’t so. That’s what I am talking about. Learn price action and keep going forward.

I love the line in the last Rockey movie, called (Rockey Balboa). One of the lines he uses when talking to his kid is, “Winning is not about Not getting hit, but about getting hit and keep moving forward, keep moving forward, that’s how winners are made”. So true when it comes to trading. You will get stopped out, but what are you going to do about it? Put it out of your mind and look for the next trade move and come back, one trade at a time. Don’t try and eat it all at once. One trade at a time, one after another, based on momentum and solid price action moves.

As a bonus to my readers today, I have below today’s momentum swings mapped out similar to yesterday’s posting. I don’t know how long I will do this, but it’s there today. I can’t show you the other timing tools I use, but I will tell you that they match up to every signal I have posted on the screen within one price bar. Those other tools give the trader more confidence until he learns more about how to map out his price action treasure. There’s that treasure talk again. Go figure.

http://www.screencast.com/t/9Ld4q9Wf Today’s equity chart

http://www.screencast.com/t/7yekZzC2PUy Today’s potential trades as marked, Video, no sound, 2 minutes.

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Market Rebounds Right on Time

Monday, May 18th, 2009

Today is Monday, May 18th and the market puts in a nice rebound day as expected.

Very nice day today to the upside as I had said in Fridays blog. The Dow was up around 230 point and the S&P 26 points. About half of the move was before the market opened, so full participation on the move by all was slightly hampered.

Over the course of this week we should see some higher prices overall and retest the old highs of last week. I had said a couple weeks ago that I was expecting prices to go to around 940 on the S&P and we came up to around 930 and backed off.

I still think the market will want to push itself up into that outside resistance area which is around 940 ish. That would give us a slightly higher high and would put in a nice fat pivot point to trade short off of, if in fact we get it.

If today’s lows get taken out, all bets may be off. Today’s low is the line in the sand for this move of the last couple of months. If it gets taken out, the move should be back to the middle of the previous range at a minimum.

In today’s trading, I did good, picking up my daily goal, as I have come to expect. But I did take a few stops on some split trades early on. I had missed three real good trades because of my computer acting slow at the order point, very frustrating. Others who were following me had no problems picking up those good entries, capturing their points early on. I took a break after the first hour and finished up a little later, capturing a few nice trades to more than put me over the top for today.

I still have not upgraded my trading software which is going to fix the problem I have had with posting my equity chart like I had been, but I have included today a short video of a few trades that I actually took and a recap of the day’s trading signals in another video.

I will post the video on cattle futures maybe tomorrow that I did on the weekend. This is just showing that if you understand how price action works, combined with support and resistance and other techniques, that you will be able to put yourself in front of trades that can carry you to profitability no matter what you like to trade.

Trading Lesson:    Trading is by no means easy, but you can do a few things to put the odds of profitability in your favor. One of those things, as it has been talked about in trading circles, is to control your emotions. Emotions make people do things that they would not otherwise do. Fear and Greed can make people enter bad positions and take you out of good ones.

One of the ways to help overcome some of these problems is to be able to settle in your mind what is a good trading goal for the day. If you want to be a millionaire and you want it to happen now, that is not a realistic objective. If you want to replace other income with trading income, you still need to answer the question:  How much is enough?

If you are realistic, and come up with a modest figure and work towards that goal slowly, you will have a far better chance in reaching that, but more importantly, sustaining that over a long period of time. I have come up with a figure that will work for me and it seems reasonable at 2-3 S&P points per day. I have not had any problem getting to this figure for months now and it is because my expectations are reasonable in what I can safely take out of the market today, tomorrow and the next.

If your expectations are 8-10 points per day, that is not realistic over a long period of time. You may be able to hit that some days, but the psychological pressure you will be putting yourself under to obtain that figure will take a toll on you over time. It will make you reach for trades that are just not there, inevitably making costly mistakes and having to struggle to just make up for those mis-trades. If you are honest and realistic with your daily goal, assuming that you have one, something much smaller is sustainable and will not create the anxiety that hitting such a lofty goal will put you under.

That being said, once you hit your goal and you are in sync with the market flow, you can at times continue to trade but you should consider cutting down on your trade size. This will again take the pressure off and allow you to concentrate on the just the pure move, by removing some of the fear that can creep in by trading your P&L.   If you trade on your own, you have to be your own risk manager, there is no one there to rein you in if you put your account at risk by taking multiple losses. Do you have a plan if that happens?  You should, because it happens to everyone at some point and others all too often.

We as traders need to always work on performance as a means of extending your personal mastery. This is done by repeating the same base trade setups that happen again and again each and every day. Waiting for the trade to come to you is key. You cannot go looking for it, you will get lost. The markets have a rhythm to each and every one of them. A collection of people’s emotions taking prices up and down. I have said this before but it bears repeating. Find the rhythm and go with it.  Doing so will put you into a small group of traders that can, versus the traders that can’t. Which do you aspire to be?

http://www.screencast.com/t/8ce2iH3Df              Some of today’s available trades

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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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Successful Day Trading Continues

Tuesday, April 14th, 2009

Today is Monday April 13th and I had a nice smooth day trading, although not feeling very well.

I took Thursday and Friday off last week and meant to post a note letting everyone know, but I forgot. Friday the markets were closed so not much happened anyway. I had a great Easter weekend with family and friends.

As the morning started, I was not feeling like myself today and considered not trading at all, but I gave myself a little extra time to see if I could handle putting on a few trades. I guess it turned out pretty good.

I was only going to make a few trades, get to one thousand dollars and stop. That would have been plenty good enough, but since I had not had a loss and it was coming to me pretty easily, I decided to stay with it for a while.

I really had patience to wait for the trade. I let a few go by but I took many trades for small profits, some for only 1/2 point. That was all the market was giving me, because the range was so small. I started in the slow time of day and had to wait out the trades, but there just was very little movement and it took a long time to develop, so I picked up whatever I could get safely on each turn. It added up just the same, like I have said before.

A little later, I had a nice 3 point + trade to tack on to what I had put together. All in all, I took 27 trades and they were all gains, with one trade at break even, for a $3,500 dollar day and I was not feeling well.  I should get sick more often -  just kidding.

It sure is nice to hit the trades for gains over and over again. It adds nicely to your confidence and will set you up for the rest of the week. You can be sure, I will not let my guard down.

We always need to respect the markets, like I have talked about so many times. Many traders will have their biggest losses right after they had their biggest gains. It’s all in the mind and how it processes the emotions of a big day. Settle down and take tomorrow just like you had no gains at all today. Each day needs to really stand on its own. It would be best for me to put this day out of my mind and prepare for a smooth day of profits tomorrow, with as little draw down as possible.

I am going to wrap it up a little early today and will have some kind of trading lesson for tomorrow’s blog.

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

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Interesting Trading Lesson Today

Saturday, April 4th, 2009

Today is Friday, April 3rd and I had a good day, but not without a few problems.

I started out just fine. I almost had my daily goal in just a few minutes. But then I was not patient enough to wait just a minute more for a clear signal and sure enough, I got stopped out. That trade was going to put me over the top and capture my daily goal, about 15 minutes worth.

What happened after that is, I found myself in an up-trending market and was looking for a counter trend trade setup. This was the trend starting about 8:30 am W.C. time. I doubled up on a trade short 5+5 for two positions short and got stopped out with a 4 tick stop. Why I fought that trend up, I don’t know. This goes back to what I was commenting on earlier in the week. If you get a picture or idea in your mind that the market is going to do something and it is not co-operating with you, the problem is not in the market action, but with you, or me in this case.

This is why we all need to be humble and respect the markets. Trading success can be a great thing to give you confidence in your ability to put together winning trades, but it can also be an Achilles heel. Each and every day, you really need to keep an open mind to direction. This is what can happen to a lot of traders if they think they know the next move of the market. Let the market tell you and don’t be impatient. If the whole series of moves looks a little confusing, just let a little time go by. That is what I did today, when I was up to almost daily goal and slipped back just a little in the red.

I took a break and came back a little later and started nailing it. I came right back like I have done in the past to post some real nice gains for the day. I ended up taking it to two times daily goal or around $2,500 in equity, but it took me some time. I just put on mostly small trades, 1 point, 3 ticks and so on. I was just focusing on market timing. I took my trade size down to average 5 contracts, some smaller, a few bigger, but averaged around 5. With a 5 contract average I probably picked up a net after commission 10 points of profit to get my totals.

If I am having trouble, for whatever reason, I almost always go back to my bread and butter trading. Sometimes when you are targeting 2 or 3 points in a trade and the market is not giving it to you, change and be satisfied with 1 point here and 1 point there. It adds up pretty fast, if you keep stringing them along one after another. It counts just the same as a 3 point trade. Trading is not always easy and there are many unseen factors you could be battling, but try and keep it simple. My method is simple, but not easy. And there is a difference.

I have a short video of some of the last trades I took today. It is on a clean chart and I will show you some of my timing techniques while using trendlines. I could have captured a lot more points on a lot of these trades, but that was not even in my mind for the most part. I was concentrating on market timing. If I just get that part right, I know I can pick up the profit, it all adds up the same at the end of the day.

Have a great weekend!  Vince

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

http://www.screencast.com/t/e73y7VRj1                  Trendline trading lesson,  video 5 minutes

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