Author: John Gaines
Source: articleage.com
Why do hundreds of thousands online traders and investors trade the forex market every day, and how do they make money doing it?This two-part report clearly and simply details essential tips on how to avoid typical pitfalls and start making more money in your forex trading. Trade pairs, not currencies - Like any relationship, you have to know both sides. Success or failure in forex trading depends upon being right about both currencies and how they impact one another, not just one.Knowledge is Power - When starting out trading forex online, it is essential that you understand the basics of this market if you want to make the most of your investments. The main forex influencer is global news and events. For example, say an ECB statement is released on European interest rates which typically will cause a flurry of activity. Most newcomers react violently to news like this and close, Stock Day Trading, their positions and subsequently miss out on some of the best trading opportunities by waiting until the market calms down. The potential in the forex market is in the volatility, not in its tranquility.Unambitious trading, Stock Day Trading, - Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the short run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the ask price before you can make any, Stock Day Trading, profit and this is much more difficult when you make small trades than when you make larger ones. Over-cautious trading - Like the trader who tries to take small incremental profits all the time, the trader who places tight, Stock Day Trading, stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a fair chance to demonstrate its ability to produce. If you don't place, Stock Day Trading, reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.Independence - If you are new to forex, you will either decide to trade your own money or to have a broker trade it for you. So far, so good. But your risk of losing increases exponentially if you either, Stock Day Trading, of these two things:Interfere with what your broker is doing on your behalf (as his strategy might require a long gestation, Stock Day Trading, period);Seek advice from too many sources - multiple input will only result in multiple losses. Take a position, ride with it and then analyse the outcome - by yourself, for yourself. Tiny margins - Margin trading is one of the biggest advantages in trading, Stock Day Trading, forex as it allows you to trade amounts far larger than the total of your deposits. However, it can also be dangerous to novice traders as it can appeal to the greed factor that destroys many forex traders. The best guideline is to increase your leverage in line with your experience and success. No strategy, Stock Day Trading, - The aim of making money is not a trading strategy. A strategy is your map for how you plan to make money. Your strategy details the approach you are going to take, which currencies you are going to trade and how you will manage your risk. Without a strategy, you may become one of the 90% of new traders that lose their money.Trading Off-Peak Hours - Professional FX traders, option traders, and hedge funds posses a huge advantage over small retail traders during off-peak hours (between 2200 CET and 1000 CET) as they can hedge their positions and move them around when there is far small trade volume is going through (meaning their risk is smaller). The best advice for trading during off peak hours is simple - don't.The only way is up/down - When the market is on its way up, the market, Stock Day Trading, is on its way up. When the market is going down, the market is going down. That's it. There are many systems which analyse past trends, but none that can accurately predict the future. But if you acknowledge to yourself that all that is happening at any time is that the market is simply moving, you'll be amazed at how hard it is to blame anyone else. Trade on the news - Most of the really big market moves occur around news time. Trading volume is high and the moves are significant; this means there is no better time to trade than when news is released. This is when the big players adjust their positions and prices change resulting in a serious currency flow.Exiting Trades - If you place a trade and it's not working out for you, get out. Don't compound your mistake by staying in and hoping for a reversal. If you're in a winning trade, don't talk yourself out of the position because you're bored or want to relieve stress; stress is a natural part of trading; get used to it.Don't trade too short-term - If you are aiming to make less than 20 points profit, don't undertake the trade. The spread you are trading on will make the odds against you far too high.Don't be smart - The most successful traders I know keep their trading simple. They don't analyse all day or research historical trends and track web logs and their results are excellent.Tops and Bottoms - There are no real "bargains" in trading foreign exchange. Trade in the direction the price is going in and you're results will be almost guaranteed to improve.Ignoring the technicals- Understanding whether the market is over-extended long or short is a key indicator of price action. Spikes occur in the market when it is moving all one way.Emotional Trading - Without that all-important strategy, you're trades essentially are thoughts only and thoughts are emotions and a very poor foundation for trading. When most of us are upset and emotional, we don't tend to make the wisest decisions. Don't let your emotions sway you.Confidence - Confidence comes from successful trading. If you lose money early in your trading career it's very difficult to regain it; the trick is not to go off half-cocked; learn the business before you trade. Remember, knowledge is power.The second and final part of this report clearly and simply details more essential tips on how to avoid the pitfalls and start making more money in your forex trading.Take it like a man - If you decide to ride a loss, you are simply displaying stupidity and cowardice. It takes guts to accept your loss and wait, Stock Day Trading, for tomorrow to try again. Sticking to a bad position ruins lots of traders - permanently. Try, Stock Day Trading, to remember that the market often behaves illogically, so don't get commit to any one trade; it's just a trade. One good trade will not make you a trading success; it's ongoing regular performance over months and years that makes a good trader.Focus - Fantasising about possible profits and then "spending" them before, Stock Day Trading, you have realised them is no good. Focus on your current position(s) and place reasonable stop losses at the time you do the trade. Then sit back and enjoy the ride - you have no real control from now on, the market will do what it wants to do.Don't trust demos - Demo trading often causes new traders to learn bad habits. These bad habits, which can be very dangerous in the long run, come about because you are playing with virtual, Stock Day Trading, money. Once you know how your broker's system works, start trading small amounts and only take the risk you can afford to win or lose.Stick to the strategy - When you make money on a well thought-out strategic trade, don't go and lose half of it next time on a fancy; stick to your strategy and invest profits on the next trade that matches your long-term goals.Trade today - Most successful day traders are highly focused on what's happening in the short-term, not what may happen over the next month. If you're trading with 40 to 60-point stops focus on what's happening today as, Stock Day Trading, the market will probably move too quickly to consider the long-term future. However, the long-term trends are not unimportant; they will not always help you though if you're trading intraday.The clues are in the details - The bottom line on your account balance doesn't tell the whole story. Consider individual trade details; analyse your losses and the telling losing streaks. Generally, traders that make money without suffering significant daily losses have the best chance of sustaining positive performance in the long term.Simulated Results - Be very careful and wary about infamous "black box" systems. These so-called trading signal systems do not often explain exactly how the trade signals they generate are produced. Typically, these systems only show their track record of extraordinary results - historical results. Successfully predicting future trade scenarios is altogether more complex. The high-speed algorithmic capabilities of these systems provide significant retrospective trading systems, not ones which will help you trade effectively in the future. Get to know one cross at a time - Each currency pair is unique, and has a unique way of moving in the marketplace. The forces which cause the pair to move up and down are individual to each cross, so study them and learn from your experience and apply your learning to one cross at a time. Risk Reward - If you put a 20 point stop and a 50 point profit your chances of winning are probably about 1-3 against you. In fact, given the spread you're trading on, it's more likely to be 1-4. Play the odds the market gives you. Trading for Wrong Reasons - Don't trade if you are bored, unsure or reacting on a whim. The reason that you are bored in the first place is probably because there is no trade to make in the first place. If you are unsure, it's probably because you can't see the trade to make, so don't make one. Zen Trading- Even when you have taken a position in the markets, you should try and think as you would if you hadn't taken one. This level of detachment is essential if you want to retain your clarity of mind and avoid succumbing to emotional impulses and therefore increasing the likelihood of incurring losses. To achieve this, you need to cultivate a calm and relaxed outlook. Trade in brief periods of no more than a few hours at a time and accept that once the trade has been made, it's out of your hands. Determination - Once you have decided to place a trade, stick to it and let it run its course. This means that if your stop loss is close to being triggered, let it trigger. If you move your stop midway through a trade's life, you are more than likely to suffer worse moves against you. Your determination must be show itself when you acknowledge that you got it wrong, so get out. Short-term Moving Average Crossovers - This is one of the most dangerous trade scenarios for non professional traders. When the short-term moving average crosses the longer-term moving average it only means that the average price in the short run is equal to the average price in the longer run. This is neither a bullish nor bearish indication, so don't fall into the trap of believing it is one.Stochastic - Another dangerous scenario. When it first, Stock Day Trading, signals an exhausted condition that's when the big spike in the "exhausted" currency cross tends to occur. My advice is to buy on the first sign of an overbought cross and then sell on the first sign of an oversold one, Stock Day Trading, . This approach means that you'll be with the trend and have successfully identified a positive move that still has some way to go. So if percentage K and percentage D are both crossing 80, then buy! (This is the same on sell side, where you sell at 20). One cross is all that counts - EURUSD seems to be trading higher, so you buy GBPUSD because it appears not to have moved yet. This is dangerous. Focus on one cross at a time - if EURUSD looks good to you, then just buy EURUSD. Wrong Broker - A lot of FOREX brokers are in business only to make money from yours. Read forums, blogs and chats around, Stock Day Trading, the net to get an unbiased opinion before you choose your broker. Too bullish - Trading statistics show that 90% of most traders will fail at some point. Being too bullish about your trading aptitude can be fatal to your long-term success. You can always learn more about trading the markets, even if you are currently successful in your trades. Stay modest, and keep your eyes open for new ideas and bad habits you might be falling in to.Interpret forex news yourself - Learn to read the source documents of forex news and events - don't rely on the interpretations of news media or others. John Gaines online trading, currency trading, financial serviceA veteran of online trading, John Gaines offers the financial services industry his perspectives and expertise on a variety of trading systems and financial instruments, including forex, CFDs, futures, options and stocks.
Showing posts with label market. Show all posts
Showing posts with label market. Show all posts
Wednesday, September 30, 2009
Sunday, September 27, 2009
Trading Commodity Futures Using Support and Resistance - Paper Trading
Author: Erich Senft
Source: articleage.com
Setting Up a Paper Trading AccountQuestion:I cannot trade with "real money" as yet; however, how do I go about setting up a paper trade account?Answer:You can paper trade various ways and it really does not require that, Stock Day Trading, you have anything more specialized than a notebook to track your trades and access to charts.Begin by funding your paper trading account with the amount of money you think you will really begin with, whether it is $2000 or $20,000. I would suggest that you begin with no less than $5000 and $10,000 is even better.Next you need to decide on which markets you are going to trade. The more money you have in your account, the more markets will be available to you. If you are trading with a $5000 account there is no point in becoming familiar with a market like Crude Oil that has a margin of $3000 per contract!Assuming that you are a smaller trader, you will be most interested in the lower margin markets like the grains, some of the meats, maybe a metal and a currency or two. I would, Stock Day Trading, suggest you limit, Stock Day Trading, your scope to about 6 - 8 markets, as these will be enough to track on a daily basis.Even real money traders rarely follow more than 8 markets...it just becomes too cumbersome, as I'm sure you will find when you've got, Stock Day Trading, more than one paper trade going at a time.If you don't know which markets to choose from, maybe I could make a couple of suggestions:* Corn, or wheat - these are good markets for traders of all levels, but especially the beginner. The margin is not too high and the markets normally act predictably and trend well. Corn and wheat have a tendency to move together (but not always), so watching both, Stock Day Trading, can be redundant.* Cocoa - a good market to make money in as a small move can add up to good profits. Also can be a good market to lose money in for the same reason. I don't mind cocoa, although I know people who have sworn it off. This is the time to find out if it is for you...when it doesn't cost you real money.* Sugar - used to be a good market because it is easy to get in with minimal risk; however the abundance of support and resistance can make it confusing to new traders. Lately the market has lacked direction which only adds to the confusion. Still it is low margin, Stock Day Trading, and relatively low risk market to trade.* Live Cattle - a decent meat market. Some new traders avoid the meats entirely because of their ability to make huge ranges. Cattle is the "safest" of the meat markets.* Cotton - can, Stock Day Trading, be a good market, but is capable of making large ranges. I used to avoid cotton like the plague, but have become fonder of it in recent years.* Soybeans - the Pork Bellies of the Grain complex. If soybeans are too volatile for you consider trading one of the bean cousins, like soybean oil, or soybean meal. They tend to mirror soybeans, but are generally, Stock Day Trading, less margin and less volatile.* Silver - I like the metals; however gold can be a little rich for the small trader. Silver mirrors gold - the poor man's gold, Stock Day Trading, . Some people like copper, but I consider it too thin and margins too high for small traders.* Canadian Dollar/Australian Dollar - two of the more reasonable currency markets. The margins are lower, but there is excellent money making potential. Other markets like Swiss Franc, British Pound, and Japanese Yen are good markets too but require much more margin and risk. All the currencies have a tendency, Stock Day Trading, to move in the same direction anyway (opposite the US Dollar) so it doesn't really matter.But don't stop here, this is the time to practice and refine your skills so include any other markets you are interested in, but avoid the exotics like lumber, rice, oats, palladium, etc. They are just too thin and too volatile for the small trader to be involved in.Now that you have a paper account and a mix of markets to trade you need to search the markets to find trades to make. Once you have found a trade you like, write down your entry, your exit and your profit target - exactly.If you are dealing with a broker, you can call and ask them if your paper order had been filled on a particular day. Alternatively you can just look at the charts and figure it out for yourself.Sometimes you will need to see an intraday chart to know exactly when you got your fill. Barcharts.com offer free intraday charts. Just follow the commodity, Stock Day Trading, chart link and then click custom charts, Stock Day Trading, to alter the time frame displayed to a 5 or 10 minute interval.Track your trades day by day keeping a journal of your profits and losses. A simple way to "journal" your trades is to put them on 3x5 index cards - one card per trade. Write down you reasons for taking the trade as well as exact entry and exits. Make sure to note what you did right and what you would do differently the next time. Allow an extra two ticks on your fills and exits as this will simulate slippage. Brokerage fees are usually $40 round turn per contract.See how well you can do but be honest. Cheating here will not help you in the future. I'm sure you've heard it before, but nothing changes when you trade with real money. If you can't do it on paper, you won't make it for real. Trust me. I've been there.If you don't already have it, you might want to consider using Gecko's Track 'n Trade Pro. As the name suggests the software not only provides charts but also "tracks your trades". You fund a fictional account, place your orders and the software will automatically update your position day by day.It really is phenomenal software and if you are halfway serious about trading you should check it out. It is a legitimate tax deduction too. ;-) You can get a free 30 day trial by following this link: http://www.trackntrade.com/demo/?abbr=SENFTThere is also paper trading software, Stock Day Trading, out there and on the internet which is supposed to simulate trading; however in my opinion it is not realistic for most small traders.Some of the simulators only allow you to trade the e-mini and others start you out with a $50,000 account. This is great if you want to trade the e-mini, or if you are trading with a $50,000 account, but this is not the case for most traders.Anyway, that's paper trading in a nutshell. I hope it helps a little. Please do not hesitate to write back if you have more questions, of if you need me to elaborate on something.Best of luck,- Erich erich@supportandresistance.comPS. Don't skip this part of your education. Most traders hurry through paper trading only to get killed in the markets. Don't make this mistake.U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures, Stock Day Trading, and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading, Stock Day Trading, system or methodology is not necessarily indicative of future results.CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS, Stock Day Trading, MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.The commodity markets first captured Erich Senft's attention in the 1970's when the Hunt brother's made the news when they tried to corner the silver market. Ever since then he had a desire to learn more about what made the commodity markets tick.After experiencing mild success trading futures with the, Stock Day Trading, limited strategies offered by Ken Roberts, he delved deeper into the study of, Stock Day Trading, the commodity markets and became particularly interested in the concepts markets.Erich and partner Tom Loge' run http://www.supportandresistance.com and publish the hugely popular Traders Helping Traders Ezine 6 days a week. Erich and Tom have a daily blog at http://www.supportandresistance.com/blog/Erich is a graduate of the University of Alberta business program and has a Bachelor of Commerce degree, Stock Day Trading, . He is also a registered Commodity Trading Advisor (CTA). He lives in the Pacific Northwest with his wife and three cats. When he's not talking or trading commodities you can usually find him on the golf course chasing a disobedient little white ball.
Source: articleage.com
Setting Up a Paper Trading AccountQuestion:I cannot trade with "real money" as yet; however, how do I go about setting up a paper trade account?Answer:You can paper trade various ways and it really does not require that, Stock Day Trading, you have anything more specialized than a notebook to track your trades and access to charts.Begin by funding your paper trading account with the amount of money you think you will really begin with, whether it is $2000 or $20,000. I would suggest that you begin with no less than $5000 and $10,000 is even better.Next you need to decide on which markets you are going to trade. The more money you have in your account, the more markets will be available to you. If you are trading with a $5000 account there is no point in becoming familiar with a market like Crude Oil that has a margin of $3000 per contract!Assuming that you are a smaller trader, you will be most interested in the lower margin markets like the grains, some of the meats, maybe a metal and a currency or two. I would, Stock Day Trading, suggest you limit, Stock Day Trading, your scope to about 6 - 8 markets, as these will be enough to track on a daily basis.Even real money traders rarely follow more than 8 markets...it just becomes too cumbersome, as I'm sure you will find when you've got, Stock Day Trading, more than one paper trade going at a time.If you don't know which markets to choose from, maybe I could make a couple of suggestions:* Corn, or wheat - these are good markets for traders of all levels, but especially the beginner. The margin is not too high and the markets normally act predictably and trend well. Corn and wheat have a tendency to move together (but not always), so watching both, Stock Day Trading, can be redundant.* Cocoa - a good market to make money in as a small move can add up to good profits. Also can be a good market to lose money in for the same reason. I don't mind cocoa, although I know people who have sworn it off. This is the time to find out if it is for you...when it doesn't cost you real money.* Sugar - used to be a good market because it is easy to get in with minimal risk; however the abundance of support and resistance can make it confusing to new traders. Lately the market has lacked direction which only adds to the confusion. Still it is low margin, Stock Day Trading, and relatively low risk market to trade.* Live Cattle - a decent meat market. Some new traders avoid the meats entirely because of their ability to make huge ranges. Cattle is the "safest" of the meat markets.* Cotton - can, Stock Day Trading, be a good market, but is capable of making large ranges. I used to avoid cotton like the plague, but have become fonder of it in recent years.* Soybeans - the Pork Bellies of the Grain complex. If soybeans are too volatile for you consider trading one of the bean cousins, like soybean oil, or soybean meal. They tend to mirror soybeans, but are generally, Stock Day Trading, less margin and less volatile.* Silver - I like the metals; however gold can be a little rich for the small trader. Silver mirrors gold - the poor man's gold, Stock Day Trading, . Some people like copper, but I consider it too thin and margins too high for small traders.* Canadian Dollar/Australian Dollar - two of the more reasonable currency markets. The margins are lower, but there is excellent money making potential. Other markets like Swiss Franc, British Pound, and Japanese Yen are good markets too but require much more margin and risk. All the currencies have a tendency, Stock Day Trading, to move in the same direction anyway (opposite the US Dollar) so it doesn't really matter.But don't stop here, this is the time to practice and refine your skills so include any other markets you are interested in, but avoid the exotics like lumber, rice, oats, palladium, etc. They are just too thin and too volatile for the small trader to be involved in.Now that you have a paper account and a mix of markets to trade you need to search the markets to find trades to make. Once you have found a trade you like, write down your entry, your exit and your profit target - exactly.If you are dealing with a broker, you can call and ask them if your paper order had been filled on a particular day. Alternatively you can just look at the charts and figure it out for yourself.Sometimes you will need to see an intraday chart to know exactly when you got your fill. Barcharts.com offer free intraday charts. Just follow the commodity, Stock Day Trading, chart link and then click custom charts, Stock Day Trading, to alter the time frame displayed to a 5 or 10 minute interval.Track your trades day by day keeping a journal of your profits and losses. A simple way to "journal" your trades is to put them on 3x5 index cards - one card per trade. Write down you reasons for taking the trade as well as exact entry and exits. Make sure to note what you did right and what you would do differently the next time. Allow an extra two ticks on your fills and exits as this will simulate slippage. Brokerage fees are usually $40 round turn per contract.See how well you can do but be honest. Cheating here will not help you in the future. I'm sure you've heard it before, but nothing changes when you trade with real money. If you can't do it on paper, you won't make it for real. Trust me. I've been there.If you don't already have it, you might want to consider using Gecko's Track 'n Trade Pro. As the name suggests the software not only provides charts but also "tracks your trades". You fund a fictional account, place your orders and the software will automatically update your position day by day.It really is phenomenal software and if you are halfway serious about trading you should check it out. It is a legitimate tax deduction too. ;-) You can get a free 30 day trial by following this link: http://www.trackntrade.com/demo/?abbr=SENFTThere is also paper trading software, Stock Day Trading, out there and on the internet which is supposed to simulate trading; however in my opinion it is not realistic for most small traders.Some of the simulators only allow you to trade the e-mini and others start you out with a $50,000 account. This is great if you want to trade the e-mini, or if you are trading with a $50,000 account, but this is not the case for most traders.Anyway, that's paper trading in a nutshell. I hope it helps a little. Please do not hesitate to write back if you have more questions, of if you need me to elaborate on something.Best of luck,- Erich erich@supportandresistance.comPS. Don't skip this part of your education. Most traders hurry through paper trading only to get killed in the markets. Don't make this mistake.U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures, Stock Day Trading, and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading, Stock Day Trading, system or methodology is not necessarily indicative of future results.CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS, Stock Day Trading, MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.The commodity markets first captured Erich Senft's attention in the 1970's when the Hunt brother's made the news when they tried to corner the silver market. Ever since then he had a desire to learn more about what made the commodity markets tick.After experiencing mild success trading futures with the, Stock Day Trading, limited strategies offered by Ken Roberts, he delved deeper into the study of, Stock Day Trading, the commodity markets and became particularly interested in the concepts markets.Erich and partner Tom Loge' run http://www.supportandresistance.com and publish the hugely popular Traders Helping Traders Ezine 6 days a week. Erich and Tom have a daily blog at http://www.supportandresistance.com/blog/Erich is a graduate of the University of Alberta business program and has a Bachelor of Commerce degree, Stock Day Trading, . He is also a registered Commodity Trading Advisor (CTA). He lives in the Pacific Northwest with his wife and three cats. When he's not talking or trading commodities you can usually find him on the golf course chasing a disobedient little white ball.
Thursday, September 24, 2009
Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies
Author: Tony Spann
Source: articleage.com
Peter is a professional trader, Paul is not. Peter has a tested, proven, written trading plan that he follows each time he enters a trade, Paul does not. Peter has agreed to meet with Paul to help Paul become a more successful trader.Paul was early for his first appointment to see Peter a few days later - he was feeling both excited and apprehensive. Peter had told him he would show him how to use technical analysis and swing trading strategies to trade Stock market trends with confidence - but could he really do it?Did he have the, Stock Day Trading, ability to become a successful trader after losing so much money in the market these last two years? Was he just wasting Peter's time?As he waited, he thought about the look Beth had given him when he had told her about his trading losses...the sense of failure he had experienced as she just walked away. The feeling of utter helplessness he had felt as the enormity of his losses had finally dawned on him. He had been so close to financial freedom, but now that had been taken away from him.He was just starting to feel sorry for himself again when Peter strode into the foyer of the office building and wished everyone good morning - feeling sorry for himself would have to wait until later.Peter motioned him to follow him to the elevator. Paul did so and they chatted as the lift took them to Peters 30th floor office. It was smaller than he had imagined, just a receptionists desk in the waiting room and one office with a view of the city.He expected something grander, but the office was functional, and besides, Peter didn't have a need for any more space as he had only 1 staff member, Kim, his Secretary and receptionist, host, coffee maker and confidant.The focal point of Peter's office was his trading screen - a triple screen plasma display monitor over 4 foot, Stock Day Trading, wide. "Not that's a screen," Paul thought to himself.Kim brought in coffee and then left them alone. Paul poured them both a cup and took a seat.Peter gazed out the window towards the, Stock Day Trading, city for more than a minute before speaking. "So you want to be a trader?" he finally asked. "Yes, but more than that, I want to be a great trader," Paul answered, "Like you.""How do you know I am a great trader? And anyway, what is your definition of a great trader?" Peter asked."I heard you talking at the diner the other day - you certainly know what you are doing, and the market is up 5 days straight and more than 130 points since you bought the S&P 500 Index, that's 20% in a week!" Paul explained. "I think anyone who can take their profits on the day of a major low like that and then, Stock Day Trading, have the ability to turn around and buy...and be dead right, is a great trader.""That is true, the Index is up a long way. And yes, I did get in at the low, didn't I? So I guess, by your definition, I am a great trader," Peter chuckled to himself."How far do you think the market will go up before it has a breather?" Peter asked. "I have no idea," Paul replied. "Neither do I, that's why I have placed my sell orders below the daily lows each day in case it turns around again and I'm ready to go short again," Peter explained."It's not so much picking the low that is important or even necessary, it's managing the trade as it progresses that makes the money," Peter added."But we'll get to that later, let's have a look at a chart and tell me what you see," Peter said. He opened his charting software and soon they were looking at a monthly chart of the S&P 500 Index. Chart available at Stock Trading Review.com"This is the last 3 years price, Stock Day Trading, history of the S&P 500 - what can you tell me about the direction of the trend?" Peter asked."It's been going down," Paul replied. "Correct, and which way have you been trading this market that has been in a clear down trend?" Peter continued. "I haven't been trading it at all, I've just been fully invested,, Stock Day Trading, losing money," Paul replied."Then you have indeed been trading it, my friend." Peter continued. "By sitting on your hands for the last 2 and a half years while prices continued to fall, you have been fighting the trend. People who fight the trend always lose money."Then, you finally sold in a panic, like all the other small traders who finally gave up hope last week. You sold to people like me. The same thing happens every time there is a correction or bear market - the small traders hang on until they can't stand to be in the market any longer, they all sell together in a panic and then the market goes up.""Tell me, looking at this chart, when did the downtrend start?" Peter asked."Well I guess around December, 2000 is where it looked like it started to fall away," Paul replied. "Correct," replied Peter, Stock Day Trading, ."That means that from December 2000, there was no reason to be buying this Index, or buying Stocks that were showing the same chart pattern, and there was every reason to have your Stock portfolio hedged if you didn't sell or have your money in cash."Paul looked at the chart and of course it was easy to see the trend was down with hindsight.Before, Stock Day Trading, he could say anything, Peter continued. "Of course, hindsight trading is perfect, so how would you have known the best time to get out of the market or hedge your portfolio?" Paul looked at the chart and said, "I guess when the moving averages crossed over.""Correct," said Peter. "So, for the last 2 and a half years, the trend on the monthly chart was down. "What else does this chart tell you about the market?"Paul looked at the chart, but he wasn't really sure what Peter wanted to know. "I'm not sure," he finally confessed."Take a close look at the reactions, Stock Day Trading, within the downtrend. Notice that the largest one only managed to go against the trend for 3 months. In any timeframe, a market or Stock that can only go against the major trend for a few bars like this is in a very strong trend."Also, the Index was consistently closing below the short term, Stock Day Trading, moving average, and always closed below the longer term moving average - this is not something you want to sit through fully invested, holding on and hoping," Peter continued.Paul could, Stock Day Trading, see now the reason for his huge losses. He had looked at charts before but he had never looked at the big picture. The monthly chart showed the trend clearly - and it had been down. A simple moving average crossover sell signal would have saved his fortune..."This simple timing system is what I use for my long term portfolio," Peter continued. "I have 70% of the funds I have allocated to the Stock market invested for the long term in leveraged S&P 500 Index Funds. My investment in these funds forms the core of my Stock portfolio."I initially entered when I got a buy signal in 1994 and added more funds each month - 50-70% of my net short term trading profits and other income. I kept an eye on the monthly chart and didn't get a sell signal until the end of 2000. I was fully invested in those funds from around 500 points to 1450 points."Peter then showed Paul a monthly chart going back to 1994. Paul looked at it in disbelief. He was looking at probably the greatest wealth creation trend in history and he had missed most of it because of his short term focus. Chart available at Stock Trading Review.com."Remember this Paul," Peter said as they studied the long term chart, "Wealth comes from looking at the big picture. Many people believe that holding for the long term means forever, Stock Day Trading, . I prefer to hold things that are rising in value. If the trend turns down, I take my money and wait until the trend turns up again."This strategy of timing the market with a simple moving average crossover has made me a fortune while millions of people in this country have lost their life savings."Smart investors always invest the majority of their capital for the long term, but have clear guidelines for preserving it if the trend changes. They only trade with a small amount of money that they are prepared to lose."Your trading will be more profitable if you know that you have a substantial portfolio invested long term and it is increasing your wealth. By trading your entire account, and not managing it properly, you risked, and finally lost, most of it."And even though I, Stock Day Trading, bought a small position in Index futures a few days ago, my long term portfolio is still fully invested in Mutual Funds that trade inversely to the Index - in other words, the unit price of those Funds increases if the Index goes down."The trend is still down on the monthly chart as you can see, so that's the way I want to be positioned with the majority of my, Stock Day Trading, portfolio. I think we have seen the, Stock Day Trading, low, but I am not prepared to risk my wealth on, Stock Day Trading, it. If the trend changes, then I will change with it. As you can see, I don't have to make decisions very often."The market took nearly a year to form a top and start down. It might take a year to form a base if I am right and we are near the low. Patience and emotional control will make you a fortune -fear and greed will destroy your wealth."Peter let the enormity of the previous rally and subsequent bear market sink in, and then said, OK, "Now we've had a look at the big picture, let's have a look at the weekly trend." Chart available at Stock Trading Review.com.As they looked at the weekly chart, Peter continued, "We know, Stock Day Trading, that the monthly trend is down - this weekly chart shows the most recent leg down that may have brought in the low for this bear market. The remaining 30% of my Stock market allocation is used to trade shorter term trends using both this timeframe, Stock Day Trading, and the daily chart."Bearing in mind that we are looking for trades with the major trend, we are looking to enter this market as soon as it confirms that the fast move down is indeed under way again after each of the bear market rallies that typically come along every few months. I have drawn a swing chart over the bar chart to highlight the swings of the market as it moved lower."Tell me what you see here," Peter asked. "Again I see a down trend - the moving averages are more often, Stock Day Trading, than not heading down and the swing chart you have drawn over the bars is making lower tops and bottoms - the trend is definitely down," Paul replied."And still you held on, while billions of dollars was wiped off the value of the Stock market all around you!" Peter said. "You knew the market was going down as you are somewhat familiar with charts, why did you not do anything to protect yourself?""I was always told that I should hang in for the long term - that the market always came back, and that it had never failed to make a new price high after every bear market. I guess I was too scared to do anything in case I got out right at the bottom. As it turned out, I did that anyway," Paul said.Peter continued, "Notice on this chart that the rallies were also no more than one or two bars. This indicates a very strong trend - not something anyone should be buying into or holding if they want to protect their wealth."There were many people buying the dips as the down trend unfolded. This strategy had worked well in the bull market, but it failed miserably when the bear market came along. Every rally failed, forcing buyers to become sellers as the trend continued down."Trading the market requires us to adapt - the market, Stock Day Trading, has seasons - if we are out of season with the market, we get crushed."The rallies were just traps., Stock Day Trading, Every bear market has them, and every time, traders think they have picked the bottom, only to find that they have not."Paul looked at the chart and for the first time, with the help of the swing chart overlaid on top of the bars and the moving averages set as they were, he could see how simple it was to determine the trend. Especially the last few weeks - it was certainly a panic."Now, let's have a look at the last few weeks to see what we can determine." Chart available at Stock Trading Review.com."Again, I have drawn a swing chart over the price bars on this daily chart. Once you understand swing charts, you will be able to draw these lines in your mind and you will not need to draw them on your charts any more," Peter said."As you can see, the moving averages are again moving down at a fair clip and the reactions, Stock Day Trading, to the down trend are no more than 3 bars. With the Monthly and Weekly trends strongly down, and a daily trend that is showing very weak rallies in this fashion, what else is a trader to do but short sell this market?" Peter asked.Paul could see it clearly now, the trend was blindingly obvious -why had he not taken, Stock Day Trading, any notice before? There had been a fortune for the taking and he had not seen it."But how, Stock Day Trading, did you know for sure the market would turn on that day?" he asked Peter. "Ah, that is a lesson for another day my young friend. For now, lets make sure you understand trend trading first. Once you know what a trend looks like, you will be in a position to make consistent profits from the market, not before."With that, their first meeting was over. Peter had some important visitors waiting in the reception area to discuss a Joint Venture in a property development. It was time for Paul to go.He thanked Peter for his time and left the office. As walked out through the reception area, Peter called out behind him, "When you get home, set up all the Stocks you owned in a watchlist on Incrediblecharts.com, set it to monthly, put some moving averages on them and work out where you should have exited - that is your homework for this week. I will see you next Wednesday, Stock Day Trading, at 8.00am. Don't be late..."Paul arrived home with a renewed sense of purpose.He did as Peter ordered and as he went through his previous portfolio, he saw that he should have sold every Stock he had owned by January 2001 at the latest. He felt disgusted with himself at having not been able to see this sooner, but he consoled himself that at least now he was on the right track.He was still apprehensive, but he had a chance to put things right for his family. He was determined to make it as a trader, and with Peter's help, he felt he could indeed succeed...To Your Trading, Stock Day Trading, Success,Tony Spann and the TeamStock Trading, Stock Day Trading, Review is dedicated to helping you succeed as a trader by sharing with you simple and easy to follow tips and techniques.Join our FREE "Stock Trading Review" NewsLetter http://www.stocktradingreview.com/stock-trading-newsletter.html to get your hands on some real world "insider" stock, Stock Day Trading, trading tips and techniques and access to our exclusive "Members Only" Free Stock Trading System.You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated.Discover more insider secrets and the exact proven strategies to trade stocks profitably: http://www.stocktradingreview.com(c) 2005 Stock Trading Review - All Rights Reserved.
Source: articleage.com
Peter is a professional trader, Paul is not. Peter has a tested, proven, written trading plan that he follows each time he enters a trade, Paul does not. Peter has agreed to meet with Paul to help Paul become a more successful trader.Paul was early for his first appointment to see Peter a few days later - he was feeling both excited and apprehensive. Peter had told him he would show him how to use technical analysis and swing trading strategies to trade Stock market trends with confidence - but could he really do it?Did he have the, Stock Day Trading, ability to become a successful trader after losing so much money in the market these last two years? Was he just wasting Peter's time?As he waited, he thought about the look Beth had given him when he had told her about his trading losses...the sense of failure he had experienced as she just walked away. The feeling of utter helplessness he had felt as the enormity of his losses had finally dawned on him. He had been so close to financial freedom, but now that had been taken away from him.He was just starting to feel sorry for himself again when Peter strode into the foyer of the office building and wished everyone good morning - feeling sorry for himself would have to wait until later.Peter motioned him to follow him to the elevator. Paul did so and they chatted as the lift took them to Peters 30th floor office. It was smaller than he had imagined, just a receptionists desk in the waiting room and one office with a view of the city.He expected something grander, but the office was functional, and besides, Peter didn't have a need for any more space as he had only 1 staff member, Kim, his Secretary and receptionist, host, coffee maker and confidant.The focal point of Peter's office was his trading screen - a triple screen plasma display monitor over 4 foot, Stock Day Trading, wide. "Not that's a screen," Paul thought to himself.Kim brought in coffee and then left them alone. Paul poured them both a cup and took a seat.Peter gazed out the window towards the, Stock Day Trading, city for more than a minute before speaking. "So you want to be a trader?" he finally asked. "Yes, but more than that, I want to be a great trader," Paul answered, "Like you.""How do you know I am a great trader? And anyway, what is your definition of a great trader?" Peter asked."I heard you talking at the diner the other day - you certainly know what you are doing, and the market is up 5 days straight and more than 130 points since you bought the S&P 500 Index, that's 20% in a week!" Paul explained. "I think anyone who can take their profits on the day of a major low like that and then, Stock Day Trading, have the ability to turn around and buy...and be dead right, is a great trader.""That is true, the Index is up a long way. And yes, I did get in at the low, didn't I? So I guess, by your definition, I am a great trader," Peter chuckled to himself."How far do you think the market will go up before it has a breather?" Peter asked. "I have no idea," Paul replied. "Neither do I, that's why I have placed my sell orders below the daily lows each day in case it turns around again and I'm ready to go short again," Peter explained."It's not so much picking the low that is important or even necessary, it's managing the trade as it progresses that makes the money," Peter added."But we'll get to that later, let's have a look at a chart and tell me what you see," Peter said. He opened his charting software and soon they were looking at a monthly chart of the S&P 500 Index. Chart available at Stock Trading Review.com"This is the last 3 years price, Stock Day Trading, history of the S&P 500 - what can you tell me about the direction of the trend?" Peter asked."It's been going down," Paul replied. "Correct, and which way have you been trading this market that has been in a clear down trend?" Peter continued. "I haven't been trading it at all, I've just been fully invested,, Stock Day Trading, losing money," Paul replied."Then you have indeed been trading it, my friend." Peter continued. "By sitting on your hands for the last 2 and a half years while prices continued to fall, you have been fighting the trend. People who fight the trend always lose money."Then, you finally sold in a panic, like all the other small traders who finally gave up hope last week. You sold to people like me. The same thing happens every time there is a correction or bear market - the small traders hang on until they can't stand to be in the market any longer, they all sell together in a panic and then the market goes up.""Tell me, looking at this chart, when did the downtrend start?" Peter asked."Well I guess around December, 2000 is where it looked like it started to fall away," Paul replied. "Correct," replied Peter, Stock Day Trading, ."That means that from December 2000, there was no reason to be buying this Index, or buying Stocks that were showing the same chart pattern, and there was every reason to have your Stock portfolio hedged if you didn't sell or have your money in cash."Paul looked at the chart and of course it was easy to see the trend was down with hindsight.Before, Stock Day Trading, he could say anything, Peter continued. "Of course, hindsight trading is perfect, so how would you have known the best time to get out of the market or hedge your portfolio?" Paul looked at the chart and said, "I guess when the moving averages crossed over.""Correct," said Peter. "So, for the last 2 and a half years, the trend on the monthly chart was down. "What else does this chart tell you about the market?"Paul looked at the chart, but he wasn't really sure what Peter wanted to know. "I'm not sure," he finally confessed."Take a close look at the reactions, Stock Day Trading, within the downtrend. Notice that the largest one only managed to go against the trend for 3 months. In any timeframe, a market or Stock that can only go against the major trend for a few bars like this is in a very strong trend."Also, the Index was consistently closing below the short term, Stock Day Trading, moving average, and always closed below the longer term moving average - this is not something you want to sit through fully invested, holding on and hoping," Peter continued.Paul could, Stock Day Trading, see now the reason for his huge losses. He had looked at charts before but he had never looked at the big picture. The monthly chart showed the trend clearly - and it had been down. A simple moving average crossover sell signal would have saved his fortune..."This simple timing system is what I use for my long term portfolio," Peter continued. "I have 70% of the funds I have allocated to the Stock market invested for the long term in leveraged S&P 500 Index Funds. My investment in these funds forms the core of my Stock portfolio."I initially entered when I got a buy signal in 1994 and added more funds each month - 50-70% of my net short term trading profits and other income. I kept an eye on the monthly chart and didn't get a sell signal until the end of 2000. I was fully invested in those funds from around 500 points to 1450 points."Peter then showed Paul a monthly chart going back to 1994. Paul looked at it in disbelief. He was looking at probably the greatest wealth creation trend in history and he had missed most of it because of his short term focus. Chart available at Stock Trading Review.com."Remember this Paul," Peter said as they studied the long term chart, "Wealth comes from looking at the big picture. Many people believe that holding for the long term means forever, Stock Day Trading, . I prefer to hold things that are rising in value. If the trend turns down, I take my money and wait until the trend turns up again."This strategy of timing the market with a simple moving average crossover has made me a fortune while millions of people in this country have lost their life savings."Smart investors always invest the majority of their capital for the long term, but have clear guidelines for preserving it if the trend changes. They only trade with a small amount of money that they are prepared to lose."Your trading will be more profitable if you know that you have a substantial portfolio invested long term and it is increasing your wealth. By trading your entire account, and not managing it properly, you risked, and finally lost, most of it."And even though I, Stock Day Trading, bought a small position in Index futures a few days ago, my long term portfolio is still fully invested in Mutual Funds that trade inversely to the Index - in other words, the unit price of those Funds increases if the Index goes down."The trend is still down on the monthly chart as you can see, so that's the way I want to be positioned with the majority of my, Stock Day Trading, portfolio. I think we have seen the, Stock Day Trading, low, but I am not prepared to risk my wealth on, Stock Day Trading, it. If the trend changes, then I will change with it. As you can see, I don't have to make decisions very often."The market took nearly a year to form a top and start down. It might take a year to form a base if I am right and we are near the low. Patience and emotional control will make you a fortune -fear and greed will destroy your wealth."Peter let the enormity of the previous rally and subsequent bear market sink in, and then said, OK, "Now we've had a look at the big picture, let's have a look at the weekly trend." Chart available at Stock Trading Review.com.As they looked at the weekly chart, Peter continued, "We know, Stock Day Trading, that the monthly trend is down - this weekly chart shows the most recent leg down that may have brought in the low for this bear market. The remaining 30% of my Stock market allocation is used to trade shorter term trends using both this timeframe, Stock Day Trading, and the daily chart."Bearing in mind that we are looking for trades with the major trend, we are looking to enter this market as soon as it confirms that the fast move down is indeed under way again after each of the bear market rallies that typically come along every few months. I have drawn a swing chart over the bar chart to highlight the swings of the market as it moved lower."Tell me what you see here," Peter asked. "Again I see a down trend - the moving averages are more often, Stock Day Trading, than not heading down and the swing chart you have drawn over the bars is making lower tops and bottoms - the trend is definitely down," Paul replied."And still you held on, while billions of dollars was wiped off the value of the Stock market all around you!" Peter said. "You knew the market was going down as you are somewhat familiar with charts, why did you not do anything to protect yourself?""I was always told that I should hang in for the long term - that the market always came back, and that it had never failed to make a new price high after every bear market. I guess I was too scared to do anything in case I got out right at the bottom. As it turned out, I did that anyway," Paul said.Peter continued, "Notice on this chart that the rallies were also no more than one or two bars. This indicates a very strong trend - not something anyone should be buying into or holding if they want to protect their wealth."There were many people buying the dips as the down trend unfolded. This strategy had worked well in the bull market, but it failed miserably when the bear market came along. Every rally failed, forcing buyers to become sellers as the trend continued down."Trading the market requires us to adapt - the market, Stock Day Trading, has seasons - if we are out of season with the market, we get crushed."The rallies were just traps., Stock Day Trading, Every bear market has them, and every time, traders think they have picked the bottom, only to find that they have not."Paul looked at the chart and for the first time, with the help of the swing chart overlaid on top of the bars and the moving averages set as they were, he could see how simple it was to determine the trend. Especially the last few weeks - it was certainly a panic."Now, let's have a look at the last few weeks to see what we can determine." Chart available at Stock Trading Review.com."Again, I have drawn a swing chart over the price bars on this daily chart. Once you understand swing charts, you will be able to draw these lines in your mind and you will not need to draw them on your charts any more," Peter said."As you can see, the moving averages are again moving down at a fair clip and the reactions, Stock Day Trading, to the down trend are no more than 3 bars. With the Monthly and Weekly trends strongly down, and a daily trend that is showing very weak rallies in this fashion, what else is a trader to do but short sell this market?" Peter asked.Paul could see it clearly now, the trend was blindingly obvious -why had he not taken, Stock Day Trading, any notice before? There had been a fortune for the taking and he had not seen it."But how, Stock Day Trading, did you know for sure the market would turn on that day?" he asked Peter. "Ah, that is a lesson for another day my young friend. For now, lets make sure you understand trend trading first. Once you know what a trend looks like, you will be in a position to make consistent profits from the market, not before."With that, their first meeting was over. Peter had some important visitors waiting in the reception area to discuss a Joint Venture in a property development. It was time for Paul to go.He thanked Peter for his time and left the office. As walked out through the reception area, Peter called out behind him, "When you get home, set up all the Stocks you owned in a watchlist on Incrediblecharts.com, set it to monthly, put some moving averages on them and work out where you should have exited - that is your homework for this week. I will see you next Wednesday, Stock Day Trading, at 8.00am. Don't be late..."Paul arrived home with a renewed sense of purpose.He did as Peter ordered and as he went through his previous portfolio, he saw that he should have sold every Stock he had owned by January 2001 at the latest. He felt disgusted with himself at having not been able to see this sooner, but he consoled himself that at least now he was on the right track.He was still apprehensive, but he had a chance to put things right for his family. He was determined to make it as a trader, and with Peter's help, he felt he could indeed succeed...To Your Trading, Stock Day Trading, Success,Tony Spann and the TeamStock Trading, Stock Day Trading, Review is dedicated to helping you succeed as a trader by sharing with you simple and easy to follow tips and techniques.Join our FREE "Stock Trading Review" NewsLetter http://www.stocktradingreview.com/stock-trading-newsletter.html to get your hands on some real world "insider" stock, Stock Day Trading, trading tips and techniques and access to our exclusive "Members Only" Free Stock Trading System.You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated.Discover more insider secrets and the exact proven strategies to trade stocks profitably: http://www.stocktradingreview.com(c) 2005 Stock Trading Review - All Rights Reserved.
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