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Trading Do's and Dont's

  
  Education
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In no particular order of importance

  1. Forget the news, remember the chart. You’re not smart enough to know how news will affect price. The chart already knows the news is coming.
  2. Buy the first pullback from a new high. Sell the first pullback from a new low. There’s always a crowd that missed the first boat.
  3. Buy at support, sell at resistance. Everyone sees the same thing and they’re all just waiting to jump in the pool.
  4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.
  5. Don’t buy up into a major moving average or sell down into one. See #3.
  6. Don’t chase momentum if you can’t find the exit. Assume the market will reverse the minute you get in. If it’s a long way to the door, you’re in big trouble.
  7. Exhaustion gaps get filled. Breakaway and continuation gaps don’t. The old traders’ wisdom is a lie. Trade in the direction of gap support whenever you can.
  8. Trends test the point of last support/resistance. Enter here even if it hurts.
  9. Trade with the TICK not against it. Don’t be a hero. Go with the money flow.
  10. If you have to look, it isn’t there. Forget your college degree and trust your instincts. (more…)

7 Major Candlestick Reversal Pattern Pairs

  
  Education
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Candlestick reversal patterns can be a boon to any trader’s repertoire. Combining them with support/resistance lines and other indicators can increase a trader’s edge substantially. Each set below contains both the bearish and bullish counterparts. These are ideal setups that require directional movement (i.e. nothing range bound). The more volume at the given point, the more strength each of these patterns portend.

Realize that a candlestick pattern is simply a means of reading data on the chart. Whether you trade forex, stocks, options or futures it is a superior tool for technical analysis.
Once you become familliar with the basic candlestick patterns you will quickly assimilate their meaning and easily interpret them.
The patterns are basically intuitive and the learning curve is small.
There comes a point where you will recognize market sentiment without even identifying a specific candlestick pattern.
No matter what system style or technique you may implement the fact is you will be that much more effective by making candlestick charts your tool of choice.
The alternatives or archaic to say the least, and downright ugly once you get used to using Japanese candlesticks.
Candlestick charts are the most widely used for of charting for good reason. With a little practice and help, it is actually the most intuitive process for understanding current and future price action.
 harami7

 

 Bearish and Bullish Harami –
Identified by a long bar followed by a very short one. Harami signal a loss of momentum and a possible reversal.

darkpiercing6
Dark Cloud Cover and Bullish Piercing Pattern – The dark cloud cover and bullish piercing patterns reveal weakness in the current trend and emerging strength in the opposition. (more…)

My Personal Trading Rules

  
  Education
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  • Turn off the news.

  • If you’re not feeling well for whatever reason, take the day off.

  • Feeling overly confident? Decrease your size.

  • Waffling on a trade? Pull the trigger! The hardest ones are usually winners.

  • Resist the urge to take off half when a trade is going your way.

  • Have a target in mind for every trade. Exit when price approaches that level.

  • Support, resistance and targets are ‘areas’, not specific prices. Give them some leeway.

  • Trade in the direction of the Cumulative TICK.

  • Unusually strong/weak Cumulative TICK? Increase your size.

  • Use mental stops. Adjust your stops based on the current volatility.

  • Establish a total maximum loss you’ll take in one day and stop trading if that’s hit.

  • Be conscious of your self-talk. Maintain a positive inner dialogue with yourself.

Day Trading Mistakes

  
  Education
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There are some major day trading mistakes that just about every new trader will make early on in their career.  The ones who survive are those who can recognize these mistakes and take corrective action.

The first mistake many day traders make is to skip the planning phase of the day or a trade.  Every day you sit down in front of your monitors you should have a general plan for the day.  You should understand the major trends and support/resistance of the major indices, and the stocks you plan on trading.  In addition to that, once you see your stock setting up for a trade you should have a plan that includes an entry, a target and a stop-loss before you even pull the trigger on the trade.

Another mistake that we often see in day trading is the inability to exit on a losing trade.  If you have issues with getting out of the market when your pre-planned loss has been hit on your own, try using stop-loss orders.  Never. Never ever ever move a stop loss order once it’s been placed.  This requires some discipline but it will save you tons of money in the long run.  You should never be hoping that your stock will turn around, and go where you expected.  You should be executing your plan to the letter.

On a similar note, you also never want to move your targets.  If you keep moving your target away from the stock’s current price, you’re never going to take your profits.  A typical day trading exit strategy is to take profits at predetermined levels as you proceed into green territory.  This means that before you’ve entered the trade you’ve chosen two or more targets.  You exit a portion of your trade at each target.  Now, if you think your stock is going to trend for the day, you can plan for that too.  This is called a trade-to-hold.  It doesn’t mean you move your target, but rather you try to stay in the trend by setting a trailing stop.  A trailing stop can either be automatically set at a certain percentage or point value behind the stock price, or you can mechanically keep moving your stop loss up to obvious points of resistance or support behind your trending stock. (more…)

Trading: Doing the Homework

  
  Education
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HOMEWORKMany new traders fail in the stock market simply because they rush in without putting in the proper time and discipline in doing their homework. Trading is a professional endeavor much like any other career, you will only get out of it what you put into it. There is no easy money, you will have to earn it by out witting, out playing, and out smarting the majority of other market participants.

You need to learn ten things to be a successful trader:

  1. How to manager your risk per trade.
  2. What systems and methods really make money over the long term.
  3. What system fits your personality and beliefs about the market.
  4. How much heat you can you handle. How big can you trade with out emotions taking over?
  5. You must learn how the market actually works, trends, flows, and functions.
  6. Learn to focus only on what makes money in the market, everything else is noise.
  7. Discover who the greatest traders of all time were and study how they operated.
  8. Find out what the best books on trading are and read them.
  9. Study the charts of the stocks you are trading to understand how it works with trends, support, resistance, and moving averages.
  10. Practice paper trading, simulated accounts, and trading small positions of real money until you have mastered your trading plan. (more…)
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