1) They are trading a market and time frame that lacks opportunity;
2) They are trading a method that does not possess an objective edge in the marketplace;
3) They have a promising market, time frame, and method, but are not executing it properly.
Of these reasons, #3 is the most frustrating for traders. They feel as though they have the tools to succeed, but they themselves get in the way of their own success. Many times this is because emotional factors interfere with sound decision-making.
Archives of “time frame” tag
rssTen Reasons – Trading Long Option Strangles
A long strangle is long one call at a higher strike and long one put at a lower strike in the same expiration and on the same stock. Such a position makes money if the stock price moves up or down well past the strike prices of the strangle. There are higher costs and risks with these strategies, as I discuss below.
Strangles are low risk plays, one side of the options will go up in value when the other side goes down in value the majority of the time.
- If one side becomes worthless it generally means the other side is worth a lot.
- You can make money on strangles even when you do not know which way the market will move.
- It is much less stressful to hold a position with a hedge in place.
- The big risks are transferred from the option buyer to the option seller in this play.
- Strangles lose small with small movements but win big when there is a big move. The are asymmetrical in their construction.
- When one side of the option sellers blow up their account due to an outsized move you will be on the other side of them and be the trader their capital flows to.
- Strangles can be played on any time frame.
- With the strangles the winning side has a growing delta and the losing side has a shrinking delta.
- Strangles can be used to capture trends, volatility, and reversals.
Where is the risk? (more…)
1930-The Gartley Pattern -For Traders
A leading technical analyst of the 1930s created a method for trading that is still applicable today. Learn how to trade market turning points based on Fibonacci retracements and market psychology with the Gartley Pattern.
Many traders ask how a trading method that is 77 years old is applicable today. When you combine timeless tools like Fibonacci Retracements with great risk: reward ratios, it’s easy to see why this method is so popular. If those aspects of a trading method appeal to you, it’s my pleasure to introduce you to the Gartley chart pattern.
What is the Gartley Pattern?
The Gartley pattern is a powerful and multi-rule based trade set-up that takes advantage of exhaustion in the market and provides great risk: reward ratios. The pattern is also known as the “Gartley 222” because the pattern originated from page 222 of H.M. Gartley’s book, Profits in the Stock Market that was published in 1935 and reportedly sold for $1,500 at the time.
The Gartley pattern is based on major turning points or fractals in the market. This pattern plays on trend reversal exhaustion and can be applied to the time frame of your choosing. The other key that makes this pattern unique are the crucial Fibonacci retracements that come together to fulfill the plan.
There is a bullish / long / buying pattern and an equally powerful bearish / short / selling pattern. Much like you would find with a head and shoulders pattern you buy or sell based on the fulfillment of the set up.
Buy & Sell Gartley Chart Pattern (more…)
What should you look for in a trading system?
1. Profitability: This is a must when we look for a system .Lowering the risk factor and increasing the reward is simply the answer to a profitable system
2. Probability: One of the important elements of a trading system, but it does not always mean it will be a profitable trading system, if the proper money management is not in use.
3. Consistency: Without consistency we will not be able to breath in the on going changing market condition. A consistently profitable system will pick up some drawdown as soon as the extreme condition is over.
4.Flexibility: Providing Simple, Easy and Powerful System which can be used in any time frame and on any financial instrument.
11 Rules For Better Trading
Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.
Rule #1
Be data centric in your approach. Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.
Rule #2
Be disciplined. The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment.
Rule #3
Be flexible. At first glance this would seem to contradict Rule #2; however, I recognize that markets change and that trading strategies cannot account for every conceivable factor. Giving yourself some wiggle room or discretion is ok, but I would not stray too far from the data or your strategies.
Rule #4
Always question the prevailing dogma. The markets love dogma. “Prices are above the 50 day moving average”, “prices are breaking out”, and “don’t fight the Fed” are some of the most often heard sayings. But what do they really mean for prices? Make your own observations and define your own rules. See Rule #1.
Rule #5
Understand your market edge. My edge is my ability to use my computer to define the price action. I level the playing field by trading markets and not companies.
Rule #6
Money management. Money management. Money management. It is so important that it is worth saying three times. There are so few factors you can control in the markets, but this is one of them. Learn to exploit it.
Rule #7
Time frame. Know the time frame you are operating on. Don’t let a trade turn into an investment and don’t trade yourself out of an investment. (more…)
Managing your energy
When we get up in the morning, we have a certain amount of energy. It is up to us to decide how we will use our energy and where we will focus it. So how do you manage your energy during the day?
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- What activities energize you and what drains your energy?
- How do you sequence your activities?
- Do you try to do everything yourself, or do you focus on your strengths and delegate the rest?
- How do you deal with stress?
- How do you motivate yourself?
- Who do you surround yourself with?
- How do you manage your energy?
- How do you deal with the bad news or naysayers?
- How do you deal with emails, phone calls, IMs and other things that can distract you?
- Are you being productive or running out of time each day?
If you try to be everything to everyone, you get burned out.
You might have heard of the 80/20 rule – 20% of our efforts get 80% of our results. You can focus your energy on the efforts that get you the results, or let yourself get distracted. When you get distracted, you are very busy, however you do not produce the result that you want in the time frame that you want. The choice is yours.
HOW DISCIPLINE HELPS IN TRADING
“Discipline in executing each and every trade according to your trading methodology is the secret to your success. If you want to improve your trading, what you need to do is very simple. Before you enter any trade, imagine that you will have to explain this trade to a panel of your peers, by explaining to them the reason for your entry, your money, trade, and risk management guidelines, and why you exited the trade. Imagine having to explain why you chose this particular market and this particular time frame, along with how you set objectives for the trade, and how you determined where your initial protection would be. If you can truly do this, I strongly believe that you can be successful.
Just prior to entering every trade, try to imagine yourself executing the trade perfectly. Imagine how it will feel when you enjoy having made money with your trading.
Yes I know, you don’t have time to do that. Why? Because you never plan your trades ahead of time. You probably don’t have a strategy, and instead of waiting patiently for trade that meets your well-defined parameters and your thought-out plan, you just jump in the minute you think you see something that looks good.
You need to take a lesson from a spider. The spider waits patiently in his web until some unsuspecting insect flies into the spider’s trap.
Have you been flying into any of my traps? I wait for trades that meet my expectations, trades that fit my plan. I wait patiently, and being kind-hearted I don’t want any of my readers to land in my web. I’d rather the unsuspecting are readers of someone else’s newsletter. But it’s amazing how often I get to feed.”
11 Rules for Better Trading
Trading in the markets is a process, and there is always room for self improvement. So as we start the new year, here are my 11 rules that help me navigate the markets. By no means is this list exhaustive or exclusive.
Rule #1 Be data centric in your approach : Take the time and make the effort to understand what works and what doesn’t. Trading decisions should be objective and based upon the data.
Rule #2 Be disciplined : The data should guide you in your decisions. This is the only way to navigate a potentially hostile and fearful environment. (more…)
Day Traders
If a trader is willing to give a large share of his time and energy to study of the markets and of technical considerations, and if he has the proper ability and proper personal makeup, then it seems quite certain that he will make greater profits on the shorter time frame as opposed to position trading. Certainly the possibility for such profit is much greater in short-term trading.
On the other hand, the individual who is unable or unwilling to give up a good portion of his time and energy to the study of technical considerations, who knows or finds himself erratic in his trading success or unfitted psychologically for short-term trading, will, of course, find greater profit, slower but more certain, by confining his operations to those for the long-swing.
The third and most likely possibility is that most individuals will lose either way. This is the real key:
… a study done by one of the major clearing firms analyzed what percentage of their retail accounts were profitable in the mid-’80s to mid-’90s, and that number came in around eight percent. The most profitable accounts were those with the highest activity levels [ed. pre-tax profits, of course]. But, overall, the floor traders and specialists have always been the most profitable group of traders in history.
It seems the secret to profitable short-term trading is to hold the order book, “proper personal makeup” and “the study of technical considerations” be damned
Recipe for catching a reversal:
Ingredients: For this recipe you will need one (1) well-known or “classic” technical chart pattern on a daily time frame, preferably near the high or low of the mid-term price range. When your pattern of choice has been observed, you will then need to collect at least two (2) or more instances of public expressions of sentiment which confirm the prognostication of said pattern: pre- or post-market media bytes, business news website headlines, confident/fearful declarations on your favorite trading forum, or any other variety of before-the-fact assumption.
Preparation: When the above ingredients have been secured, wait for a daily close which would confirm “ripeness” of the pattern. Next morning, enter a stop order at the confirmation price in the opposite direction of pattern breakout to initiate position. If stop is triggered, immediately enter protective stop at prior low/high.
Parboiling: If market moves quickly in your favor, take profits on at least a partial portion; mentally “set aside” closed profit for re-entry if market pulls back towards initial entry price with next few days. If pullback manages to hold above prior high/low, re-enter full position at your discretion. (more…)