The Trading Plan comes first and should account for the following parameters: 1. Entering a trade. 2. Exiting a trade. 3. Stop Placement. 4. Position Sizing. 5. Money Management. 6. What to Trade. 7. Trading Time Frames. 8. Back Testing. 9. Performance Review. 10. Risk vs. Reward. The Game Plan consists of putting the parameters of the Trading Plan to work in day to day trading with the following benefits: 1. It will force the trader to select a trading style. 2. It will encourage market study. 3. It will aide in helping pick the correct trades. 4. It will prepare the trader for what the market has to offer. 5. It will help in properly monitoring and exiting trades. 6. It will keep the trader from overtrading. 7. It will help with finances. 8. It will keep the trader focused. 9. It will take the gambling out of trading. 10. It will make a better trader out of you. |
Archives of “time frames” tag
rss51 Professional Trading Tips
1. Trading is simple, but it is not easy.
2. When you get into a trade watch for the signs that you might be wrong.
3. Trading should be boring.
4. Amateur traders turn into professional traders once they stop looking for the “next great indicator.”
5. You are trading other traders, not stocks or futures contracts.
6. Be very aware of your own emotions.
7. Watch yourself for too much excitement.
8. Don’t overtrade.
9. If you come into trading with the idea of making big money you are doomed.
10. Don’t focus on the money.
11. Do not impose your will on the market.
12. The best way to minimize risk is to not trade when it is not time to trade.
13. There is no need to trade five days a week.
14. Refuse to damage your capital.
15. Stay relaxed.
16. Never let a day trade turn into an overnight trade.
17. Keep winners as long as they are moving your way.
18. Don’t overweight your trades.
19. There is no logical reason to hesitate in taking a stop.
20. Professional traders take losses because they trust themselves to do what is right.
21. Once you take a loss, forget about it and move on.
22. Find out what loss parameters work best for your setup and adjust them accordingly.
23. Get a feel for market direction by “drilling down” (looking at multiple time frames).
24. Develop confidence by knowing and executing your trade setups the same way every time.
25. Don’t be ridiculous and stupid by adding to losers.
26. Try to enter a full size position right away.
27. Ring the register and scale out of your position.
28. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment.
29. You want to own the stock before it breaks out and sell when amateurs are getting in after the move.
30. Embracing your opinion leads to financial ruin.
31. Discipline is not learned until you wipe out a trading account.
32. Siphon off your trading profits each month and stick them in a money market account.
33. Professional traders risk a small amount of money on their equity on one trade.
34. Professional traders focus on limiting risk and protecting capital.
35. In the financial markets heroes get crushed.
36. Stick to your trading rules and you will never blow up your trading account.
37. The market can reinforce bad habits.
38. Take personal responsibility for each trade.
39. Amateur traders think about how much money they can make on each trade. Professional traders think about how much money they can lose.
40. At some point all traders realize that no one can tell them exactly what is going to happen next in the market.
41.Losing trades don’t diminish you as a person. You’re also not your winning trades. They are just by-products of the business you’re in.
42.Act in your best interest – placing a trade because you’re afraid of missing out on a big move is NOT acting in your best interest.
43.Flawless execution comes from forming a habit. A habit is formed when it is repeated over and over again. Start practicing.
44.Don’t let personal/external factors affect the trading for thou judgment is clouded. Let the market show you what to do. Always.
45.Make sure your trading goals are 1) realistic, 2) attainable, 3) measurable. If they don’t meet these criteria, then the goal is nothing.
46.You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of “failed” breakouts).
47.Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.
48.. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t trade.Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
49.
50.Averaging down on a position is like a sinking ship deliberately taking on more water.
51.You Need MONEY -MIND-METHOD & Target to get success in Trading.If u miss any one of them…its my challenge to anybody in World …U will never ever be succesful !!
Updated at 22:45/07th Sept/Baroda
40 Rules for Traders
| 1. Trading is simple, but it is not easy. 2. When you get into a trade watch for the signs that you might be wrong. 3. Trading should be boring. 4. Amateur traders turn into professional traders once they stop looking for the “next great indicator.” 5. You are trading other traders, not stocks or futures contracts. 6. Be very aware of your own emotions. 7. Watch yourself for too much excitement. 8. Don’t overtrade. 9. If you come into trading with the idea of making big money you are doomed. 10. Don’t focus on the money. 11. Do not impose your will on the market. 12. The best way to minimize risk is to not trade when it is not time to trade. 13. There is no need to trade five days a week. 14. Refuse to damage your capital. 15. Stay relaxed. 16. Never let a day trade turn into an overnight trade.17. Keep winners as long as they are moving your way. 18. Don’t overweight your trades. 19. There is no logical reason to hesitate in taking a stop. 20. Professional traders take losses because they trust themselves to do what is right. 21. Once you take a loss, forget about it and move on. 22. Find out what loss parameters work best for your setup and adjust them accordingly. 23. Get a feel for market direction by “drilling down” (looking at multiple time frames). 24. Develop confidence by knowing and executing your trade setups the same way every time. 25. Don’t be ridiculous and stupid by adding to losers. 26. Try to enter a full size position right away. 27. Ring the register and scale out of your position. 28. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. 29. You want to own the stock before it breaks out and sell when amateurs are getting in after the move. 30. Embracing your opinion leads to financial ruin. 31. Discipline is not learned until you wipe out a trading account. 32. Siphon off your trading profits each month and stick them in a money market account. 33. Professional traders risk a small amount of money on their equity on one trade. 34. Professional traders focus on limiting risk and protecting capital. 35. In the financial markets heroes get crushed. 36. Stick to your trading rules and you will never blow up your trading account. 37. The market can reinforce bad habits. 38. Take personal responsibility for each trade. 39. Amateur traders think about how much money they can make on each trade. Professional traders think about how much money they can lose. 40. At some point all traders realize that no one can tell them exactly what is going to happen next in the market. |
"Maintaining Sanity in a Schizophrenic Market"
The current market seems to be manic depressive without even a shred of memory from one day to the next. How does a trader preserve control and commitment when faced with this challenge?
I think the first place to begin is with the questions we ask ourselves. Is there an opportunity here? Where is the opportunity now? How can I take advantage of this opportunity?
Then ask yourself, how do I deal with the volatility? Do I decrease size and stretch out the risk parameters? Do I increase size to take advantage of this extraordinary opportunity? Do I shorten or increase my time frames to increase my safety and profitability? As traders we are always faced with the dual needs to seize a significant opportunity and to preserve our capital. This balancing act is at the core of trading.
Of course, you need to address the underlying fundamentals. What are they? Are they becoming more so or less so? Are they changing or remaining the same?
Define the problems you are facing and redefine them. Einstein was asked how he would go about solving a problem if he only had 60 minutes in which to solve it. He answered that he would spend the first 59 minutes defining the problem. Once you’ve identified and defined the issues you’re facing, look for workable solutions. See problems as challenges not as threats. I always assume if there is a problem, there is a solution. Once you’ve found a solution, test it.
You need to sustain an optimistic outlook. This means not taking market conditions personally. Know that the difficulties will pass as well as the opportunities. You can learn from difficulties and let them go even as you learn from and utilize opportunities. Keep honing your skills and see the glass as more than half full. You can heal your trading by finding a way to understand evil even as you find a way to make the best of a situation. Any crisis can make you stronger if you don’t let it make you weaker.
So let’s go back to the original question. Where is the opportunity here and now, and how do you go about taking full advantage of it? When you find it, go for it. If you don’t find it, wait for it to develop, and carpe diem (seize the day).
Control
Stocks rise when they are being bought up. Stocks fall when they are being sold off. I always ask myself “Who is in control. The buyers or sellers.” Control changes often and in different time frames you can argue that one party or the other were merely taking a rest.
I generally buy stocks that are going up and short sell stocks that are falling. But I also play the sharp reversals that happen if there is a huge gain or drop as I know gravity will take effect and profit taking will occur. The smart way to day trade is to be on the winning side be it buyers or sellers.
As a small fish in a big ocean I can only ride on the coattails of the big boys who actually move the market. My job as a trader is to recognize when trend or momentum is starting to kick in and climb aboard. Short term trends or momentum are the only thing that I trade. The old cliche’ “the trend is your friend” is so very true.
I only trade in the direction the chart is telling me to. Maybe you can watch the talking heads on TV blathering on or read about how great some stock is without forming an opinion on it. I can’t, so it’s safer to insulate myself from any and all information. I actually don’t care what, where, why, how or when a company does what it does. Who am I to be able to process all this information? I do know that when a stock is rising, more people are buying it than selling it and vice versa. Seems easier to me to only look at and believe the chart and trade accordingly. If I have preconceived notions about what the stock may do, I will not be able to cut my losses when the chart tells me to. I will hold on to the dream all the way to the poor house. Always trade with the trend.
Cutting your losers is one of the most important aspects of trading.Unless you have an unlimited pile of money to fritter away you must admit you’re wrong and exit the trade. If you don’t you will not have enough to remain in the game. End of story.
Letting the winners run is also important. They are winners after all and that is all that counts. Adding size (buying more shares) can turn little winners into big winners.
If you disregard any or all of these 3 simple rules you won’t be around trading very long.
Implicit learning
Implicit learning manifests itself as a “feel” for a performance activity. Research tells us that implicit learning only occurs after we have undergone thousands of learning trials. Without such immersive exposure, traders never truly internalize the patterns in their markets and time frames.
40 Trading Lessons
1. Trading is simple, but it is not easy.
2. When you get into a trade watch for the signs that you might be wrong.
3. Trading should be boring.
4. Amateur traders turn into professional traders once they stop looking for the “next great indicator.”
5. You are trading other traders, not stocks or futures contracts.
6. Be very aware of your own emotions.
7. Watch yourself for too much excitement.
8. Don’t overtrade.
9. If you come into trading with the idea of making big money you are doomed.
10. Don’t focus on the money.
11. Do not impose your will on the market.
12. The best way to minimize risk is to not trade when it is not time to trade.
13. There is no need to trade five days a week.
14. Refuse to damage your capital.
15. Stay relaxed.
16. Never let a day trade turn into an overnight trade.
17. Keep winners as long as they are moving your way.
18. Don’t overweight your trades.
19. There is no logical reason to hesitate in taking a stop.
20. Professional traders take losses because they trust themselves to do what is right. (more…)
FOCUS
Have you ever stopped to consider how many different trading strategies there are? How about time frames for each strategy? And what about the best instrument to trade that strategy within the time frame selected? What about the indicators? Which ones are we planning to apply to the strategy? If we were to add it all up there are literally hundreds, if not thousands of strategies, just in one time frame! And what about the other traders trading one of these strategies that may be designed specifically to trade the opposite of what you trade? There is absolutely no way humanly possible to master all, or even a large number of, the strategies available to us. Therefore, we must focus on a particular strategy and become a strategic specialist. In doing so, we defeat the ego’s need to know everything, which we know is impossible in the first place. With focus, we can think clearly about our specialized strategy knowing when and where to enter and exit the market since we know exactly what the market is supposed to look like to do either one. This focus helps eliminate the confusion and frustration we experience when the market does not make sense (which is most all of the time!).
The Only Way to Day Trade
There are four cardinal principles which should be part of every trading strategy. They are: 1) Trade with the trend, 2) Cut losses short, 3) Let profits run, and 4) Manage risk. You should make sure your strategy includes each of these requirements for success.
Trade with the trend relates to the decision of how to initiate trades. It means you should always trade in the direction of recent price movement.
Mathematical analysis of commodity price data has shown that these price changes are primarily random with a small trend component. This scientific fact is extremely important to those desiring to pursue commodity trading in a rational, scientific manner. It means that any attempt to trade short-term patterns and methods not based on trend are doomed to failure. It also explains why day trading is darned difficult and why almost no day trader is a long-term success.
The shorter the time frame in which you examine price action, the smaller the trend component is. Commodity price action is fractal. That means that as you shorten or lengthen the time frame, price action remains similar in behavior. Thus, five-minute charts have roughly the same appearance as hourly charts, daily charts, weekly charts and monthly charts.
This similarity in chart appearance convinces traders that you can day trade successfully with the same tools you use on longer-term charts. Of course, they try to use much of the arsenal of technical analysis that doesn’t work on long-term charts either. Things like Oscillators, Candlesticks and Fibonacci numbers.
However, even trend-following tools that work in intermediate to long-term time frames won’t work in day trading. This is because the trend component is so very small in short-term data that you must use a highly effective method to overcome the costs of trading.
In longer-term trading, you can let your profits run. You do it by definition or it wouldn’t be long-term trading. In day trading you can only let your profits run to the end of the day. This means your average trade (the average profit of both your winning and losing trades) must necessarily be much smaller than if you could let your profits run for days, weeks or months. However, your costs of trading–slippage, commissions, the bid/asked spread and mistakes–stay roughly the same on a per trade basis. Thus, your day trading system must be much more consistent and robust to stay ahead of the costs of trading than would an intermediate to long-term system. There are few day trading approaches that meet this test.
Since market price action is mostly random, successful trading methods must somehow exploit a non-random feature of market price action. The tendency of most markets to trend is the only possible edge in trading, so a winning approach must harness trend in some way. Tradeable trends do not show up often in the very short term. They certainly are not present every day. That is why the person who tries to day trade at least once every day, and perhaps even more often, is doomed to failure. The more often you day trade, the more likely it is that you will be a long-term loser. (more…)
Greed and Fear
Greed and Fear are two of the strongest emotions that can have major influences on our trading behaviours and hence profitability.
We have all experienced these, from the inability to put a trade on to the gut ache seeing money on the table evaporate.
Recently I have been thinking of these two emotions in a different light. What I want to propose is that these two emotions have very different “time-frames” of operation, with respect to trading. Now I have
no detailed research or data to back this up, but I felt I’d put this out there and see what other traders thought…
Fear = Short Term = Most likely to be experienced before or soon after a trade is placed.
Greed = Longer Term = Emotion that plays a major role further into the trade timeline.
My rationale here is that it is FEAR that (some) people feel before putting on a trade, worrying if they should place the trade or not, once in a trade it is FEAR that makes them start hoping that it wont go
against them.
With GREED, I think this starts to come in later. For instance, if the position has become profitable, then starts to loose and become negative, it is GREED for the money that was on the table that keeps you
in the trade, not fear of loss. As it usually takes time for the trade to become profitable, the emotion of GREED by association is the emotion that takes longer to materialise. Indeed, I would argue that when
you think back to the trades ‘that could have been’, you are more likely to remember the trades that ‘could have’ made you a good return, rather than the quick losses you took?