Tuesday, November 30, 2010

Things that screw your trading day :-)

There are some things that happen in our daily lives that really get on our nerves!

In our business, if you are not calm enough, no doubt your trading will be poor, your state of mind is really important at the beginning of a trading day, you have to fill your mind with good, positive thoughts, so that your action will lead you way up.

You have to  make sure there isn't anything at all bothering you, your mind has to be crystal clear so that you'll be able to use it to its fullest potential because in the trading game if you don't focus on your trades 100% you will lose.

It's paramount that you have a positive attitude and you do want to win, so that you'll be ready to follow your plan and will take only those setups that you know that have good probabilities to work.

So, make sure you are ready to face another trading day,  but beware of the: Things that might screw your trading day:

1 - You woke up really early to see if there is anything going on in the markets, so you start looking at your charts and when you look at the clock you see that more than an hour has passed and you just remembered that last night you promised your wife/husband that you would take some time off so that you could have breakfast together, but what happens is that exactly now a "superb setup" appears and you don't want to miss that opportunity... so you'll be late for breakfast, your day is screwed...

2 - You went to a party last night and you met a friend you hadn't seen for years, it was such a good time and you ended up drinking much more than you had planned to...

3 - Bad hair day...

4 - You left an order to buy working o/n and when you wake up in the morning, after having a terrible night with a recurring nightmare that you were losing a lot money in that position, you realize that actually market went up more than 10 points but your order didn't get filled by 1 tick...

5 - You thought market had fallen enough for the day and you decide to buy a double sized position, when suddenly you realize market is actually plunging 80 points in a couple of minutes! Oh no! Flash crash again!!?? When you look at the DOM you see your position has been liquidated by your broker and you blew up the account...

6 - You think the trading system you have been using for 2 weeks only does not work, but when you ask others that are using the very same system you realize everyone else is making money with it...

7 - You insert an order to go long, market is dead slow and you think your order will never get filled, you wait and wait... up to a certain moment when you have to step out for some reason. You're pissed off and decide to cancel that order... only for when you come back after one hour you see that market went one tick below your price and exploded up...

8 - You just woke up to cover the order you left working from last night and when you turn your computer on you realize there's some kind of issue with your internet connection... you remember your broker is sleeping at this time so you decide to call the night help desk, after they ask you those 10 questions about: who you are, account number, why did you marry your wife... they finally tell you: "OK, what can I do for you?" Too late, your position is in the red...

9 - You are ready to buy at that price you've been waiting for a long time when you decide to have a look at the Twitter stream just to make sure that the guy who makes the best calls is also on the same side of the market but you see he's actually short and says he expects price to plunge another 10 handles, so, as you get in doubt, you cancel your buy order, and of course, market quickly goes up 5 handles, but not before testing your price with precision...

10 - The above things only happen to traders, of course. This one I'll leave for you to add in the comments area below  :-)

Trading is fun! Have a great week.

Monday, November 22, 2010

Thank you, Mr. Market

This week, as everyone is preparing to celebrate Thanksgiving day, let's take a look at the importance of being a grateful trader.

In every religion, no matter whether you're Jewish, Christian, Muslim or whatever, the basic principle is being thankful for what you have in your life: your family, abundance, health and peace, to name a few...

But why is it important to have a thankful attitude towards the market?

Approaching the market with a grateful state of mind is really important so that you can see it more clearly, if you feel no anger but on the contrary you feel gratitude, it'll give you an inner joy making your mind available to the opportunities market presents every single day.

No doubt we have many many reasons to be thankful to Mr. Market. Just imagine if:
  • ...you were not allowed to participate in the markets
  • ...they banned short selling
  • ...you didn't have any money to trade
  • ...you didn't have the possibility of trading through your computer
  • ...market didn't have enough liquidity for you to day trade
  • ...you couldn't be in or out of the market whenever you wanted
Even if you are going through a difficult time in the market, think of this: difficulties are opportunities to better things; they are stepping stones to greater experience. Perhaps someday you will be thankful for some temporary failure in a particular direction.

Happy Thanksgiving all!

Successful trading.

Let us be grateful to people who make us happy; they are the charming gardeners who make our souls blossom.
-- Marcel Proust 

Monday, November 15, 2010

10 sins to avoid in trading

Know the 10 deadly sins people commit in trading and avoid them at all costs:

1 - Anxiety

A new week is beginning, you have to make money no matter what, you have bills due and you want to take it from the market - Avoid this kind of thinking! You have to make "friendship" with the market, if you try to force it to give you money, you will probably lose instead. You need to have a relaxed state of mind and just try to surf the waves...

2 - Prepotence

Some people will start in this business, make some "easy" money and then think they are smarter than everyone else, be careful, this is the right path for a big loss, don't fall in that trap.

3 - Impatience

You have been waiting for that setup to happen, market is doing its course and is taking a "long time" to reach your levels where you want to buy/sell, so you decide your level is not going to be tested anymore and cancel your order and jump into the market just to, after 10 minutes, see the market come to your price and your order would have been filled for a much better price or you might even get stopped out and then market reverses from there... Be patient.

4 - Indiscipline

When you enter a trade have your STOP in place and don't play overleveraged you'll end up making a mistake that will give you the opposite from your desired result. Have your limits established before you enter a trade, usually you will regret you didn't do it.

5 - Instability

Don't keep changing your strategy every week, find a system that works most of the time and stick to it.

6 - Indecision

If you look too much for news you might get in doubt about when to get in or out of the market, concentrate only on major news and trust your technical analysis (once you know how to do it), trash most of the news and you will do much better.

7 - Insecurity

Sometimes you are so hungry for tips from other traders that you end up going against your own analysis and guts. Always have a plan and trade your plan.

8 - Greed

This is also about position sizing, don't risk much more than you would be comfortable to lose, otherwise you will not be able to trade correctly. Make an experiment and trade with only one car for instance... Do you see how you do much better? Now try with 100 cars... True or not?

9 - Jumping the gun

Patience is one of the keys for successful trading, wait until you see a setup you really like, you know the market offers great opportunities every single day, why risk when you are not seeing anything important going on?

10 - Negligence

Trading is a business, have well defined weekly, monthly and yearly targets and have a strategy to reach those targets. If you don't establish clear targets you will not get anywhere.

Best of luck!

Friday, November 5, 2010

Have you found your edge yet?

Does it constantly happen to you that by the moment you enter a position the market almost immediately goes against you? You wait and wait and wait, all the trades you do mentally work to the tick, but when you pull the trigger... it doesn't work!

Have you ever entered a trade just to take a lot of heat and by the time you decide to leave it, market goes a good couple of points in your favor?

That drives you really mad, you want to "kill" the market, smash the keyboard to pieces, you can even hear an evil big "laugh" from the market at you...

You CAN change that, and you'll be laughing at the market! You need to have an edge that works most of the time to give you the confidence to pull the trigger each and every time that edge is presented to you. You do nothing until you have that kind of condition that "you know" it's your chance to make a profit, even if it's only a small one, a 2,3 or 4 points profit.

If you still haven't found your edge for profitable trading, try to find it out somehow, it's the only way to stay in this game, you need some tool that will allow you to confidently pull the trigger, when you find your edge, you will be able to think in advance and have a plan: - "if the market does that I'll do this", "if it closes here I'll jump in" and so on. Once you find an edge that works "most of the time" stick to it and only change it if you find another way that has proved to be better, that works more frequently.

Now, you need an edge that fits your personality, in my own case for instance, I need an edge that gives me a good earning ratio... I lost too much in the past, so to fit my personality I need something that "I'm sure" will give me at least 70% of winning trades. Last month, from more than 50 trades that I did, I was stopped out only 3 times, an amazing good rate indeed.

So, when you find a system that will allow you to sit and wait for the best setups you will start doing well, but ONLY TRADE when one of those setups are triggered, you have to be patient, otherwise you will take unplanned trades just to regret you did it. Remember: you trade to make money, to get a living from it, right?

A system that fits your personality is a system that you feel comfortable with, you know you will be stopped out sometimes and that MUST not bother you. Some people will not have any problem being stopped out on 90% of their trades, as far as the other 10% of the trades will cover all the losses and make them money, this system without any doubt is not for me, a prefer to take trades that will give me from 1 to 3 points but they will frequently happen, that's my way to trade, and you must find yours too.

Successful trading!