Move on to the next level

Imagination is more important than knowledge. - Albert Einstein

Trading is a real big challenge, no doubt about that, truly one of the most difficult endeavors anyone can undertake, but it can turn to be real fun if you follow a set of rules. Following a system means you will only trade when those preset conditions are met, otherwise you will just watch the market, that thing only already takes a good percentage of the stress off the trader.

It's all a matter of learning what to do and have the discipline to follow it day in, day out, and take the profits little by little on the way to your sought-after targets, allowing you to be consistently profitable.

I started trading around 8 years ago and lost consistently for almost 5 years in a row! I was trading daily from open to close and just couldn't make it, I used to win very little in a couple of trades and lose big in most of them, at that time I really thought trading for a living was just impossible... until I decided to create a system (and follow it), only taking trades that fell in the patterns I knew had a good probability of working, little by little the rules got all created and I finally have a system that works! Eureka!

So, after those 5 long years I started seeing the first wins with consistency, which got improved a lot over time and now, after having used it for almost 3 years, I can say I'm very satisfied with the results I'm getting and also being able to help others achieve their dreams in their trading.

I've learned markets behave similarly every day, only the figures change, patterns repeat themselves over and over again, respecting key levels most of the time and  many times to the exact tick.

The system I've put together is so simple, anyone can learn how to use it in one or two weeks, as long as you know how to enter orders in your trading platform that's all you need to start using and taking advantage of it.

 As everything in life, it might look complex at first, but after one week most traders understand all the concepts.

Have you ever played video games? Did you notice how difficult it seemed to be in the beginning just to become much easier after a couple of tries?

You lost a couple of "lives" but after a while you managed to pass on to the next level, true or not?

Same thing with trading when you use a system, in the beginning it may look hard, but after a couple tries you start getting the hang of it and start making money consistently and you will be able to move on to the next level! It's just a matter of practice.

The system is all visual, no guesswork, you see it, you trade it, if the key levels we're watching are not tested, then all we have to do is sit and wait, but if they do, we confidently just take the trade, trading according to our own style, no matter if you're a scalper, day or swing trader, just follow the system the way you feel more comfortable, using the time frames that interest you, if you're a swing trader then your STOP losses will have to be wider, a scalper will use tighter STOPs and will take profits quickier.

Of course if you are just starting in trading then you will want to risk very little, so you would start as a scalper, risking from 4 to 8 ticks (max) on each trade (on ES - SP500 e-minis) and taking profits as targets are met or just getting stopped out and being ready to move on to the next trade. Once you reach your $ targets you may increase the size you trade, this is key to moving faster to your targets.

Decide to do the right thing today and stop wasting time and money, create your own system or just learn one that works, give yourself a chance to move on to the next phase.

If you want to learn how we consistently make 2 to 3 points a day on ES, join us now at: www.diamondsetups.com

Best of luck!

Confidence comes not from always being right but from not fearing to be wrong.


Disclaimer
Notice: Futures involve substantial risk of loss & are not suitable for all investors. Comments are opinions only. Not trade recommendations.

Dancing to the rhythm

After studying the markets for well above the 10,000 hour barrier, as Gladwell puts it in his book "Outliers", I have come to a level that gives me confidence to make the same type of trades day in, day out, as we know the patterns repeat themselves every single day.

Today I'm able to make money week in, week out, with the least stress and risk possible, I use a couple of tricks to get rid of them and that's the main reason why I keep my trading room open and many traders have fun there while enjoying some nice profits from my calls. Oh yes, we do lose sometimes, there is no trading strategy that will win 100% of the trades, we've had a nice 30 trade sequence without being stopped out this year, but then we went back to the normal 6-7 wins in a row.

The system we use offers traders many trading strategies adapting to each market condition and a trader's own trading style, sometimes we have traders going short while others are long, but both make money.

So, according to market behavior we use different methodologies, if we have big volatility in the markets for instance, then we use one strategy, just to give an example, a day trading strategy we use allowed us to make an average of 30 points a week for several weeks, and of course we loved it, because we caught the big moves that began by end of July last year which lasted to the beginning of January this year, we had many many wide range days making it really a perfect time for us, day traders.

I remember we had even a 100-point-day move on the SP500, on that day I called the low in our trading room, right after FOMC announcement, we got it perfectly, with the lowest possible "heat" (a couple of ticks) and then it went up forever giving +100 points in one single day! WOW! That was a really lucky call!! LOL

But after that 6 month period, from February this year, market started making tighter range days, making it much more difficult to those who were used to the 20 to 50 point range days, so now we can use a different strategy, we can say that this time it is more like "Hit and Run", a really simple strategy but really amazing, works above 85% of the time, and most of them getting quickly filled, without having to "suffer" a couple of points down before it goes up, the moves are usually real quick, sometimes the trade is done in just seconds giving the trader no chance to be stressed thinking whether the market will go up or down, we just take the trade and quickly take profits, we wait for key levels to jump in.

Besides that, we can choose when we want to work, those who prefer mornings, OK, they can trade 2 hours a day in the morning and be done by noon, or any time they want.

We don't care about the trend, neither about news, all we want is to take a small bite everyday and go home, or we can stay around and just watch the markets while chatting to friends.

By making only 2 points a day, if you trade for instance 2 cars only on E-mini SP 500, or ES, as we call it, you already have US$ 200.00/day which on a consistently basis is not bad at all, to think that you can increase that to 20, 30, 50, 100 cars, it's the same work but with bigger rewards.

Try to get yourself a trading system, either buy one or create your own, just make sure you put down all the rules, but trust me, it will cost you much less if you buy one.

Best of luck trading this week!

See you next time or in our trading room.

Who wants to be a millionaire?

Oh yes, trading can do wonders for the ones who are disciplined, willing to pay their dues and work as a bricklayer doing the same thing everyday, certain that it's just a matter of time until they can reach even their wildest targets, all they have to do is plan the road ahead and travel safely all the way to their destination.

But most of the small traders I know are not looking to make millions of dollars in the markets, at least not in the short term, they know this is not possible with a small account, all they want is to be able to have a decent living out of trading, as any other small business owner; you don't want to start a business with say US$ 50,000 and expect that bu the end of the year you will have made US$ 1,000,000 in profits, that's not very likely, unless you come up with a brilliant idea on the internet with a new killer website/application...

We know there are lots of pitfalls along the way and we need to be aware of changes of conditions in the markets, sometimes we will be able to make a killing in the markets such as on the period between August and November/2011 when the volatility went wild and we were able to make a great deal of points when trading the SP500 e-minis, 20 points and more were common on most of the weeks during that period for any day trader with a good strategy, but things already started changing in December with tighter ranges making it more difficult to grab fat profits, so let's wait and see if the return of volume to the market will bring the volatility back or will we continue into a period of tighter ranges in the beginning of the new year?

No matter how the market behaves, we, day traders, will have to continue patient and disciplined waiting for the good setups to show up and only trade when they do, we will not force trades as we know they have a good probability of failing, we want the high odds trades only.

So, what exactly do I mean when I say: "do the same thing everyday"?

When you use a trading system you know the market will repeat a couple of patterns everyday, traders will show their greed and fear and that is what will make the market move the prices up and down, so your job is to wait until you see a "good setup" and make sure you pull the trigger when you recognize it, because you know that in more than 80% of the time that trade will be a winner or you will be ready to lose in case your STOP gets hit and you will patiently wait for the next setup, so it's the very same thing everyday, you just need to follow the system and you know that in the end of the day you will be profitable, we work with probabilities and we know what to expect.

One important thing to observe is to make sure you have your targets set for the day, week, month, year and a long-term one, where you want to be in 5 or 10 years from now, and also that you will increase the size you trade by the time you reach the key targets as I have explained in my previous blog post.

So, kick start the year doing the right thing and by the end of this year you will be rewarded with a good harvest, paying off for all the hard work you've put in during the whole year.

Below I put a small checklist with the 7 key things a trader needs to be successful in 2012:

1- Find yourself a good trading system

- If you don't have a plan on how you will trade, a plan you know that works most of the time, it'll be really hard to achieve consistent results, so make sure you create your own system or buy one from a reliable system vendor, as you probably know, I have put together a really simple system, easy to learn and use, the Diamond Setups.

2- Make sure you have a good software/platform

- Trading futures with a Forex account will make it almost impossible for you to be successful, competition is stiff, you need the best tools, make sure your broker is a specialist in futures, there are many good platforms out there, find one that will fit your trading style. Same with the charting software, make sure you get one that is flexible and that will allow you to customize it to fit your needs.

3- Have a good internet connection

- Of course if you will be day trading you need a reliable internet connection, make sure you get the best money can buy and also have a second one available in case the main one fails, it might be either a 3G connection or even a dial up emergency connection so that you will not be totally in the dark.

4- Have a comfortable and pleasant place to work

- If you trade from your garage or from the basement, make sure you have created a properly set up office space, with good lighting and well organized, it's hard to do the right thing if you're trading locked in a cubicle. If the place is noisy, with your neighbor's dog barking all the time, that might bother you and influence on your trading, pay attention to the small little things.

5- Get rid of those "friends" who say you can't

- Most of us have some "friends" who will always want to make fun of you when you start trading for a living, don't let them spoil your weekend as that could last the whole week and make you have a bad week, your state of mind is really important, get rid of those types... OH! Is it your wife/husband who says you can't? No one can stop you when you know where you want to get.

6- Read good books on trading

- As Warren buffet says: "I don't know a single rich person who doesn't like reading". You need to read to learn how others have succeeded in this business and follow their example, so make sure you read the good books available out there. On the right side of my blog I have a list with the 10 books a trader must read, there are many other good books, of course, but those 10 are definitely must reads.

7- Be disciplined

- And last but not least: Be disciplined with your trading this year, if you do the right thing every single day the rewards will show up automatically, you don't have to think about your profits, just make sure you trade well and the money will come to you. You will never be able to do good while you're failing to pull the trigger on good setups, or getting out of a trade without being stopped out, or by taking profits too quickly instead of letting your winners run, these are only a couple examples, you will never regret you were disciplined by the end of this year.

Maybe you think it'll take too long until you become a millionaire, but maybe you're wrong.

"Make measurable progress in reasonable time." ~ Jim Rohn

Wishing you all the luck in your trading in 2012.

Happy New Year!

New 8 to 10 new highs developing on SPX and SPY

After ten weeks this pattern will be back again in play, this week, *IF* we make a new high, it will be the 8th consecutive new high, we might still see the 9th and 10th on the coming weeks, or NOT, because this is how this pattern works it may stop making new highs on ANY of those 3 next new high bars, so what we need is to see if there is any confluence, some important resistance, when it makes new highs this week, how high can it go?

Will it cut the 1300 psychological barrier like a hot knife on butter and just keep going up or will we see some kind of pullback when/if it tests that important area from 1300 to 1307 (CASH)?

Click on the chart to see it bigger.

SP500 Weekly Chart

The same pattern is in play on SPY, let's see what "the boyz" want to do when we make this new high, I intend to start building a short position this week, but of course we might see it going much higher, remember, in this business, anything is possible.

Have a great week every one!

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.

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 

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!

Starting a new blog

Hi folks!

Anyone who knows me for a longer period of time from Twitter as @RenaTrader knows that I also have a passion for diamonds (you can read how I started in that business and also in trading by clicking “About me” on the right side of the screen) and I also write a blog about diamonds in Portuguese, so I thought: why not write another blog on my passion for trading?

So that’s what I decided to do, my aim is to try to help people by writing about the difficult task of becoming a trader and how to overcome most problems traders face when in the initial phase of the learning curve, I really think the 3 first years are the toughest, although many traders are able to make it in less time, but it was not my case. I myself thought several times it was just impossible to be consistently profitable and thought about giving up many many times… So I hope I’ll be able to help not only the beginners but also the ones who have been struggling for some time already on this tough path to to go in order to become successful in the markets.

Just a quick note: If you’re looking for charts you will not find any here, I'm writing this blog in order to share market knowledge on  risk management, trader’s psychology, strategies  and also some funny stories.

Feel free to send me emails or leave comments, I’m looking forward to hearing from you.

Good luck and happy trading!