Archive | April, 2011

Next up 1390 on the SP500, but first we could…

28 Apr

ES Futures

We’re looking for a rally to 1390, however before we do so we may pullback into the next daily halfway back setup.

Secrets of Successful Traders

27 Apr

The Secrets of the Successful Trader…

The trading game is as much played psychologically as it is physically executing trades. After the markets are closed is where average traders turn into successful traders. To be a successful trader it takes a specific skill set, but more importantly the proper mindset. The techniques, strategies, and lingo can be readily learned, it’s the other side, the psychological aspect which turns an average trader into a successful trader.

Create a Business Plan – “Plan Your Trade, Trade Your Plan”

Treating trading as a business with the objectives, goals, and guidelines clearly laid out will not only help keep things organized, but allow for less emotional involvement during tough market conditions. Defined entry and exits need in place for when to take losses and profits. Protecting profits while limiting losses is the name of the game, remember the bottom line, we’re in this to make money.

Being diligent and thorough with your trading keeping detailed records will be a tremendous help and allow you to go back and really pick apart things the things that are working from the things that aren’t.

Finally decisive action is an important quality to have when developing as a trader. A good trader has trained his eye to spot potential forming trends. Often times when a clear trend is established it is already too late to enter in the trade. The business is trading and treating it as such will be the first step to becoming successful.

Exercise Discipline

  • Patience, the word traders live and die by.
  • Doesn’t over trade
  • Balancing trading with personal, family, and time with friends
  • Only blame themselves for bad mistakes
  • The only person who can be blamed for your trading actions and mistakes is YOU. Whether you heard the stock tip from a friend or on TV, it is you that pulled the trigger and only you who can take credit for the losses and conversely profits, you make.
  • Apply Money Management Skills Exclusively
  • Isn’t afraid of taking losses, but keeps them small (or win loss ratio etc. under control)
  • Knows there will always be another trade
  • Lets their winners run (takes bigger chunks out of the markets)
  • Having an arsenal of strategies is great, but knowing when and what type of market environment to use them is the key to having a successful trading career.

Never Stop Learning

Becoming a successful trader takes time, years and years of studying the markets day in and day out. Making mistakes, losing money, and learning from your mistakes. By reading and learning from the mistakes of others, we are able to ease some of those losses.

Understand that there is no Holy Grail

While many black box systems exist, they only work for a short period of time before failing or breaking down.
The simplest form of trading is price and volume and successful traders always come back to reading price and volume.

Must Have an Strong Desire to Succeed

This doesn’t mean extremely risky, it simply means open to recognizing and seizing opportunities. Passionate and resilient – People will say you can’t do it, and the markets may get you down, but if you are driven you will succeed.

New Target for the SP500, Higher or Lower?

21 Apr

The ES, or the E-mini S&P Futures hit a pivotal level on 4/18 which has sent the market screaming higher. As we continue to drive higher and break prior highs, more and more stops will be hit which in turn sends the market high.

We need sellers at highs to make new highs and buyers and lows to make new lows. This is because the stops that the sellers place at highs (just about the highs) will be fuel for the market to make new highs at which point these traders will reverse their positions and chase the market long.

ES Target 1358

Our target for the S&P500, 1358. It’s straight up, or nothing.

Is the Market Headed for a Breakout?

21 Apr

The inverted head and shoulders that we talked about last week is fulfilling its end of the bargain, did you get long? Here is a look at the top line figures over the past few years. Notice that the NASDAQ and Russell are leading the way higher. This makes sense as a technology and small caps are where the most entrepreneurship and growth comes from as we work our way out of a recession.

S&P 500

Dow

NASDAQ

Russell

The VIX is about to rip, which way is it headed

The VIX is in store for a big move. Checkout the image below, it’s at the apex of a descending triangle. If we get a breakout in the market above this year’s highs watch for a confirming breakdown in the VIX.

Volatility Index

What is Technical Analysis?

18 Apr

Have you ever wondered why technical analysis works?

Technical analysis is the study of chart patterns and technical indicators used to develop entry and exit points for placing trades. Here is a great online free resource, a course in technical analysis.

The basis for most technical analysis is candlestick charting 101, and Steve Nison’s book Japanese Candlestick Charting Techniques, is the go to book for learning these methods.

Aside from the self fulfilling prophecy, often times price moves in the stock market result from groups of people anticipating the same result, only the resulting move it turns out, is in the opposite direction as the masses first thought.

Think about it…

If a stock moves from $50 to $100 and begins to pullback, the traders who missed the first move will be interested in getting in. Some will feel they must chase the move and will end up buying at highs instead of patiently waiting for the next pullbacks. There will however, be a group of traders, who patiently wait for the stock to pullback to say, $75. They have their entry pin pointed and as soon as they get filled place their stop on the trade, in this case the trades placed their stops between $70 and $72.

As luck would have it the market continues to slide through the $75 level and upon dipping into the $60’s is met by a flurry of stop orders which sends the stock back down to the $50 range

Watch Out for the Larger Time Frames

12 Apr

When we trade intraday or even daily setups we often forget about the larger time frames. When I do my analysis for the week I always begin on the monthly chart and work my way down to the smaller time frames.

Potential Inverted Head and Shoulders Forming

What out for a potential inverted head and shoulders in the markets over the next two weeks. These are usually defined with a hammer which can make for difficult intraday trading.

SPY Inverted Head and Shoulders

Infinity Futures Platform

11 Apr

Checkout Infinity Futures for a cheaper alternative to the TT (Trading Technologies) and CQG trading platforms.

The Missing Piece to Your Trading Journal

8 Apr

Keeping honest, detailed, and meticulous records of your trades is the only way to grow, and the best way to do this is by keeping a detailed trading journal. Van Tharp talks about this in his book  Trade Your Way to Financial Freedom along with other ideas on trading for a living.

If you’re not into keeping hand written journals and don’t quite get the whole excel coding thing another option are these Trading Spreadsheets. There are various options to choose from for stocks forex, futures, and options you’ll be able to find something that suits your needs.

To see examples form my own trading journal click here.