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Dec 21

Day Trading Rules to Live By

By adminNo Comments

Most people looking to make money in the markets believe that the answer lies in finding some simple technical analysis strategies that will catapult them to profitability.

The truth is that trading is not as simple as beginners believe. It is a profession, and like any profession it requires a learning curve. Reading a book or getting a few simple “tips” is not going to turn you into a professional trader.

After studying for a length of time, it’s not uncommon for students to begin their search for the “holy grail.”

They search for more indicators, chart patterns, gurus, alert services or the latest secret day trading strategies and other things that will provide their answer to becoming successful.

But here’s the fact. Success lies within you .. and it won’t come easy.

In fact, one of my favorite success principles is this:

“Successful people do what unsuccessful people are unwilling to do.”

Let’s apply this to trading in the form of my list of “Day Trading Rules to Live By” … all of which have to do more with you than with the market.

The consistency you need is in your mind, not in the market. Many in the market get frustrated because the market often behaves differently than they expect. You can’t rely on the market to be consistent. It is largely a random walk. But there are times when the market does setup with a probability scenario that gives you an edge. Your job is be consistent in trading those probability setups and trade them every time they occur.
Trade like a cat. Most beginners over trade. It’s one of the most common trading sins. Your job is to be better than other day traders in having the discipline to wait like a cat in the brush until just the right moment (your high probability setup) and then jump on the trade without hesitation.
Successful trading is simply a game of not making mistakes. Keep a list of your day trading rules posted on the wall or on your monitor and then follow those rules perfectly. You must be more disciplined than the average trader. Never depart from your rules no matter how good a trade “looks” or “feels” to you if it violates your objective and back-tested rules.
Only trade when you are in an optimal emotional state. Never trade when you are tired or are in an emotionally unstable situation (after a fight with a spouse or friend for example). Day trading is more like athletics than academics. Trading on such a short time frame requires you to be able to make split second decisions, and you’re risking a lot of money when you do. Make sure your mind is sharp and your emotions are centered.
Keep a detailed trading log. Every day trading course I’ve seen has a trading log. Yet my experience in dealing with trading students demonstrates that less than 10% of them actually use it. This is a huge mistake. Not only should you log every trade, but you should also record how you felt and what you were thinking as you took the trade. In this way your logs will become a type of “biofeedback” mechanism for you. Personally, this was the difference that made all the difference for me.

These 5 day trading rules are not the type of rules that you were probably looking for. The masses want rules about indicators, price bars, where you get in and where you get out.

Granted, you definitely need clear objective rules about those things as well. Yet thousands of traders have those types of rules, and yet continue to fail because those rules are about market action.

They fail because they don’t have, or don’t follow, the more important rules the rules about their own action.

If you find yourself resisting the importance of these rules about your own behavior, realize that you are one of the masses who feels the same way. But since the masses fail at day trading, you must set yourself apart and do something different than them.

Following these 5 day trading rules are what the retail traders fail to do. Not because they can’t do them, but because they are unwilling to do them. And remember, “Successful people do what unsuccessful people are unwilling to do.”

Dr. Barry Burns is the owner of Top Dog Trading which teaches people how to avoid the long learning curve in day trading

He started his study of the markets under the direction of his father, Patrick F. Burns, who became independently wealthy through trading and had over 70 years of trading experience before passing away in 2005.

He has been the featured speaker at DayTradersUSA, and developed a 5 Day Course for WorldWideTrders.

Dr. Burns has been a headlining guest speaker for the Market Analysts of Southern California, given seminars around the country at many Wealth Expos as well as many Traders Expos, been interviewed on the Robin Dayne “Elite Masters of Trading” Radio Show, and is the former moderator of the FuturesTalk chat room.

He has a doctorate in Hypnotherapy and is a certified NLP practitioner, and therefore able to help people with the psychology of trading.

Nov 14

Day Trading Tutorials The Basics

By adminNo Comments

Jumping in up to your neck isn’t wise.

Day trading has become such a big hit recently that a number of get rich quick merchants have already jumped headfirst in to the bandwagon quite often up to there necks or, at the very least, have shown real interest in doing so.

However most of them, soon find that trading stocks and bonds at such a frantic pace sure isn’t all it’s cracked up to be.

Why is this?

It’s really just plain obvious

Simply it’s because they haven’t got a clue on what is needed and so they will never learn how to become a successful day trader.

It’s just plain obvious that a lot of them certainly would have benefited from having gone through some day trading tutorials first to improve their performance on the market.

You see day trading is a highly complicated business fraught with many hazards; both beginners and experienced traders alike need to possess some knowledge of the process to successfully avoid the many traps and pitfalls involved

How on earth Do You Start?

Do you know the answers.

Shown below are a few questions that every day trader, regardless of experience, should know the answers to.

Understanding and having a solid grasp of the very basics of day trading will not only help them survive, but it will also make their day trading experience much more worthwhile and prosperous.

What is day trading?

How does it work?

Day trading, like other many forms of trading, involves the buying and selling in financial markets such as stocks, stock options, futures, and currencies.

Like most deals made in the market, the end goal is to make a profit from the differences, however slight, from the start of trading and the prices at the end of the trading day.

However unlike most market transactions, day traders wrap up all there deals in one single trading day, in an attempt to profit off of market uncertainty.

Most days, there are many major or minor changes in the value of certain financial markets throughout the trading day as a result of the state of market conditions.

What is it they do?

What Day traders do is try to take advantage of these highs and lows by buying into these markets, holding on to them sometimes for seconds, minutes or even hours at a time, and then selling them for a hefty profit just at the right time.

If they manage to pull off the right trade, at the right time they will often earn a very sizable profit.

Whats The Downside?

What can help?

Should the trade turn out to be a bust later on,, they could easily stand to lose a great deal of money as well.

Since day trading is such a high-risk, high-reward venture, some traders look to day trading tutorials to better aid their chances of success.

Day traders normally have no interest in long-term investments and, for the most part, don’t keep their positions open past the close of a trading day.

They do this because there is a great chance that the value of the markets they invested in will change dramatically between the end of one trading day and the start of another.

And Now What…

Get a free day trading mini course.

We’ve reached the end of the first part of this guide. So far, not much has been said about day trading tutorials, but stay with us. We’re just dipping our toes in at the moment.

If You Found this Interesting and would like to know more click below and get your free day trading mini course.

http://www.squidoo.com/daytradingtutorials

Nov 13

Day Trading For a Living

By adminNo Comments

I was reading an article recently which maintained it is not possible to make money day trading. Naturally this piqued my interest because I day trade for a living and last time I looked I was doing OK.

The article began by making the very valid point that the vast majority of day trading articles are not written by traders at all, but rather they are written by people marketing systems with hypothetical track records created with the benefit of hindsight.

That is absolutely true.

It is equally true of articles about every other trading style in commodity futures, stocks, forex and options. Whether it is covered calls, trend following with our extra special absolutely never seen before new indicator, swing trading, pairs trading, spread trading, or selling naked options, or any other style, it will often have a hypothetical track record. The time period of the method being promoted is absolutely irrelevant.

The article quotes CFTC rule 4.41 which every futures trader has seen many times. It says:

“Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.”

This pertinent warning is not confined to day trading systems. It is applicable to ANY trading system in ANY time frame where hypothetical or simulated track records are provided.

You see, most system developers research historical data to find high probability setup patterns. They develop indicators and trading rules to exploit these patterns. There is nothing wrong with that, so long as it is realized that the resulting system is optimized over this data set. The only valid way to test the system is on a completely different, independent set of data. Often a system that looks spectacular on the data the developer was originally working with will fail miserably when applied over a different period or in a different market.

The article went on to say that all day trading systems lose because “volatility in short term time frames is random and prices can and do go anywhere, meaning that if you try and use support and resistance levels they wont help you with your trading signal or help you get profitable market timing. You therefore cannot get the odds in your favour and will lose over time. This is fairly obvious when you consider that the price in any financial market is made by a vast diverse group of traders”.

Well, that is quite a statement. The fact is “volatility” exists in any time frame and, by definition, it is random in the time frame considered. Indeed, prices can and do go anywhere, whatever time frame you are looking at.

Support and resistance levels are identified from trading charts. If no time scale is displayed it is impossible for any trader to differentiate between a 1 minute chart, a 1 hour chart, a 1 day chart, a weekly chart or a monthly chart if they are not told which market they are looking at. The fact is all charts, in all time frames, exhibit similar characteristics. You will find trends, ranges and most importantly support and resistance levels. It follows that whatever edge you think you can get from identifying support and resistance levels in one time frame is equally applicable in the other time frames too.

Most successful traders use strategies which either (a) sell resistance and buy support, or (b) buy breakouts through resistance and sell breakouts through support. These core strategies are available to any trader working in any time frame.

The distinguishing feature of the day trader is that (s)he always exits trades before the end of the trading session. No positions are held overnight or over weekends. By adopting this approach the trader minimizes “event risk” which is the chance that some dramatic event will so disrupt the markets that you suffer a major loss. (Stop losses are ineffective in this scenario because the market “gaps” through your stop loss level.)

The REAL drawback to day trading is trading costs.

Say that in some hypothetical market, the typical trading costs are commissions (2 points) and slippage on entry and exit (1 point each). So for each trade, trading costs average about 4 points. Now, if a long term trader typically targets 100 points, trading costs would be 4%. For a medium term trader targeting, say, 40 points trading costs are 10%. But for a day trader, targeting 8-10 points, trading costs are 40-50%! Obviously, if a trader is determined to trade this market, then medium to longer term trading is the only sensible option. It would not be surprising for a trader focussed exclusively on this market to form the opinion that day trading does not work.

Clearly, then, not all markets are good for day trading. If the average market movement is just a few points, the trader will be unable to find short term trades which cover the trading costs. Even where the trading costs can be covered, they often turn what looks like a good system into a poor one. This is because, as a rule of thumb, trading costs are nearly always deducted from theoretical profit in successful trades, and added to the theoretical loss in losing trades. This significantly changes the average win to average loss ratio for the system.

To prosper, the day trader seeks out volatile markets where the the projected trading costs are a small percentage of targeted gains. The Expectancy of the system used, allowing for the impact of trading costs on the average win to average loss ratio, must be positive.

Fortunately, many such markets exist. The rather stodgy forex market, with its high trading costs, is NOT a good example. However, there are commodity markets and many individual stocks which exhibit the required volatility.

Author of Day Trading Grain Futures (published by Harriman House), David Bennett trades US commodity futures from his home on the Gold Coast in Australia. Visit http://www.12oclocktrades.com to read more articles and learn more about his trading style.

Oct 29

Swing Trading Vs Day Trading

By adminNo Comments

Be honest, now. Back in ’99 when seemingly every waiter and grocery-store clerk had a stock portfolio, did you get rich day trading? Back in those good old days there was plenty of talk about making money day trading, but how many people do you know who actually accomplished it? One look at a 10 year Nasdaq chart leaves no doubt that some people did get rich on the way up–and a few of them probably had the good sense to get out before it was too late. But most people ‘played’ the market–and lost–through mindless buying of mutual funds, and by accepting worthless corporate stock options in lieu of actual pay.

Fast forward to 2007. The Dow is at its historic high and the Nasdaq is roaring back to life. It doesn’t take a genius to realize that now is the time to think about trading again. But truth be told, most people will not take the initiative to make their own trading decisions. Most people will get burned all over again.

To really profit from the coming bull market you must commit yourself to making your own trading decisions. Don’t trust your broker, your boss, or your brother-in-law. Only by assuming responsibility for your financial future can you expect to achieve success; nobody is in a hurry to do it for you.

Most people who do decide to trade on their own hook will naturally think of day trading. And you can bet when the bull market takes off plenty of pundits and gurus will be urging you to day trade. But for most people day trading isn’t a viable option, either because they can’t afford to sit in front of a computer screen all day, or because they have enough common sense to realize day trading is a lethal game. So how can you profitably trade?

The answer for many people is swing trading. Swing trading is the practice of holding stock positions (long or short) for a few days to a few weeks. You don’t need to sit in front of your computer all day with your finger on the panic button, and you don’t have to play cat and mouse with market makers looking to hang your scalp on their wall. The typical moves made by a stock during a swing play will dwarf the tweenies that day traders salivate over, and with sensible use of stop orders you won’t need to lose sleep at night fretting about the risk.

Day trading is a little like the World Series of Poker. Do you think you could sit down with Greg Raymer or Chris Moneymaker and beat them at a hand of No Limit Texas Hold ‘em? When you day trade you’re taking the same chance. The people on the other side of your trades are professional market makers. What the stock will do in the next day, week or year may be beyond the control of any one person, but what happens in the next 15 seconds depends entirely on the decisions of individual traders. Your loss is their immediate gain, and these guys (and gals) have been doing this for a long time. Even the most perfectly formed setup quickly turns into a sucker-play because these professionals know the newbies will take the bait. In the world of day trading, the losers get their hat handed to them in short order.

With swing trading you get the same fair chance as everyone else, institutional traders and individuals alike. As long as you trade stocks with a reasonable amount of volume, you can rest assured that no one trader, or even a group working in unison (which would be illegal, to boot) has the resources to bully the market. Setting your stop 5% below your entry point virtually guarantees that you won’t get scalped (it doesn’t guarantee the stock won’t move 5% against you, but if it does it won’t be because one trader decided to scalp you). And the profit potential for a well played swing trade could be 10% in a few days, or maybe 20-30% in a few weeks. Of course, it takes knowledge and experience to identify the right trades, but your chances of success are just as good as any Wall Street trader if you’re willing to take the time to ‘plan your trade and trade your plan.’

Truly outstanding bull markets only come along a few times in a lifetime. Swing trading gives you a realistic chance of profiting from those great bull markets. You already missed the last one in ’99. Don’t miss out on this chance. Now is the time to start studying up on swing trading so you’ll be ready.

Todd Strickland

[http://swing-trade-online.biyazo.com]

Oct 17

Day Trading Success Tips – Do You Have the Mentality to Become a Winning Day Trader?

By adminNo Comments

Successful Day Trading Strategy is dependent on many variables, rather than just one “magic day trading pill.”

The day trader’s skill level, for example. Or his or her day trading experience level. Or the quality of the day trader’s training. But there is one variable that is often overlooked when people assess their overall day trading strategy, and/or try to figure out why they can’t seem to win a trade to save their lives.

There are many Traders out there, new and experienced, that have lost trades before they ever hit the “execute” button on their trading platform. These traders can’t seem to win trades consistently. Their losses far outpace their day trading success.

They’ve taken the time to learn day trading, and they have what they THINK should be a winning day trading strategy, but they still keep losing. But these day traders can’t figure out why (or, rather, why not).

They are doing everything right, following their day trading strategy to the “T”, charting their course.

So why is that some Day Traders are so successful, and other’s just aren’t?

There may be many reasons why, but there is one BIG reason that is responsible for the failure of many would-be day traders.

Here is a key day trading tip – Day trading is an art, not a science. An artist’s attitude and outlook is reflected in his art. If an artist has a negative attitude, a defeatists attitude, then that is reflected in his art.

Successful Day Traders have a Winner’s Mentality.

They go into a trade with a positive outlook, fully expecting to win that trade. Sure, they don’t win every trade. But they are mentally prepared for it when they do lose, and can overcome it, and get back on track for successful trading. But most importantly, they are mentally prepared BEFORE they ever enter a trade.

If you have a Defeatist attitude, you will lose far more trades than you win.

Why? Because your thoughts affect your actions.

Your Fear of loss will cause you to hesitate, and get into a trade too late, or miss it outright all together.

Your Fear of Loss will cause you to panic if a trade starts to go against you, and hit the EJECT button, locking in your losses, rather than trusting your day trading strategy.

Your defeatist attitude can even skew how you see the market’s behavior. If you have a defeatists attitude, you might see a positive indicator as negative, and enter a trade in the wrong direction. You might misinterpret what is happening leading up to your trade, causing you to execute poorly. And your Defeatists attitude will cause you to place sole blame on your day trading strategy, rather than on yourself where that blame belongs.

On the flip side, if you have a Winners Attitude, you won’t hesitate. You’ll KNOW what to do in every instance. Day Traders with a Winners’ Mentality also realize that day trading is an ART, NOT a Science. You don’t automatically get output “X” if you input “Y”.

By trading with a Winners’ Mentality, you’ll BELIEVE in your system. And most importantly, you won’t compound losses with losses. You know that trading is inherently risky, and that there exists the potential for real and substantial losses. But with a Winner’s Mentality, you can get past losses, and you can secure strong wins, much more easily than the Defeatists.

The Market presents opportunities to day traders to take advantage of. If you have a “Winner’s Mentality”, then you’ll be much more likely to take advantage of those opportunities and develop into a Market Dominating Day Trader. But if you continue to trade with a defeatists attitude, than your success as a trader has already been determined…and the outlook is grim.

Have you picked up your FREE copy of the Day Trading Success Video Boot Camp?

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To claim your very own video boot camp, simply visit our website and enter your name and address.

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And discover how YOU can become a Market Dominating Trader!

Don’t hesitate, because after all, the markets are moving tomorrow. Do you know how to take advantage of it?

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