To be a trader - 20 years'journey from novice to pro novice

[oilman5]

BASIC PSYCHOLOGY

There are 3 most factors that effect a Investor or a Trader in the Markets.
Of them are Greed, Fear and Hope. I will list a brief description of each of the below.

Greed: taking the meaning from Webster's (noun)
1. Excessive desire to acquire or possess more (esp material wealth) than one needs or deserves.
2. Reprehensible acquisitiveness; insatiable desire for wealth (personified as one of the deadly sins).
Greed always says, wait a little more so that the holding will rise and can make more Money.

Fear: taking the meaning from Webster's (verb, felt more appropriate)
1. Be afraid or feel anxious or apprehensive about a possible or probable situation or event (example: If I dont enter this stock now, I will loose on it).

Hope: from Webste'rs (verb, best suited for Markets)
1. Be optimistic; be full of hope; have hopes; "I am still hoping that all will turn out well".
2. Intend with some possibility of fulfilment; "I hope to have finished this work by tomorrow evening".

Well holding a loosing position even if it down to 20-30% ? This is Hope, that make you feel that the stock will go up and you can recover your losses.


No one can shy away or exempted from these 3 factors when involved in the Markets. Let it be those FII's, Fund Managers or our new breed of Tech Savvy Brokers, Professional Traders or the Retail Investors.

When this thought comes that, which breed of Traders/Investors get killed or maimed in a Steep Correction? The answer was simple, 90% of the time, the retail investors followed by Professional Traders, Mutual Funds (unless, they have a really Bad Manager like me ) and very minismal are the FII's.

Why so the retail investors get killed, when the same GFH Factor governs one and all? Well, the answer is simple, if you understand the markets very well and for the laymen it goes this way.

The simple difference between Life and Death in the Stock Market is controlling the GHF Factor. The less the GFH Factor, the more the Survival here.

That is the reason, why the FII's, Mutual Fund Manager and Professional Traders survive here more than retail investors. Since they know how to control their GFH Factors.

Variably or Invariably why others can control their GFH factor and why not the retail? at the end all are human beings! The thing is there are checks and balances in terms of methodologies to control the GFH for the Big Guys, there is no one to control a retail as he his a Boss for himself. Thats how the self destruction starts.

The 3'Ms: The 3'M ( Mind, Money & Methodologies) will help you control the GFH Factor. I am lifting this straight way from Alexander Elder's book (Trading for A Living & Welcome Into My Trading Room).

1. Control the Mind and overcoming the emtions ( GFH Factor).
2. Protect your Money( maximize profits and cut losses by Proper Entry and Exit Plans)
3. using Methodologies ( Pyramiding, Reverse-Scale Techniques, Stop Losses)

Also, these days Trading Systems are available for dirt cheap. If you want to make money, be ready to spend money to get your proper setup.

Like
1. For a swing or short-term trader, a EOD Charting Software is more than Enough
2. For a Day-Trader, access to Real-Time data is crucial, even a 5 min delay can kill you.


I may have presented this not in a orderly fashion, but most of them I learnt some myself, some reading books and some from the Traderji forum.

Step One: Unconscious Incompetence.

This is the first step you take when starting to look into trading. you know that its a good way of making money cos you've heard so many things about it and heard of so many millionaires.Unfortunately, just like when you first desire to drive a car you think it will be easy - after all, how hard can it be?? - price either moves up or down - what's the big secret to that then - lets get cracking!

unfortunately, just as when you first take your place in front of a steering wheel you find very quickly that you haven't got the first clue about what you're trying to do. you take lots of trades and lots of risks. when you enter a trade it turns against you so you reverse and it turns again .. and again, and again.

you try to turn around your losses by doubling up every time you trade - sometimes you'll get away with it but more often than not you will come away scathed and bruised

Well this is stage one - you are totally oblivious to your incompetence at trading.Stage one can last for a week or two of trading but the market is usually swift and you move onto stage two.

Stage Two - Conscious Incompetence

Stage two is where you realise that there is more work involved in this and that you might actually have to work a few things out.

you consciously realise that you are an incompetent trader - you don't have the skills or the insight to turn a regular profit.

During this phase you will buy systems and e-books galore, read websites based everywhere from Russia to the Ukraine. and begin your search for the holy grail.

During this time you will be a system whore - you will flick from method to method day by day and week by week never sticking with one long enough to actually see if it does work. every time you came upon a new indicator you'll be ecstatic that this is the one that will make all the difference.

you will test out automated systems on Autotraders, you'll play with moving averages, Fibonacci lines, support & resistance, Pivots, Fractals, Divergence, DMI, ADX, and a hundred other things all in the vein hope that your 'magic system' starts today.

you'll be a top and bottom picker, trying to find the exact point of reversal with your indicators and you'll find yourself chasing losing trades and even adding to them cos you are so sure you are right.

You'll go into the live chat room and see other traders making pips and you want to know why it's not you - you'll ask a million questions, some of which are so dumb that looking back you feel a bit silly. You'll then reach the point where you think all the ones who are calling pips after pips are liars - they cant be making that amount cos you've studied and you don't make that, you know as much as they do and they must be lying. but they're in there day after day and their account just grows whilst yours falls.

You will be like a teenager - the traders that make money will freely give you advice but you're stubborn and think that you know best - you take no notice and over leverage your account even though everyone says you are mad to - but you know better.

you'll consider following the calls that others make but even then it wont work so you try paying for signals from someone else - they don't work for you either.

This phase can last ages and ages - in fact in reality it can last well over a year - My own period lasted about 18 months.

Eventually you do begin to come out of this phase. You've probably committed more time and money than you ever thought you would, lost 2 or 3 loaded accounts and all but given up maybe 3 or 4 times.

Then comes stage 3

Stage 3 - The Eureka Moment

Towards the end of stage two you begin to realise that it's not the system that is making the difference.

you realise that its actually possible to make money with a simple moving average and nothing else IF you can get your head and money management right

You start to read books on the psychology of trading and identify with the characters portrayed in those books.

Finally comes the eureka moment.

The eureka moment causes a new connection to be made in your brain.

you suddenly realise that neither you, nor anyone else can accurately predict what the market will do in the next ten seconds
and you define your risk threshold.

You start to take every trade that your 'edge' shows has a good probability of winning with.

when the trade turns bad you don't get angry or even because you know in your head that as you couldn't possibly predict it it isn't your fault - as soon as you realise that the trade is bad you close it . The next trade will have higher odds of success cos you know your simple system works.

You have realised in an instant that the trading game is about one thing - consistency of your 'edge' and your discipline to take all the trades no matter what.

You learn about proper money management and leverage - risk of account etc etc - and this time it actually soaks in and you think back to those who advised the same thing a year ago with a smile

you weren't ready then, but you are now.

The eureka moment came the moment that you truly accepted that you cannot predict the market.

Then comes stage four

Stage 4 - Conscious Competence

Ok, now you are making trades whenever your system tells you to.

you take losses just as easily as you take wins

you now let your winners run to their conclusion fully accepting the risk and knowing that your system makes more money than it loses and when you're on a loser you close it swiftly with little pain to your account

You are now at a point where you break even most of the time - day in day out, you will have weeks where you make 100 pips and weeks where you lose 100 pips - generally you are breaking even and not losing money.

you are now conscious of the fact that you are making calls that are generally good and you are getting respect from other traders as you chat the day away.

You still have to work at it and think about your trades but as this continues you begin to make more money than you lose consistently.

you'll start the day on a 20 pip win, take a 35 pip loss and have no feelings that you've given those pips back because you know that it will come back again.

you will now begin to make consistent pips week in and week out 25 pips one week, 50 the next and so on.

this lasts about 6 months

then comes Stage Five

Stage Five - Unconscious Competence

Now were cooking - just like driving a car, every day you get in your seat and trade - you do everything now on an unconscious level.

you are running on autopilot. You start to pick the really big trades and getting 100 pips in a day is becoming quite normal to you.

This is trading utopia - you have mastered your emotions and you are now a trader with a rapidly growing account.
you're a star in the trading chat room and people listen to what you say. you recognise yourself in their questions from about two years ago.

you pass on your advice but you know most of it is futile cos they're teenagers - some of them will get to where you are - some will do it fast and others will be slower - literally dozens and dozens will never get past stage two but a few will.

Trading is no longer exciting - in fact it's probably boring you to bits - like everything in life when you get good at it or do it for your job - it gets boring - you're doing your job and that's that.

You can now say with your head held high "I'm a trader"

 

[oilman5]

………………………………………………..
"Take control! Make money quickly and safely by doing what others don't.

Ever tried using the 'buy and hold' strategy? You have!

Are you a millionaire yet? Perhaps not!Why Buy and Hold Doesn't Work.

At this point we need to make a clear distinction.

In this course we are talking about stock market trading not stock market investing. The fundamental difference is the time frame and the degree of active involvement.

The investor's approach is generally long term and they are prepared to hold onto stock despite short-term reversals.
A trader on the other hand is someone who buys and sells stocks and derivatives on a regular basis with the aim of profiting from short-term price movements.

Their perspective is short to medium term and they are concerned about the opportunity cost involved in having their funds tied up in stocks that aren't performing.

They also use different types of strategies so have greater flexibility. Both approaches can be successful.
Our point of view is that trading provides greater opportunity for profit and ironically greater risk control. One aspect of a typical investor's approach is the strategy -known as buy and hold.
Essentially this involves holding onto stocks through thick and thin on the basis that over the long haul they are expected to increase in value.

This approach has two fundamental problems.

The first is that stocks move both up and down.

If you simply buy stocks you can only profit if they increase in value.

Successful traders have strategies to trade both sides
of the market. So whether prices rise or fall, they can make a profit.

More fundamentally, if you simply hold onto stocks,
there is no guarantee they will increase in value.

No matter how long you hold onto them. Even if you
choose so called good stocks this is no promise of
success. Indeed, this approach can be very dangerous,
even devastating.
Lots of investors lost an awful lot of money on these
stocks and others like them. You can see that simply
holding onto stocks can be very risky.

But we will show you how, if you know what you are
doing, trading can be a relatively low risk approach.

So how did buy and hold become such an unquestioned
piece of received wisdom? Like just about any strategy,
it worked when the market was going up.

Stocks rose for such a long time that the buy and hold
concept seemed flawless. But Stock prices can and do drop suddenly.

Buy and hold is really just buy and hope.

So stock market trading is our preferred strategy and
the one we will explain in this course.

But there are two key issues you need to appreciate
about this approach.

The first one is time.

Trading is more active than investing and so requires a
greater time commitment.

Depending on your style of trading this can vary from
a few hours a week to several hours a day. And some
strategies require you to be involved in the market
when it is open, whilst other methods can be managed
out of hours.

Our course covers a range of trading systems that can
suit your time frame.

The other issue is your mental attitude.

Trading requires a different mindset to investing.

It is not a set and forget approach.

You need to actively manage your trades and be
prepared to act quickly when the situation changes.
there
are only four analysis techniques for selecting stock to trade.

1]Market Cycles
2]News
3]Fundamental Analysis
4]Technical Analysis

And you may also remember that of these four techniques we prefer technical analysis.

As distinct from fundamental analysis, technical analysis
provides precise mechanisms for trade entry and exit.

And the critical decision we need to make on daily basis
is which stocks do we choose to trade and when is the
right time to get in.

So we want to suggest to you that the best strategy for
determining the timing of your trades is technical analysis.

What do we use in our technical analysis that works so
well for us?

Our trading system can be defined as simply:
Three Simple Strategies
Three Simple Setups
Three Simple Triggers.

These things help you to do the following activities which
will be the core of your system.

1. select the stock
2. time the entry
3. manage the trade
4. time the exit.
Selecting the stock involves the following criteria:

1. mid-cap or blue chip stocks only
2. optionable stocks only
3. price between $10 and $60 ($10 to $35 in Australia)
4. daily volume above one million
5. medium to high volatility (preferably high)

This last point regarding volatility is crucial.

We love volatility...for being on the right side of
moving markets is what makes us money.

A stagnant market means there's no opportunity for us
to make money.
[this is an australian guide]NOT RIGHT IN INDIAN CONTEXT..
we will outline in clear simple
terms exactly what strategies you need to use to
get started making profits for yourself.

We then show you exactly what Setups you need to look
for to decide what to trade.

We then give you the exact triggers you need to
use to time your entry and exit in order to protect your
capital and make profits.

That is what people have found so useful with our system.

They can protect that crucial capital that we all work
so hard to accumulate and yet still be in a winning
position
to capitalise on winning trades.

Here just a few of our rules you must follow to be
successful.
Only trade with money you can afford to lose.
Never trade with borrowed money.
Only trade when you are in the right physical and mental
state.
Only place a trade if you are at least 80% confident.
Do not trade without a stop loss.
Place your stop loss at the same time you place your trade.
Don't enter the market until you get a clear signal.
You need at least three setups and three triggers before
entering a trade

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
never ever introduction to get highest priority..hence openion always comes last....this order should never be broken[if u want to money out of market]

bullish view.....how far market can go up ..at what time limit..
an analyst writes tcs price target 1650..it means 1sigma.66% chance of reaching tcs 1650 within a yr of time..if present condition [linear interpolation] prevails
if he writes conservative target 1600...itmeans 95%[2sigma]
chance of achieving that target within a yr

now again on new quarterly result out/review of company this may be edited depending on prevailing market condition

however conviction is rare in analyst ..to put big money...WHY?

HE KNOWS THE RISK/ASSUMPTION..which rarely get published..
the trick of management ...promotion sell

sentiment change..alternate scenario..how far market can fall?
at what duration it shall continue...nobody knows..but fibonacci definitely helps the trader..where is support...commit little money..commit and see
price reversing ..hey u get it right..buy more now!

hence market movement offers enough oppurtunity to active observer
methodical man can make money out of it

 

[oilman5]

The 24 Most Important Rules Of Trading

1. Always Cut your losses and let your profits run. Take small losses and large wins.
2. Once you have defined the trend, trade only in that direction.
3. Always have a game plane. Never enter a trade unless you know where you should get in and where you should get out.
4. Always use a protective stop to limit your losses.
5. Be patient. Wait for the right opportunities. Don't just trade for the sake of trading.
6. If the reason you entered the trade is no longer there, get out.
7. Do your homework. By the time you enter a trade you should already know what you are going to do and what you expect from the trade. Placing a trade should be the easiest part of trading. If you are still trying to work things out when you enter the trade you are not ready for that trade.
8. If your method of trading is working, don't change it.
9. The market is never too high to buy or to low to sell.
10. Every trader has losses, don't let your losses get to you psychologically.
11. There is no such thing as an indicator that is a 100% right all the time. Use common sense along with your method of trading. If your indicators are telling you one thing but the market is obviously doing something else, listen to the market.
12. The market is always right.
13. Use money management in your trading.
14. Only trade markets you are sufficiently capitalized for.
15. Never trade with money you cannot afford to lose.
16. Be disciplined.
17. If you hit your target profit, take it. Don't get greedy and hope that you will make more.
18. Don't try and regain all your losses in one trade.
19. Don't blindly follow someone else's recommendations. Do your own homework.
20. If it's not going well, take a break for a few days or weeks. Make sure you are in the right psychological frame of mind before you start trading again.

21. Don't trade to many markets. It's better to be an expert in one market than a novice in many.
22. Never meet a margin call. If you have a margin call it means something went wrong with your trade.
23. By the time everyone knows it's a bull or bear market, it's probably to late.
24. Loses in trading have no bearing on you as a person
,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
after this test u have to ...say yes,to ALL
....OR MODIFY YOU...
GIVE TIME IT MAY BE SOME YR, or simply quit...
indian defence dont take THOSE who not fit their criteria
so now comes your journey as trading cadet
u r lucky, if u r in trading industry.., U can make all experiment in others money
sharpening your skill without self injury. commited money here and there
a good senior . can help you a lot......
or join a correspondence course. like me test your idea on market.
..
market shall teach u by PROFIT /loss ..how far u learnt.

EVALUATE IN YOUR DIARY AND YOUR FEELING /HOW FAR u have modify your poor habit..
some exceptional HELP U MAY GET....OTHERS FROM TOP ,READILY GIVE ADVISE, if they think u have capability...in a puzzle..[i doubt after reading this 90% loss of episode in traderji forum..an MP CHAP STORY].
I want you to clearly realize one thing:

In all my years of performance consulting, I have NEVER seen a person in any field (athletic or business) who had a negative attitude AND ended up being successful.

We Have Choices
Everything we do involves making choices. As human beings, we have the freedom and ability to choose. Some things are easier to choose than others because they involve less effort, energy or resources; but easy choices are rarely the right choices. For example, if you want to get yourself into better physical shape then when your alarm goes off at 5:00am, you have a choice:

* Get up and go to the gym or
* Hit the snooze button and stay in bed for another 45 minutes

Hmm, which is the "easier" choice? And which do think is the right choice? Exactly!

Now, as traders, you sometimes make good trades or trading decisions and end up with a bad P & L. Once again, you have a choice:

* Lose your focus by getting mad at the market, ruminating, beating yourself up or
* Shift your attention to the PROCESS (things you CAN control) and re-establish your belief in your skills/talent/data points

Which is "easier" and which is the right choice?

What We Can Control
Elements outside of our control, are just that - OUTSIDE of our control and therefore, there is little point in wasting emotional capital on them. Trust me, I know how "easy" it is to get caught up in the noise - especially when times get tough - but you have to understand that it serves no positive value to you or you or your trading.

If the referee makes a bad call you can be angry for a few seconds, but GET OVER IT and MOVE ON. Why? Because the ref's call is OUT OF YOUR CONTROL.

Moving forward, I challenge you to start making the harder, right choices and use your emotional capital to focus on the PROCESS and things that are WITHIN your control.

Keep your eye on the ball and your head in the game!
Trading for a living requires a lot of discipline. It also requires a lot of streets smart if you trade discretionarily. One thing that many beginners missed is a basic concept of having multiple setups learned and practiced correctly.

Many beginners misunderstand that they can master a single setup and then can trade for a living. That is not likely the case. For each specific setup, you need to spend time to understand its reasoning behind, learn the chart pattern available in historical charts, and then practice in real-time or at least using simulation so that you know how to handle the setup in all possible situations.
stop loss is where u stop before losses stop u from trading ever (not a wise crack, think about it)...now modify this...
stop loss is at a % loss of my capital (on one trade or out of your total capital) where I stop before losses stop me from trading ever (becomes so big that it takes away a big chunk of your capital).
elder says 2% max on individual trade and 6% of ur capital in a month...there is a beautiful thread here on stop loss...search it
-- coursey : many a good trader OF TRADERJI.COM

 

[oilman5]

Here is copy paste -check usefulness of them
.................................................. .................................
Never risk more than 10% of your trading capital in a single trade.

Always use stop loss orders.( Here you should know your loss you can give in a situation where the trade starts going against you.)

Never do overtrading.

Never let a profit run into a loss.

Don't enter a trade if you are unsure of the trend.

When in doubt, get out, and don't get in when in doubt.

Never limit your orders. Trade at the markets.

Extra monies from successful trades should be placed in a separate account.

Never trade to scalp a profit.

Never average
Never get out of the market because you have lost patience, or get in because you are anxiously waiting.

Avoid taking small profits and large losses.

Never cancel a stop loss after you have placed it.

Avoid getting in and out of the market too soon.

Be willing to make money from both sides of the market.

Never buy or sell just because the price is low or high.

Never hedge a losing position.

Never change your position without a good reason.

Avoid trading after long periods of success or failure.

Don't try to guess tops or bottoms.

Don't follow a blind man's advice.

Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

When you lose don't blame it on luck.
,,,,,, “One of the primary reasons individual traders fail is an inability to act freely and decisively.

Freedom in action comes about when fear has been minimized. Trading small and diversifying neutralizes fear … . Decisiveness in action comes from clarity.

Clarity is achieved through an understanding of natural laws and the resulting probabilities.

 

[oilman5]

TRADE theme...DAYTRADE VS SWINGTRADE VS POSITION TRADE
.................................................. ................................
DAYTRADE..i treat as gambling..
totally unsuitable for amateur...
pro...can do..suits DEALER..RM..as its their job to watch
call helps..provided u understand reason of call
personally u should know call giver....u execute ...
as per luck and survival skill u make money...
DAYTRADERS BIBLE..
DAY TRADING UNIVERSITY... HELP FUL

INVIDUAL SENSE .. OF BULLPOWER ..BEAR POWER..MUST..
PIVOT PT CALCULATION ..
ANOTHER IMP CONCEPT..JUDGE THE DAY..
UPDAY BUY FIRST,SELL LATER
DOWNDAY SELL FIRST, BUY LATER

NO TREND DAY OBSERVE..
VOLATILE DAY USE YESTERDAY MEDIAN VALUE..
BUY 2% BELOW
SELL 2% ABOVE..
STUDY NIFTY AND NIFTY FUTURE....ORDER POSITION
TO JUDGE WHAT WHAT DAY IT IS...

SWING TRADE.......
nobody join in this type of trade...
with 3yr trade experience...guidance by ..senior u can...

its not at all a trade...basically judicious use of day trade and position trade...
book loss early being ..daytrader..
hold the winner...like position trader...
y have to face highest level of stress during this style..as its discretionary.
computerised signal helps..
min 2 time frame concept..useful
conflicting signal exists ..study them ...
use..1hr breakout as entry...
any momentum tool ...helpful

position trading
................................
its possible to learn ..if u have done investment before...
holding period is key..
stop..for save from rainy day..
trend concept...very useful//
fundamental idea help..
ma x..dual or band..sector strength useful..
weekly chart..good..
concept learning for free...www.ino.com
part time play..possible..
in metastock aroon helps..
for pro scan tool must...
by the way if u enjoy WINNING TRADE IN MIND...
AGGRESSIVELY DREAMER...

DONT JOIN IN all 3 VENTURE......observe other in brokers office.

some testing idea..........Some idea of trade science.
you have to work on them to use effectively.…

1]market model is like river…….trend model+ cycle mode

ma…basically lagging. Ema improves…

MOMENTUM. …..it helps to define turning pt with divergence study

I] continues….rare..
Ii]step up …may seen
Iii] jerk element….normally seen in volatile Indian market..

5 bar momentum. Has shown some predictiveness

COMPLEX VARIABLE
………………………..
measuring cycle period……..phase..

NOISE[RANDOMNESS]


sinewave…

trendline [instantaneous ]

remember market mode = trend + cycle


DESIGN AUTO SYSTEM [MECHANICAL ]

1]MONEY MANAGEMENT STOP

2] GROSS PROFIT – { COMMISION + TAX} = NET PROFIT

3]LARGEST LOSS….AV. LOSS
4]LARGEST PROFIT AV PROFIT..

5] NO OF WINNING CALL…

THIS U HAVE TO TAKE FROM PAST…

NEXT ELEMENTS…
LOGIC OR PREMISES…
FILTER [ FINITE CONCEPT]…WORK IN A RESTRICTION
Improvement from lagging indicator…TO ZERO LAG INDICATOR
ZEMA = EMA + MOMENTUM

ADAPTIVE MA…WORKS IN NOISY MARKET…

MESA + ADAPTIVE MA = MAMA

Simple signal…ema up as filter..
15 ema/ 18 ema…good…

CONCEPT OF MARKET SPECTRA/MESA
…………………………………………………..


trend



detrend




Reverse trend


Phase change….forward shift…optimization of this develop predictive mode…
Detrend +45 degree
It Help advance study…
Dema ,smoothening ema..throw out error of ma..

Visualization by technical indicator helps…

Or u may study independently TREND MODE…CYCLE MODE..
AT WHAT LEVEL MARKET/INDIVIDUAL STOCK @ PRESENT…

RSI..STOCKASTIC….HELPS TO INTERPRET FURTHER[ provided u know how to use them on case basis]

Ref…system element and modern ta..

As traders, we not only have to develop technical trading skills but also the emotional skills to trade successfully.

Emotional skills help the trader get through equity ‘draw-down’ periods and multiple, consecutive trading losses that ALL trading systems experience if traded long enough. These tough events in trading will test the emotional fortitude of any trader.

This is where confidence in your tested trading system and trading with money you can afford to risk will play an important role. If the trader did not test his or her trading system, how do you think that trader will feel after four consecutive losses totaling approximately 8 percent of the trading accounts equity?

Now, compound this with the fact that it is not money this trader can afford to lose. And, compound this again if the person is day trading and losing 8 percent in one day! And, the 8 percent assumes that you are controlling your risk so that each loss is only a net maximum of 2 percent per loss.

Now, after all this, do you think the trader will feel anxiety and stress? I think so! Do you think that stress will create a good environment for successful trading? I think not! Do you think the trader will be afraid of taking another trade for fear of another possible loss? Perhaps it might because this kind of stress can cause the trader to -second guess� him or herself and the trading system, whatever it is. Traders who trade with confidence will keep trading and not -second guess� themselves OR their trading system.
As a trader you want to eliminate any and all emotions while trading. This even includes emotions generated by having too many market opinions. Emotions never help the trader! Keep emotions in your personal life and away from your trading life.

The best way to keep emotions in check is by creating a stress-free trading environment where you accept equity �draw-down� periods and can keep trading through them in a stress-free state. You do this by testing your trading system or approach.

In my opinion, the best testing method is to -paper trade� for a long enough time that you come to know the best, and the worst, that your trading system produces. �Paper trading� (again, in my opinion) is better than computer back testing because it represents how YOU are actually trading the system or approach. Yet, it is in a stress-free environment because no real money is being used.

I always tell traders, that, if they are not profitable in paper trading,� they will not be profitable trading with real money. In other words, they are not ready to actually trade! It is far better to know that you are not yet ready then to jump in head first and lose your shirt!

So, the first step in getting a handle on your emotions is to create a stress-free trading environment that provides a solid foundation for you to apply your trading skills and, then, access how you are doing. If you�re the one creating your stressful trading environment, you are short-changing yourself before you ever even start actually trading

 

[oilman5]

About Volume and Stock Markets

Stock Volume is the daily number of shares of a security that change hands between a buyer and a seller.

It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller then the volume for that period increases by 100 shares based on that transaction.

Volume is an important indicator in technical analysis as it used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move.

Volume is a trader's best friend. Few technical indicators give the experienced trader a better feel for the minds of his fellow traders and investors. The heights of their greed, the depths of their fear, the loudness of their panic, and quietude of their ambivalence. All of these emotional states are seen with volume.
Volume also shows us the footprints of big money, and unlike footprints in the sand, these footprints are there for all to see...and long after the fact. More immediate and less ambiguous than any complex indicator, volume pinpoints extreme tops and bottoms -or the areas of them- with amazing accuracy.

Additionally, unlike many indicators, volume is applicable to every timeframe. How can this be? Simple. Volume is simply a measure of sentiment, of human nature. And fortunately for us, human nature is the one ever-present constant of the stock market. Never forget that fact. Once you have your own emotions under control as a trader, knowledge of this profound fact will guide you ever after as reliably as the Northern Star guides a lone sailor across a vast sea.

Why is volume a trader's best friend ?

Volume offers a complete picture of the market.

Volume can help determine the health of an existing trend.

Specialty volume for indexes and volume-based technical analysis are very good indicators for predicting index shifts.

Volume is the indication of supply and demand. It's defined as the number of units traded during a time period. This number is significant in that it supports the prevailing price trend.

The technical analysis of volume is a basic yet very important element of market timing strategy. Volume provides clues as to the intensity of a given price movement.

Minute-by-minute trading volume shows the reversal points of the market, and therefore when to buy and sell!

Currently when a change in sentiment occurs in the market, most people don�t find out until it is too late. This can be costly to an investor. Trading volume offers investors an invaluable tool to know when and where a change in sentiment is going to occur, and act accordingly.

Intraday volume helps you see where a stock is being repeatedly bought as it dips. Likewise, towards the end of a rally, a wide volume spike often signals that the move is at an end, at least short-term. If you weren't aware of it before, you should be starting to see why volume is a trader's best friend.

 

[oilman5]

1ST STEP WHEN U START
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All the knowledge in the world will not amount to anything without action.
And unless and until you take action you will also never know whether you can do something
The first step is critical.

You may know everything there is to know about parachuting but unless you take that first step, you will never experience what it means to be a parachutist.

In the same way you could read every book and attend every course on trading and paper trade for years, but until you step into the market you will never become a trader.
And until you take that step you will never make a dime.Knowledge alone is not enough. Massive action is necessary for success.
One of the most significant dangers for novice traders is procrastination.

The stock market is an endless source of information.
And there are huge numbers of people offering conflicting advice.
It is easy to fall into the trap of too much thinking and too much analysis that just leads to confusion. Or of wanting everything to be absolutely perfect before placing a trade.
The only way to learn how to trade is to do it.
The reality in the market, as in most areas of life, is that you can never know all there is to know. You
just have to take educated action. And then see what results you get. Fine tune and try again.
If you wait until all conditions are perfect before you trade, you'll never trade
Do not wait; the time will never be "just right".
you have analysed the trade according to our easy to follow rules and it fits the criteria, then you have
already done all the hard stuff.

It's time to place the order.But What if I Lose on My First Trade? "

If this happens to you, and let's face it, it is quite possible, what do you do?

Well, we would never tell you what to do with your money.
But we can however share with you what we do when we lose.

When we have a losing trade, we go back to the Rules and almost always there is something there we missed or did wrong.
Other times, it is just the market and there really is nothing we can do.

Losing is part of trading. And you must learn to accept it as just an aspect of the game. Because trading is just probabilities.
Like us, you will lose. No question about it.
But what matters is that when you win you win more than when you lose.
The proportion of wins is not what is important. It is the size of your wins compared to your losses.
However, if we lose three trades in a row we stop and take a break from trading for a few days.
Some common mistakes that you might be making if you have a losing trade are listed below.

Avoid the 10 Most Common Mistakes!

You can avoid the most common option trading mistakes if you follow these guidelines:
1. don't limit your strategy to calls - buy puts also and overcome the bullish bias
2. correctly determine the trend - up for calls, down for puts; sideways for covered calls from stocks.
3. buy enough time - at least 3- 4weeks, exit with 1 weeks to expiration
4. don't underestimate the effect of volatility
5. don't over commit your funds - you can lose 100%, so limit your exposure.
6. don't put all your eggs in one basket - diversify over several stocks and use both calls and puts… never try and strike it rich from one trade
7. don't trade without first determining a target profit and exit point
8. don't use market orders and don't trade at opening or closing time
9. consider the next expiration month if you can't find a suitable trade in the current month.
10. Underwrite call / put –when u understand , in present scenario – move is unsustainable ie. NO WAY further strength is no more , divergence exists and becoming strong.
It is wise to remember the following issues when trading options.

1. they have their own risk/reward
2. time depleting asset
3. higher leverage
4. less liquidity
5. can have wide bid/ask spread
6. slippage in fast markets
Options Benefits
1. they are cheap to buy
2. flexibility - can trade both up and down trends
3. versatile strategies
4. limited risk - can't lose more than you have put in
5. leverage
6. can use them to hedge
7. limits number of stocks to review
8. can generate good cashflow
9. puts have less risk than short selling.

With covered calls there are a couple of particular problems to avoid:
1] don't become overextended on margin
2] if the stock price drops beyond your stop loss, exit your position and sell the stock.

Placing the order is the easy bit, you've already done the hard work in selecting the options and analysing the trade, now place yourself in a position to reap the reward. Place the order.

If you only paper trade, you won't experience the emotional ups and downs that you will go through once you have REAL money at stake.
It is only then, that YOU begin to see how you trade.
It is only then, that YOU begin to handle stress to make money.

We are all different and you need to see how you react when you're winning and losing to see what sort of trader you are and where you can improve on how much money you can take from the market.
These are insights gained as a trader and we are happy to share them with you. Some of the topics that will be covered are:
Picking your indicators
Trading psychology
Achieving maximum leverage
How we learn new trading skills
Recognizing a trading "Bubble"
Using probabilities to maximize your return
How to use multiple time frames
Pre and Post Trading Checklists
Pulling the trigger on your trades
Using Support and Resistance

How to evaluate a trading system
Psychological Keys to Success

 

[oilman5]

Mass Psychology moves the market: Life is 90% mental and 10% physical.

Financial markets are the same, driven totally by human emotion. To be a successful trader, it is necessary to have a fundamental understanding that mass psychology of fear and greed is the biggest single factor you must understand if you expect to trade profitably on a consistent basis.

This emotional and psychological ingredient has absolutely nothing to do with the state of the economy, but it does have an overwhelming effect on the movement of the market.

The first rule is that rumors are the prime movers of the market. It's important to realize how quickly speculation of upcoming events can change the character of the current trend. Just the mention of inflation causes investors to rush for the exits in order to dump their holdings.

This fear causes a general market decline long before the economy changes. The market anticipates the movement of the economy and shows us in advance what we can expect with regard to corporate health, unemployment, interest rates and other financial trends. A crash in the market is usually caused by psychological, not economic factors.

One of the biggest problems most traders have is expecting too much from themselves initially. Setting outrageous goals is more harmfull than anything you can do. Trying to make $1 million on a $10,000 account in a year does nothing more that show you are in the clutches of greed and denial.

We recommend you start out trading 1 contract until you have confidence in your rules based system. You should develop the self discipline to trade until you reach a net two points for the day then stop. This approach will develop confidence in your system, give you some profit every day and teach you how to recognize your signals. Later you can trade larger, but initially you must learn the discipline and patience to only take the high probability signals outlined in our course.

The problems you face when not being realistic include:

Not believing you can lose

Over trading

Taking too much risk for your account size

Expecting every trade to be a winner .

 

[oilman5]

Things that can help you become realistic include:

Look for small consistent returns. Our goal is to hit singles and doubles not home runs.

Know you market and the average point per each move.

Practice with a Sim-broker against the real market for three weeks and keep a detailed log and chart of each trade
Treat your trading like a business and include all the income and expenses so you can evaluate the true potential of your approach
Want to be a Millionaire Quickly? Use Maximum Leverage
Do you want to be a millionaire but don"t know how to get there? One thing all successful and profitable entrepreneurs, real estate investors and traders use is Leverage! Maximum Leverage is the key to all great fortunes. With leverage, you can move toward your goals many times faster than without leverage.

Futures trading allows you take advantage of positive leverage, but it's important to protect yourself against negative leverage at the same time.

How many of these leverage principles are you using?

Other people's money

Other people's experience

Other people's ideas

Other people's time

Other people's work

There are five methods to gain leverage


1]Find a Mentor who can provide Perspective, Patience and Proficiency

2]Maximize the use of tools and new skills provided by experts

3]Systematize your approach to everything by using checklists

4]Develop a Mastermind Team of like minded people who can contribute new ideas and optimize your approach.

5]Build a Support Network that will help maintain your positive attitude and support your goals.

If you are not using the five leverage principals listed above, the first thing to do is take a full personal inventory. After you have set your goals in the area that you intend to pursue, begin by eliminating everything that does not materially or psychologically contribute to the achievement of that goal. This will give you additional time and "clean out your closet" so you have eliminated most major distractions.


Next, add all five methods for gaining leverage. Finding a mentor will be the most challenging, and the most rewarding. You may find one by attending seminars or taking courses from experts in your field. Remember that this has to be a two way street so that the mentor receives equal value in return for helping you. Your Mastermind group may provide the support that your require.
Finally, setting up a systematic approach to increasing your knowledge base, daily schedule and practice sessions will reap benefits far beyond the time you invest.
Most importantly, you must start immediately.
DO IT NOW! DO IT REGULARLY! AND DO IT WITH INTENSITY!
How We Learn New Skills ?
The problem for most people who have traded for any period of time is that the losses they took learning to trade are a huge mental handicap to their future success. If you could erase memories of these losses from your subconscious and act on what you have learned since beginning a study program, trading would be much easier.

One of the most important concepts we have ever come across is the concept of "How We Learn New Skills".
Learning can be described as a four step process that will be covered here in a systematic approach. You can think of the process as a ladder and may want to invert the following explanations so you can visualize the process (Stage 1 is the first step of the ladder).
Unconscious Incompetence: You Don't Know What You Don't Know! Your first attempts at trading fail. It looked so easy!
Conscious Incompetence: You Know That You Don't Know! The search for the Holy Grail of Trading begins. That mechanical system that looked too good to be true failed. So did the newsletter and the chat room. Then you begin to learn for yourself.

Conscious Competence: You Know That You Know! You finally learn an approach well enough to make some money.

Unconscious Competence: You Don't Know That You Know! You are "trading in the zone" and do it automatically and effortlessly.

Clearly your goal is to create the shortcuts you need to get to stages three and four as quickly as possible. Here are several tips that helped us solidify our "vision" in how to execute our trading approach.

Your mind can be programmed to "hard wire" action patterns through repetition, if that repetition is consistent. For example, if you keep your charting program set constantly to the same colors, same indicators and same setup, you will have much more consistent success than if you change things constantly (the programming has to start over)

It may take up to 50,000 repetitions to totally automate a response. Think this is a lot? Don't be discouraged. Think of professional athletes and their practice routine. You can also look at other routines in your own life to see how you made the transition to step four in any of your competencies.

Using a SimBroker and monitoring your progress on win-loss ratios, profitability and consistency is one way to solidify recognition and action using your signals.

Practicing good money management in this practice session will help you automate your own system. When you do finally trade with your own funds, you will have mastered and automated two thirds of the equation. Your final goal will be to master your emotions.

 

[oilman5]

How to Recognize a Bubble
"Bubbles are invisible to those inside the bubbles" and we have been through one of the biggest economic bubble in history, but none of us saw it because we were inside that bubble. After the "Tech Wreck" of 2000 and other chaotic events, it's important to be aware of "Bubbles" and the "Stage of the Bubble" in order to get on the right side of the equation and to profit.

Previous Bubbles have included:
The Japanese "Take Over the World" Bubble of the late 1980's
The Asian Currency Bubble of the mid 1990's
The Internet/High Tech Bubble of the late 1990's
The Residential Real Estate Bubble of 2000-2004
The coming Inflationary Bubble caused by the U.S. Government's attempt to mitigate the effects of the crash of these Bubbles and 9/11.
How Bubbles Grow: 12 Easy Steps

A believable concept offers a revolutionary and unlimited path to growth.

Surplus of funds and lack of opportunities lead to buying or investing in anything available.

An idea is complex and cannot be totally explained or related to an investor.

The crowd imitates the leader. All Aboard! Even the gardener has a tip!?

Prices fluctuate from traditional level to overvalued level, THEN to all new ground and all time highs.

New levels are sanctioned by experts. "We are in a new Paradigm!"

Fear of missing the boat takes over. Cloning of the idea occurs as many new overvalued competitors enter the market.

Lending practices are eased. Money flows like water to anything or anyone with a new idea.

Cult figures emerge for the new paradigm. The media promotes lifestyles, not substance.

The Bubble lasts longer than expected. Critics are dismissed. The last suckers are sucked in.

Fraud emerges as partly responsible for the bubble as the first cracks show in the bubble
Finally, everyone has a reason why it cannot continue. But nobody dumps, and all hold onto their profits. No new buyers. Market stalls.

How a Bubble Bursts

A continued new supply of lower priced offerings occurs from rising prices. New IPO"s get bigger and bigger .
There is a rise in interest costs. The Government declares "Excessive Exuberance" and tightens credit too quickly.
Prices collapse and everyone heads for the exits at the same time. With no more buyers, prices hit free fall.
Fraud is uncovered in many diverse industries, and in monitoring and auditing agencies. This leads to more selling.
Governments intervene and give investors time to get out before the real decline.


Rules to Live By to be a master
Do not extrapolate the future from the present.
Trends continue for a long time (2-5 years) and then suddenly reverse chaotically. Witness the Tech Bubble.
Intermittent secondary corrections occur at Fibonacci Levels of 38%, 50% and 62% that result in classic Bull or Bear Traps.
Bottom picking begins several different times, trying to restart the Bubble, but to no avail. Massive losses occur to professionals trying to manipulate the markets.
Finally, everyone recognizes that "Trends go further than you expect, and last longer than expected." Everyone gives up and sells.
As the volume of the decline decreases, a slow recovery begins.
How to Use this Information

Whenever you are involved in owning, investing or trading anything, review these macro-economic lessons. They may save you TONS of money and make you a TON of money in the long run.

All stocks, commodities, technologies, currencies and real estate are subject to local, national and international Bubble Behavior. Whenever you hear the phrase "you can"t lose on this...." Remember to start running the other direction.
Probability of Success
The probability of your success in any particular trade or series of trades is dependent on how you use your charting program and technical indicators.
Understanding what your indicators are telling you is another key point. Study the formulas and compare the differences between MACD, CCI and a Stochastic indicators of the same length. Look at them visually as well as mathematically. Visually look at the differences between a normal, exponential, smoothed and weighted indicator.
Study until you know what each indicator is telling you.
One interesting concept is to actually calculate a few bars of these indicators from actual data in order to really understand what the indicator is doing and how it reacts to gaps, low volatility and regular price swings. Be sure to run the calculation until you lose a big bar as well. This skewing factor will let you know why many people distrust indicators. They do not understand the limitations of indicators in certain volatile market conditions.
Indicators are derivatives or second tiered smoothing of price action. Inherently, all indicators are lagging in one way or another. It is important to understand how they relate to price, potential future movement of price and how they are affected by past price spikes.

We tend to trade by watching only our indicators. Watching price only,(if u r new) you can become hypnotized by the noise and miss the real moves. We consider the following four points whenever we are about to make a trade.
The number of indicators moving or about to move in your direction.
The angle and rate of change of these indicators.
The position of the indicators above or below 50% or the 20/80% level for oscillators.
The likelihood of continuation based on approaching Support and Resistance, length of previous move and the time of day.
If we see three indicators moving in our direction, we just say to ourselves "1, 2, 3, Go". It is as simple as that