Trading Educators Blog

I guess from time to time I would say this somewhat differently, but what comes to mind is as follows: Here are five steps to becoming a successful trader: 1. Focus on trading vehicles, strategies, and time horizons which suit your personality. You need to be comfortable. 2. Identify non-random price behavior, wherever you can find it. 3. Absolutely convince yourself that what you have found is st...

A market may be nervous when it goes into consolidation. It may be nervous when you see lots of dojis and flip-flopping – opening high one day and closing low, and then opening low and closing high the next day. A market may be nervous when it is backing and filling – opening on gaps and then filling in those gaps, or trading way up or way down, only to finish back where it started, or at an extre...

The primary job of a market is to fill orders. Everything else that happens is derived from the reality of order filling. You enter a market with the purpose of having your order filled, and there are certain market participants who consider it their job to make a market — they do this by filling orders. Because day trading involves very short-term order filling, often many times per day, it is es...

Why do traders bail out of some markets to go to other contracts? Wouldn't it be better to learn one market and stick with it? The main reason traders bail out of a market is that they are not making any money. This has happened in various ways. In the currencies in the 1990s, for instance, lot sizes became too big for the market movers to fade (take the opposite side). The big players did not wan...

Take note the yearly ranges for the commodities you trade. What are this year's highs and lows? Are they higher highs, lows and closes compared to last year? Does the close confirm the price action? What is the long term trend? How does this year's average price range compare to the last three years' average range? Should next year have greater volatility than this year? How much in dollars was th...

Rather than seeking miracles from mechanical trading systems, I suggest seeking methods and setups that are proven to work most of the time, and learn to stop trading them when they are not working. There are methods and setups available that work from a medium to very high percentage of the time according to how much you try to extract from them. At Trading Educators, we believe in seeking small ...

Would you agree that the most annoying event in trading is the running of your protective stop? Did you know there is a way to prevent this from ever happening? Do you find that you miss a lot of really good trading opportunities because you simply do not have sufficient margin to allow you to take advantage of these opportunities? What if I could show you a way to be able to leverage your margin ...

Hey Joe! I'm an intermediate-term trader in the e-Mini S&P. I'm trying to fill out my trading method so that it is a complete technical trading approach. Do you have any thoughts on this? Following is a technical trading answer: A complete trading approach should equate about two or three weekly intermediate tops and bottoms per monthly major top and bottom movement. About the same number of s...

Grant and Napoleon had an ability that separated them from other generals, the ability to maneuver troops and supplies to their most effective placements under rapidly changing circumstances. Traders should learn how to manage their funds, rework stop placements, and change their position size with changing market conditions. Conducting warfare and trading have many common factors. All modern warf...

Restricting your trading exclusively to one market may not be your best choice. Here are some reasons why: You must not trade under pressure. Trading involves being eclectic and choosing only the best, most clear-cut trades in liquid, not overly volatile markets. It is sheer folly to trade feeling that you have to make a certain amount of money each day, or that you have to make up for a previous ...

I recently received this letter, and thought you might like to see how another currency trader approaches the markets. "I approach the markets as a game of probabilities. As far as I'm concerned, that's the only way to navigate the currency markets. "What I mean by a game of probabilities is this: I do as much as I can when figuring my fundamental and technical analysis. I read and study all I can...

Do you ever dream about winning the lottery? There are actually people who have such good luck that they repeatedly enter contests and win. They win so often that if they wanted, they could count on winning, even though they are essentially trying to capitalize on chance. They develop a "lottery mindset" in that they approach life by counting on rare chance events. The rest of us aren't so lucky, ...

From time to time, questions come up about magic indicators, and mechanical trading systems based on such indicators. People really believe in them, are thoroughly confused by them, or hate them because they cost so much money and very often return so little. Is there a right way to trade mechanically? I believe there is. There are two approaches. One is to mechanize yourself, literally become a h...

Containment is something akin to support and resistance. It is there but it isn't there. All of us have seen prices fall through so-called support like a hot knife passing through butter. We have all seen prices soar through resistance like a run-away balloon. Actually, support is a place at which a lot of people are willing to buy, therefore, buy orders tend to group at support. This temporarily ...

Do you ever wonder why there has to be a spread between what you can buy an option for and what you can sell it for? The simple answer is someone needs to make money and that someone is usually the market maker. Many option traders don't even think about the bid-ask spread. They don't even try "middling." Middling the market means you try to get close to the middle of the bid price and ask price. ...

There was a time when investors could diversify their risk by owning several different asset classes, like stocks, bonds and commodities. They could rest assured that if one asset class went down, other asset classes would go up to compensate. This strategy worked well for decades. But over the past few years, things have changed, and I think they've changed for good. So, who's to blame for this s...

Have you ever thought about what a price chart really represents? Is it just the movement of price that is seen there? For every price to actually post, there must be a buyer and a seller. Price charts are actually psychographs that measure traders' beliefs of present and future values. Traders are emotional and the market price is not always right – especially at extreme tops and bottoms, where e...

Did you know that there are professional day traders who reverse their positions about 60% of the time when they take losses? Why do they do this?? The market should not have technically reached the exit price, which is placed where the intraday market trend may have reversed the short-term trend. Consider a market that moves a three-day average range above the opening price, then breaks sharply t...

When prices are in a trading range, count the number of closes above or below a specific price near the vertical mid-level of the trading range. If 70% of the closes are above the mid-level price and the market cannot rally and close above reaction highs, a severe correction may be imminent. If a market breaks and cannot close below reaction lows, then expect a rally to carry prices above the reac...

Thanks for your prompt reply and explanation Joe. I was thinking to do straight call/put to pre-define my risk. Follow up question please. If I buy a call for 30 days and close out the option in 15 days, Do I get credit for 15 days that I did not use? The answer to your question is no! You do not get credit for the days you did not use. In fact, you penalize yourself. You paid for 30 days, not 15....