Trading Educators Blog

Hey Joe! What is Open Interest and how can I use it? First let's define what it is. Open Interest is the total number of open or outstanding options and/or underlying asset contracts that exist at a given time. Open interest is commonly associated with the futures and options markets, where the number of existing contracts changes from day to day. Open Interest is a strange statistic. It tells you...

Question by a Trader: Joe I am new to options and I'm confused about some of the terminology. What exactly do they mean by "Strike Price?" The Strike Price is the price at which an option can be exercised, and refers to the price of the option's underlying asset. In a call option, the strike price is the price at which the option holder can purchase the underlying asset. For a put option, the...

Mr. Ross, if I enter a spread long wheat and short corn, both for the same month is that a vertical spread? What if I spread March soybeans against November soybeans, is that a vertical spread? Not really! Vertical spreads typically apply to options not to trading in the outrights. If you look at the definition of a vertical spread, you will see that neither of the spreads you described fit what i...

Hey Joe what exactly is day trading? Let's face it, all orders are placed during the day, but placing an order during the day doesn't make me a day trader. In fact, lots of times, I am in and out of a trade in a single day, but only by circumstance, not intention. Day Trading is defined as the buying and selling of an underlying asset within a single trading day. This can occur in any marketplace,...

Joe, what does it mean to be a short seller? Very good question. Here's a definition of selling short as it applies to the stocks and ETFs: Short Selling (also known as "shorting," "selling short" or "going short") refers to the sale of a security or financial instrument that the seller has borrowed to make the short sale. The short seller believes that the borrowed security's price will decline, ...

Joe do you look at volume using a Histogram? Wouldn't it be better to chart volume as an oscillator? A Histogram is a graphical representation that organizes a group of data points into user-specified ranges. It is similar in appearance to a bar graph. The histogram condenses a data series into an easily interpreted visual by taking many data points and grouping them into logical ranges or bins. H...

Joe's Trading Tidbits Can we believe the reports the government puts out? Can we use them in our trading? Since I am not much of a fundamentals trader, I tend to stay away from government statistics. To me, they have very little value. As far as I can see, they are full of errors. Let me explain. What's wrong with traditional statistics? They fail to measure what is really going on in the economy ...

A lot of people wish they could trade more contracts or more shares. But I try to tell them that there is a point of diminishing returns and diminishing productivity – two laws of economics. People have an erroneous impression that, if they could only trade well with a couple of contracts or 100 shares, they could do even better with 100 contracts and thousands of shares. However, that is not quit...

Risk Management: Protecting Your Account Balance and Your Emotions The markets go up and down, and so will your account balance if you are not careful. Winning traders manage risk. There are many ways to manage risk. Some traders patiently wait for high probability setups, while other traders limit the amount of money they risk on any given trade. What strategies do you use to manage risk? How do ...

Do you have trouble following your trading plan? Many novice traders do. They develop a plan with specific guidelines as to when to enter and when to exit. The night before it all seems so clear, what they are going to do and how they are going to do it. But when the markets open the next morning, they are persuaded by a little voice to throw the plan out the window. It's a common ailment, and man...

In the trading business, it's prudent to take everything you hear with a grain of salt. Our field is full of false prophets who claim they can make you rich quickly and easily. Realistic skepticism is healthy. For example, there are many traders who made huge profits in the late 90s, and now claim that they can help you live comfortably by trading a $10,000 account. How do you do it? It's easy, th...

When you wish upon a star, what do you wish for? If you're like most people, financial freedom is one of the first things on your list. If you had a million dollars, think of what you could do. You wouldn't have to ever work again. You could just sit on the beach and relax. But if you're like most traders, you couldn't stay away from trading even if you had infinite wealth. What else could you wis...

Hi, Master I have a few questions that I don't quite understand, about Instant Income Guaranteed. Please explain to me, thanks. Q: "Only take the trades you can afford, keeping your put cover ratio at the advised strict minimum of 50% (80% preferably)"----Could you tell us how this data (50%-80%) is measured? A: If you have a $100,000 account you would use only $20,000 of it for trading IIG if you...

After months of trading in a slump, Jake tells his best friend, "I think I want to quit the trading business. Why am I doing it? There must be a better way to make a living." Have you ever felt like Jake? Trading can be stressful and demanding. It's understandable to feel like throwing in the towel at times. If you are ready to find a new job, or if you just don't seem to have the same passion for...

Q: Hello! I bought the Trading with More Special Set-Ups Webinar Recording. Do you think it's a good idea to trade on EURUSD, GBPUSD, USDJPY, AUDUSD, USDCAD, EURGBP on 1h chart with the rules given in the webinar? A: Yes, you can trade all Forex with the special setups. As a matter of fact, you can also trade futures, CFDs and stocks with these same rules. Q: Take Profits 1:1 or 2:1 - which will b...

Dear Traders,  After going through my email, I came across a personal message from Joe Ross to his students and wanted to share.  I did make a few changes to omit outdated information, but other than that, below are Joe's words.  Enjoy! ~ Martha Ross-Edmunds From: Joe Ross' Personal Letter - Trading EducatorsSubject: Personal Message from Joe Ross at Trading Educ...

Are traders naturally born to trade? Can anyone learn to trade? What is the ideal psychological profile of the winning trader? At Trading Educators, we have tried to find answers to these questions, but definitive answers are often elusive. We keep trying, though. We've surveyed traders and interviewed them. And we have tried to analyze the interviews made by others. Our conclusion: There doesn't ...

You must risk money to make money. It is sad, but true. You cannot possibly make profits in the markets unless you take some risk. Many people hate taking risks, especially with their money. However, risk is a part of everyday life. We take risks all the time, even when we complete the most mundane tasks, such as driving our children to school, or flying home to visit our family for holidays. We e...

As a beginning trader, Chuck had just put on his tenth trade. He was still new to trading, but he was optimistic that he would be successful. He wanted to succeed. He thought, "I want to prove that I'm a good trader. I hope I do well on this trade. The outcome is critical to the rest of my trading career." Chuck's thoughts and feelings are understandable. Whenever we start a major endeavor - start...

A bird flaps its wings. A storm strikes miles away. According to Chaos Theory, a seemingly irrelevant action can precipitate, and contribute to, a major event. The right set of factors comes together, and a major event takes place. It's easy to imagine an unlikely chain of events that may initiate a market move. A housewife attends to her crying child who has tripped over the newspaper, and in doi...