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Trading Educators Blog

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Aug
13

What Holds You Back from Becoming Financially Independent?

Let's look at some key factors that stand in the way of many people seeking financial independence. 1. The "Dilly Dally" effect - Too many of us are always putting off the necessary changes that need to be made regarding how we manage our money. I often talk about automating money from your paycheck into a brokerage account each week so you are positioned to get money to work for you in income-pro...

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  645 Hits
Aug
05

Forcing Things to Work

We've all faced situations in our lives where things just weren't working out. Instead of walking away from the situation, we sometimes choose to try and force a fit. Whether we're talking business, career, or investing, it's often more prudent to cut losses early on -- or to avoid a situation altogether. Imagine you've been watching a certain stock fall in price over a long period of time. You ma...

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  575 Hits
Jul
29

Day Trading is Like Guerrilla Warfare

There are only two kinds of day traders, the quick and the dead. Day trading is like guerrilla warfare. The quick, seize opportunities immediately, move their stops to break even as soon as possible and capture as much money as is possible in the shortest amount of time. The dead are never quite sure when and how to enter a market or where to get out. These dead turn into "Three Month Wonders," be...

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  606 Hits
Jul
23

Trading is NOT Investing

I'm writing this from the perspective of a trader. Traders encounter problems and situations quite different from those of an investor. Traders generally do not hold positions for many weeks, months, or years. Many traders do things that aren't in their own best interests—even though common sense warns of the consequences. Why do smart people make such mistakes? And how can they reverse the patter...

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  800 Hits
Jul
15

Understanding

I trade without indicators almost all of the time. If, when, I choose to use an indicator, it is done so with complete understanding of what the indicator is showing me and what it is good for. There are countless times when I've seen traders looking for confirmation by using multiple indicators that measure the same thing. Can you get true confirmation by using RSI to confirm what Stochastics, %R...

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  595 Hits
Jul
08

Accumulation / Distribution

What exactly is accumulation and distribution? It sounds simple, but I've never been able to figure out what they are talking about! There are four market phases containing all price action. The accumulation phase has low range and volume and occurs at the bottoms of a prolonged bear market. We saw such a situation in the past in gold, which made a long-term bottom after a 21-22 year secular bear ...

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  672 Hits
Jul
01

Trading Soundbytes

Sometimes I write a soundbyte that elicits a good response from our readers. A recent soundbyte was one of those, so I blended together the gist of what some of you wrote, and many thanks to those of you who did. The article itself is posted below in blue italics. "Why are losses such a big deal? I can tell you why. In your book Trading Is a Business, you said that once we enter the market, we are...

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  844 Hits
Jun
24

Mechanical Systems

Here's a question that came from one of my students, "Joe! Have you ever found a mechanical system that really works?" Most traders move from trading system to trading system, and trading method to trading method. Over a period of time, they may find one that suits them--one that is comfortable to run, and tests well either via back-testing, or in real-time. Some traders never stop looking for the...

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  716 Hits
Jun
17

The Right Place at the Right Time

This is an oldie, but goodie recollection from my trading days. Over a three-day weekend, Waldo received a call from his friend Jim. "Hi Wally, did you take a look at Google last week?" Waldo replied, "It was a rough week for my short positions. I didn't anticipate the buying surge and it hurt me a little. No, I didn't look at Google closely. I was caught up trading my own positions." Excitedly, J...

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  531 Hits
Jun
10

Elliott Waves

I have been corresponding with a mathematically oriented gentleman who is quite brilliant in his approach to the markets but who is very close to going off the deep end. He wrote me the following email: "I have given the 45 degree - phenomenon a lot of thought. I pretty much would like to know how you figure out the inner workings. "What I think is: "(a) The route of the 45 degree cuts the Elliot ...

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  584 Hits
Jun
10

Is it true that selling a market when it is limit up is usually a great strategy ?

This "brilliant" strategy stems from the idea that selling a market at limit up, may result in the trader gaining two limit moves in his favor while theoretically not losing any money the day of entry. I think is that this is an absurd idea. I don't advise this high risk approach as a trading tactic. Keep in mind that most markets that remain limit up on the close, will open sharply higher the nex...

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  367 Hits
Jun
03

Check Tick and Contract Volume

Only 27% of all visitors gamble in Las Vegas to make money. What percentage of market traders have a similar attitude about trading stocks or commodities? It may be very close to 27%. Anything less than the best effort to win is unacceptable. If traders want entertainment they should go to a good movie, or buy a cat. Traders should stay out of the market unless they are totally comm...

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  603 Hits
May
27

What to look for...

Hey Joe! Has anyone that you know put together a compendium of what to look for when you first start out trading? Not that I know of. But consider the following: As a trader you are in a contest. Your strongest opponent has plenty of capital. He follows a program and he does it without emotion. He is totally aware of the fact that no one knows where the next tick will fall. Whereas he usually...

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  571 Hits
May
20

Control Overconfidence

When traders are overconfident, they falsely believe that they can trade beyond their skill set. Overconfidence in trading usually reflects an exaggerated view of one's abilities, which can be fatal. Trading is an area in which accurate and realistic perceptions of one's skill levels are crucial. It's interesting to observe that traders can be especially overconfident when they feel uncertain abou...

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  587 Hits
May
12

Dump Past Losses

What are your worst losing trades? Do they haunt you? It may be difficult at times, but you have to forget about the past and think only of tomorrow. Make sure you keep a trading log. It's important to learn from your mistakes, and to the extent that you can do that objectively and unemotionally, you don't need to worry much about past losing trades influencing your current trading decisions in ne...

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  643 Hits
May
06

Losing

I think you would agree that most traders are risk averse. We don't like losses, and we'll do almost anything to avoid taking them. Losses are painful, and there's a strong need to seek out pleasure and avoid pain. It is easier to avoid admitting a loss, and traders tend to come up with many ways of denying they have a loss, such as holding on to a losing trade and hoping it will turn around, or k...

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  641 Hits
Apr
27

Trading System

You've done your homework. Countless hours of seeking out the right guru (or piecing together your own system). Weeks of monitoring your guru's daily trade picks (or paper-trading and back-testing your homemade system). You've done it by the book. No seat of the pants trading for you! OK, now you're confident. It's time to put your money where your homework is. You've had your coffee and your firs...

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  638 Hits
Apr
22

Evaluating Your Trading

Taking an honest evaluation of your own strengths and weaknesses is crucial to becoming a consistently profitable trader. If you can't identify those habits which continually make (or cost) you money, then you're just shooting in the dark. It's extremely important that you know things about yourself such as: * The time of day you are most profitable. * The position size that works best for you. * ...

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  583 Hits
Apr
15

Find Positive Values from the most Negative Circumstances

Three psychological traits prevent traders from becoming consistently successful: fear, anger, and guilt. Fear blocks the trade decision-making process due to worry about negative events that may or may not occur in the future. Guilt blocks the trade decision making process with unresolved concern about something that happened in the past. Anger is an emotional response to guilt, fear, the indecis...

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  686 Hits
Apr
09

Tick Speed and Direction

How a market does what it does, is just as important as what it does! When day trading, watch closely the way prices tick. If ticks are jumping, someone may be taking the market up or down. If the market ticks fast, it may be a clue to an upcoming fairly good-size move. Watch volume in conjunction with tick speed and direction. Fast ticking is often accompanied by an increase in volume. If prices ...

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  682 Hits

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.