Everyone trades a little differently. The trading method
outlined below is MY personal approach to trading. This method
has worked for me for the last 20 years, and has helped me to
avoid big draw downs since the mid 1980's. My trading strategy
has helped me to make a good living trading.
It takes some time to learn my method of trading because it's
based on tape reading and getting a "feel" for the market. This
is *not* about a fast,easy formula to "get rich quick" while you
sweat out every trade. Instead, this is about developing
confidence and trading consistently without fear and without big
draw downs.
Here is my 10 Step Approach to Learning My Style of
Trading:
1. Practice exiting trades at break-even, using a one-tick
target, a two or three tick soft stop (mental stop) and a 1.5
point hard stop. Never *allow* the market hit your hard stop.
Exit by moving your target toward your hard stop, not by moving
your hard stop towards your target. With time, all of this must
become a reflex. You won't always be able to keep your losses
down to 2 ticks, but only on rare occasions should you find
yourself letting the market hit your hard stop. ("Rarely" means
only about once every 50-100 trades after you get the hang of
it.)
Even though your entries won't be good enough in the beginning
to make a profit trading these tight soft stops, your entries
will gradually improve until you turn the corner and become
profitable.
Learn exits and entries separately. Don't let the one
influence the other.
Taking losses this way takes dedication and discipline, so
stick with it. It's the key to confident trading. If you never
take large losses (and rarely medium size ones), the fear of loss
pretty much goes away, and your confidence grows. Especially
after your entries improve enough to support a "scalping" type
exit strategy.
2. Every trade *in all market conditions* begins as a scalp.
Let me clarify this: if you're in a choppy market and you're
looking to get small gains, like a point or so, manage your
initial hard and soft stops *exactly* the same way you would in a
quick trend or any other type of market. That means keeping
losses as close to 2 ticks as possible, taking lots of break even
trades and exiting every time the market doesn't give you
*instant gratification* (within a minute or so).
No matter what the market is doing, you must demand that it
moves in your favor right after you enter, otherwise you get out
as close to break even as possible. This means you'll be closing
a lot of trades near break-even within the first minute. This is
the foundation of learning to trade for consistent gains.
3. Don't worry about the commissions on break-even trades. If
you do, you'll hold on to losing positions, begging them to turn
around for you. This is called *hoping.* In this business, this
type of *hoping* is the kiss of death. Your money-making trades
must move your way in the first minute or less. When trades don't
act right in the first minute, most of them will hit your hard
stops.
So don't get hung up on the fact that your broker loves you.
Who cares if he/she makes a living?
Your concern is *limiting losses*. I care more about this than
anything else in trading. (Well-timed entries make my tight soft
stops possible, so they're almost as important as the exits.)
4. Practice your entries until your timing is so good that you
can *reasonably expect* the market to go your way immediately,
before it goes more than 2 ticks against you. This is not easy at
first, but if you stick with it, you'll get it.
5. Practice fading the emotional extremes on your entries.
(Fading means entering in the opposite direction of the market's
last move.) When an extreme NYSE-Tick (often above 1000 or below
-1000) occurs at the same time the market accelerates into a
support or resistance area, look for a price stall or reversal
and fade the move. Fade the emotion.
6. Rarely, if ever, *chase* the market on your entries. Wait
for a pullback to get onboard a trend.
I favor shorts over longs... I can get out of a short position
quicker than I can get out of a long position. I don't know why.
I like to say that I "see gravity better than helium." In the
rare strong-trending markets where I may chase an entry, it's
going to be a down trend, not an uptrend. I don't trust up trends
enough to chase them. Maybe it's just a personal quirk and maybe
not. I honestly don't know.
But it's interesting to note that most (not all) professional
traders I've met are Bears and prefer short positions over longs.
You should give it some thought and find out which direction
works better for you. Are your losses bigger on shorts or longs?
Specialize in one direction and trade the other direction only
when things are looking real good.
7. Never let a gain turn into a loss. This will mean getting
out of most trades a little (or a lot) too soon. You just have to
live with it. Swing for home runs (greed) will ruin your trading.
There is no mechanical formula that I know of, (such as, "move
your stop to break even after you get 3 ticks gain") that will
work. You have to develop a feel for how the market is acting at
the moment, and use your feel to reduce your target or advance
your hard stop. This comes with experience.
8. Develop a feel for the big picture movements of the market,
not just the intraday action. Use the end-of-day market internals
to analyze the market's mood and develop a daily bias.
9. Practice does *not* make perfect. Only *perfect practice*
makes perfect. I learned this in my younger years, pursuing a
professional baseball career. Perfect practice will keep your
losses smaller than your gains in the trading business.
There are a lot of things involved in perfect practice. When
you get tired, or when the phone rings, or whatnot, *don't
trade*. Always, *always* exit trades exactly the way I've
outlined above on every trade in every market condition. Always
*wait* for your pitch, the well-timed setup for entering. Don't
practice sloppy entries just because you're bored. Only perfect
practice will help you. Anything else just amounts to practicing
bad habits.
10. Get a mentor. I traded for 6 years before I learned to
keep my losses small. My trading turned around immediately after
I met my mentor and talked to him on the phone for one week. Is
there any serious profession that you can learn without a mentor?
Maybe there is, but I don't know of any. It's certainly not
trading.
Mike Reed is author of TradeStalker's RBI Trader's Updates. He
has been trading the Market for 23 years. His support and
resistance numbers have been published on the internet since
1996. Mike's nightly support and resistance zones are specific
and incredibly accurate. He offers an unlimited free trial of his
nightly TradeStalker RBI Trader's Updates. He will be offering
"live" training online as well. http://www.TradeStalker.com
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This January Azerbaijan's exchange currency trading totaled $82.5 million Azerbaijan Business Center Baku, Fineko/abc.az. The Baku Interbank Stock Exchange (BBVB) has renewed statistics of its operations. BBVB reports that in January 2012 the nine participating banks concluded 28 deals in 36 trading sessions in e-trading system (BEST).
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Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Bank of England and ECB Hold Steady, Indonesia Cuts CNBC.com [CNBC] ----------------------- MULTI CURRENCIES VS THE DOLLAR Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency ...
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