Strangle Options Strategy » Emini

Developing A Trading Plan – Pt 4

admin — Mon, 25 Jan 2010 08:51:04 +0000

Testing a trading Plan
Before they begin in the market, some traders find it helpful to ‘paper trade’ the market for a while. This involves taking ‘hypothetical’ positions in the market and then monitoring these to see what the outcome will be.
Before doing any physical futures trading at all, the first move is to start by paper trading. A trading plan must be able to be measured. E.g. “I’ll risk no more than 2% of my capital on any given trade”. It can’t say “I won’t use too much of my equity for margin.”
Traders whose systems are more technical in nature will ‘back test’ their system against historical market data to determine the success of the system in that particular market. A trading system can be as simple as a few rules or as complex as a Black box technical analysis package. The key is that the system matches your personal trading style. You can either create a system from scratch or buy a readymade package. Either way it is advisable to test the system with dummy trades before doing the real thing. Some experts recommend 10 years of back testing with historical data (black box systems) where as others recommend a shorter time span for the testing of a simpler system. It is very important to perform your own testing on any ‘off the shelf’ systems, and not rely purely on the seller’s recommendations.
While all of these techniques are beneficial, prospective traders need to be aware that simulated trading – no matter what its form, does have its pitfalls.
Experienced traders will often say that there is no substitute for having real money in the market. Depending upon traders own discipline, the way they react in this circumstance could be very different compared to when the trade was purely hypothetical. In addition, while a market’s past performance can provide some general clues as to its price behavior, there is no guarantee that this will be repeated in the future.
Individuality
Trading plans are individualistic, based on such factors as personal experience, education, risk capital and tolerance toward risk. For this reason, trading plans may differ greatly from one trader to another. A trading plan may work better with some people than others. Consequently, you must develop a trading plan that works best for you. Among other things, this requires patience, rigid adherence to the rules that you establish, meticulous record keeping of trading performance (which provides valuable feedback) and an open mind to try new methods. There are no guarantees of profitability in the world of futures investing, but the discipline of a trading plan goes a long way toward making you a successful futures trader.
Now let’s look at some of the
SAMPLE TRADING PLAN (GENERAL SUMMARY OF MARKET ACTION)
Trading Philosophy / Trading Psychology:
I believe that Financial Markets are 100% psychology driven.Price patterns are a reflection of the collective psychology of a large number of traders.Trading psychology also a major factor in my own trading. It is identified as my trading state. Fear and Greed are powerful enemies to profitable trading and I can overcome this by training my subconscious mind to be focused on following a defined trading plan versus focusing on wins and losses.I am a disciplined trader committed to trading only for profit strictly adhering too my trading rules, plan and standard operating procedures.My style of trading is aggressive with my preference to trade directional, and pattern set ups. I will trade full time as a day trader and also seek other trading opportunities especially dealing with Options.I will not have a bias as to where the market may or may not head, I will react to the price, patterns and my tools as they present themselves applying my trading rules.I trade what I see… Not what I think!I understand that I cannot control the market, I can control only myself. My trading state and mindset is the key to the success of trading. I must be rested, fit, healthy and mentally alert. Accepting the stress of trading by keeping focused, calm, disciplined and not distracted is essential for being a professional trader.Losses are acceptable, not desirable but I can minimize them with compliance to the rules, especially avoiding impulse trades and never being in a trade without a plan or a stop.Trading is a business and I am here for the profit.
Golden Trading Rules:
Check for Stops and targets resting in the Market then update or remove them.Look left for previous structure.Always Set a Stop Loss. Always!Maintain Discipline.Avoid impulse trading. Trade with a plan and stand by the rules.Identify, Predict, Decide and Execute (IPDE).Do not enter a market within 15 minutes after a news event.Get S.E.T. (Stop, Entry, Targets) before every trade. (Know where and how to Exit…)If I lose my ISP then call my Broker immediately and go flat, then work on the technical challenges to get back online.Keep it simple.
Money Management, Risk Reward and Financial Goals:
I will trade 4 contracts as a unit maximum for the S&P e-mini.I will trade 3 contracts as a unit maximum in the Russell e-mini.For every $5K that I add to my account I can add a contract to a unit. If I reduce my account by $2K then I will reduce the contract size.Commissions, fees, charting services, continuing education and other business related costs are considered essential to trading.Risk to Reward is preferred a 2 to 1 ratio, but waiting for the set up and trading the rules is paramount and given the opportunity this standard is a guideline. My goal is to successfully net 9 combined points per week in the market.My desire is to train for the FOREX so that I can diversify looking for the best opportunities as I see them.
Daily Routine
I will only trade on days when I am well rested, relaxed and not mentally distracted by matters that will divert my focus. I will spend at least 15 minutes relaxing to music or a form of meditation after a good nights rest before trading.Conduct a Pre-Market Analysis myself, perform a top-down review of the major markets and develop a plan of the day. The trading day is from 9:30 a.m. (EST) to 4:15 p.m. divided into a morning session, lunch and afternoon session.I do not trade for the first hour on Mondays.I do not enter any new trades the last half an hour of the market hours (1545 – 1615 EST).After I have met my goal or the market is closed I will log my journal and then spend quality time with my family.At some point before the end of the day I will revisit the S&P trading day and back test my plan and system.
Pre-Market Analysis
Understanding that 70% of the volatility occurs during the first 2

Trading Education: The Fatal Mistake Traders Make

admin — Sun, 24 Jan 2010 09:47:19 +0000

Financially Fatal is the best way to describe this particular mistake that 95% of all traders make. It is the primary reason that even though traders are generally smarter than average, the failure rate is incredibly high in trading.
This is the one reason that so many traders fail even though they certainly have the ability and the aptitude to trade successfully. Because of the other factors that come into play, why this happens is very understandable, and it is not very foreseeable on the part of the trader.
Luckily, this situation is one that can be rectified before a person is completely done for in trading. The earlier in a trader’s career one can become aware of the phenomenon, the faster that person will reach a level of proficiency and consistent profitability.
Here is an explanation of what happens and what the individual trader can do to turn the odds in their favor.
The Root of the Problem
Trading is very much like other professions in that there is a considerable body of knowledge involved in the activity. While the core concept of trading is very easily understandable by most, trading as an occupation has a substantial body of knowledge to absorb and certain skills that are required to trade profitably and consistently.
As with most professions, there is a gradient to the body of knowledge in trading. There are many different concepts to be learned which are prerequisite for the full understanding of other more complex or in-depth subjects.
To illustrate the problem, let’s look at a familiar example: mathematics.
Math begins with simple counting and quantifying, then moves into adding, subtracting, multiplying and dividing. Next come algebra, geometry, and trigonometry. These provide the necessary concepts to then move into such higher math as calculus, differential equations, La Place transforms and others.
If a person were to try to go directly to algebra without a full grasp of basic math, they would be lost. If one enters calculus without a reasonably strong base in algebra, working the problems is difficult at best, and often impossible.
The Fatal Mistake Traders Make
What many traders do is go straight to intermediate level trading without the foundational concepts well developed. They jump way ahead on the gradient.
Now the problem is that when this situation occurs, it affects more than just the ability to assimilate new information. It also creates a physiological effect that interferes with already developed functions because of what is going on in the brain. Effectively it is almost like short-circuiting your brain when trying to operate under these conditions.
This is one explanation why very successful business people will often make decisions in their trading that they wouldn’t make anywhere else in their business life. Outside of trading they are brilliant, and are very wise in the ways of money management. In trading they will cause their own losses of thousands or even millions of dollars.
So why does this happen, and why is it so common? In the book, “The Subtle Trap of Trading,” the author explains in detail the five factors that come into play that set so many intelligent people on the road to ruin in the world of trading.
There are documented studies on the obstacles to learning that have found that there are specific physiological reactions when a person encounters this particular situation, that of starting too high up in a learning gradient or missing foundational knowledge while trying to grasp concepts at a given level.
This is the fundamental mistake that many traders make, and they are generally consciously unaware of this particular situation and its ramifications. Many people begin active trading without the foundational knowledge to trade at the level where they become active. When this happens, this creates a considerable obstacle to adequate learning within an efficient time frame. Subsequently, the trader often winds up taking a severe financial beating, often depleting their entire account before they have established a sufficient knowledge and skill base to trade proficiently.
Understand, the individual traders are not to blame. This is a problem of the system that unfortunately most have to go through. There is no certification or training required before a person is allowed to put themselves and their money at real risk, so the high failure rate in trading is primarily the result of inadequate warning and preparation for what trading entails.
Avoiding the Mistake (and What to do if you’ve made it)
Those that are fortunate a enough to pursue the proper guidance and help are the ones that can minimize the effects of this phenomenon which is so prevalent in the trading world. If one can find a mentor that recognizes this particular obstacle and the others that are present in the development of a trader, then chances are likely for a good trading experience. Most however choose to do it themselves or simply make it on sheer persistence alone, while learning the lessons of trading the hard way, through personal experience and substantial losses.
Rather than fall prey to this mistake, as many do, you have the option to save yourself considerable time, losses and personal anguish. This begins with backing up so to speak and making sure that you’ve got the basics fully covered, and then proceeding forward with a focus on mastery and development.

How to Trade Stocks, Forex and Emini Futures

admin — Tue, 05 Jan 2010 09:26:16 +0000

Trading is usually simple but most of the people make it a very complex game. It depends how you approach it whether for quick riches or stable income every month. Trading wants you to have a positive and a neutral mind. Successful traders follow rules all the time and earn their living trading just two hours a day. Many failed traders already develop their mind of particular direction. Neutrality itself requires that there is no direction of the market. Whenever there is a setup formed according to the given rules, one should act quickly without any confusion and hesitation. What actually happens that failed traders hesitate at the time of signal but execute trade as per their emotions. Here comes the discipline.
Successful trading in futures, emini, stocks, options, forex or any market requires sound strategies and discipline. Discipline has more weight than strategies. Learning the great and profitable strategies will not make you successful unless you have conviction to follow rules religiously. A good strategy can be applied to stock trading, currency trading and emini futures because rules are universal. Technical analysis and price action cover every market. There are some analysts in the market who teach that rules apply to one market only and at particular time. Objective analysis covers every market exhibiting number of opportunities in a week for daytrading as well as swing trading. If you have discipline to limit your risk effectively you can do daytrading or swing trading in any trading instrument. It means if you learn rules of trading you have great exposure to trading in every time frame whether it is emini, dow futures, S&P 500, commodity trading, futures trading, options and stocks. Stock trading itself presents multiple opportunities because there are hundreds of stocks in stock market. Another considerable market is a currency market with great volatility. Currency trading usually called forex trading offers huge potential of income if you are equipped with best risk management strategy. Many large brokers are now offering currency trading requiring very low margin. The important point is how you discipline yourself and control your emotions.
Nobody can deny the importance of stop-loss. People who are afraid of taking small loss incur a big loss and are usually wiped out in just few days. Discipline of taking loss will keep you in the trading game forever if you have profitable strategy. Nobody in this world can win every trade. Some traders are very disappointed after taking loss. They lose control and trade immediately in the hope that they will recover loss quickly. It’s a huge blunder. You should come back with fresh mind after spending considerable time away from your computer after making a losing trade.
Many new traders try to trade live immediately after they have learned how to trade and it is a huge mistake because they are playing with their real money. Paper trading with discipline could give substantial amount of confidence over a period of few months. What differentiates successful traders from irresponsible traders is quick decision at right time.

Trade Stocks, Forex, Futures, Emini, Commodities and Options

admin — Mon, 04 Jan 2010 09:59:46 +0000

Trading is both a simple and fairly complex game. It depends how you approach it. Trading requires a neutral mind. Following rules is a key attribute of successful trading. Many failed traders already develop their mind of particular direction. Neutrality itself requires that there is no direction of market. Whenever there is a setup formed according to the given rules, one should act swiftly without hesitation. Here comes the discipline.

Successful trading in futures, emini, stocks, options, forex or any market requires sound strategies and discipline. Actually discipline is more important than strategies. Learning the top notch strategies will not make you successful unless you are committed to follow rules strictly. Sound strategy can be applied to all markets. There are some so-called analysts in the market whose rules apply to one market only and at particular time. Objective analysis covers every market pointing out multiple opportunities in a week for day trading as well as swing trading. If you manage your risk effectively you can do daytrading or swing trading in any market. Rules are usually same in every time frame whether it is emini, emini futures, commodity trading, futures trading, options, stocks. Stock trading itself presents numerous opportunities because there are countless stocks in stock market. Another huge market is a currency market. Currency trading usually called forex trading offers huge potential of income if you know how to limit your risk. Many reputed brokers are now offering forex trading. The key is how you discipline yourself and follow rules all the time.

Another mistake of new traders is to trade live immediately after learning to trade. Paper trading with discipline could give huge amount of confidence over a period of time. What differentiates successful traders from failed traders is right decision at right time. Tough mindset is required to trade every market in every time frame.