How do you eliminate fear from trading?

Fear is one of the most difficult obstacles in trading.  Fear of losing money.  Fear of the unknown.  Fear of missing out.  it is the root cause of self loathe, self doubt and self sabotage.

I don’t really know if one can ever trade without ‘some’ element of fear - the key is controlling and channeling this strong emotion to become a consistently successful trader.

Discipline brings confidence.  Confidence overcomes fear.  But over-confidence destroys your account.  It’s a vicious cycle.

Some successful traders learned the business from the very best tutors and mentors.  So, they know what they have works and it reduces the ‘fear’ emotion.

Other traders have been trading for a long time and have had the financial means to sustain their ‘education’ of trading and have gained the proper knowledge and experience to overcome fear.

But what do you do if you are just starting out?  With a limited account?  You’ve purchased or discovered the best trading system and now it’s time to put it in action.  You’ve created a demo account and have been successfully paper trading for a while.  Now it’s time to go live.

After your first trade or two, you quickly discover things about yourself you never knew.  It’s not quite the same, is it?

Here are some tips that I think can help a trader overcome fear of trading:

1. Perhaps the most important factor: Accept the fact that you might lose on any particular trade.  Embrace the risk – if you do not (or cannot), then trading is not for you.
2. Start with small amounts, gain the confidence in your system and move your way up to larger positions.
3. Know your risk: Do not enter a trade without know EXACTLY where your risk is (stop).
4. Have an EXIT strategy: Not only do you need to know your risk, but what is the goal of a trade – Profit targets.
5. Do not trade with money you cannot afford to lose (like rent or mortgage money).
6. Once in a trade – do not change the rules.  I’ve mentioned this before, but it is amazing how many traders deviate from their plan once things do not go right (or even if they do go right).
7. Work in a stress free environment where you cannot be easily distracted during trading hours.  Causes mistakes and mental errors.
8. Never be afraid to take the next trade.  After a couple of losses you might be scared to take the next trade (unless your plan dictates you stop after X losing trades or $).
9. If you are unsure of the market or it’s direction, not taking a trade is not a bad idea.  Sometime the best trade is the one you did not take.
10. Never be afraid to ask for advice.  There are hundreds of awesome traders on Stocktwits who gladly make their time available to help and assist other traders.

As always, please make sure you have a plan and are following it properly.  It is the founding cornerstone of your trading career.

Stick to the plan and you’ll be alright.

Have a great weekend.

Why traders need a killer instinct, among other things…

Trading is one of the most difficult professions that can be undertaken by any person.  Period.  This is especially true for beginners who get so discouraged after a while that they give up usually within the first year of trading.

The odds are stacked against you as a trader, and it is a zero (even negative) sum game.   Almost every element that is critical to your success is out of your control and in the hands of the market.  The ONLY things that you, as a trader, can control are when to get in, and when to get out.

Furthermore, not only is the fate of your trade in the hands of the market, but perhaps, the biggest threat to your success is yourself – self-sabotage, trading out of fear and greed.

Developing a killer instinct in trading is absolutely critical for long term success.  This means having and developing the ability to consistently make profitable trades and overcoming all the challenges that almost all successful traders experience.

By killer instinct I don’t mean destroying other traders – it simply means having the discipline and confidence to execute your trades according to your plan.  It is something that can be taught, harnessed and developed through hard work and experience.  As such, here are some points that I believe help in creating and developing this instinct:

1. Perhaps the most important factor – create and use a TRADING PLAN.  I cannot overemphasize the importance of this point.  If you don’t have one, create one immediately.  Print it out and read it everyday if you have to.
2. Discipline – the discipline to execute your trades according to the plan.  The discipline to stick to your plan through good times and bad.  If you have done your homework, you’ll know that every system has drawdown periods.
3. Never, EVER, make up the rules or change them on the fly.  In the heat of the moment, it is easy to ‘tweak’ and bend the rules.  Especially if you are on a winning streak.
4. Never take the ‘revenge’ trade.  Imagine this – you take a trade, it comes to within 1 tick of your target, then reverses to hit your stop.  You immediately reenter the market (maybe in the opposite direction) only to have another losing trade.  There will be losses – as a trader you need to accept and embrace losses as part of this business.
5. Never move your stops (especially to increase risk) in the middle of a trade.
6. Never chase an entry.  If you’ve missed the trade, there will be others.
7. Understand how emotions and Psychology affect your trading decisions.  You are the greatest risk to your success.  It is not the market, it is not the dog, and it certainly is not ‘THEM’.
8. Self-analysis – a must for every trader.  Keep records of your trades.  Understand your tendencies, strengths and weaknesses.  Analyze your system and keep track of its performance every day, every week and every month.
9. Set goals – what do you want out of the market?  What is it you are trying to achieve.  Do you have a daily goal?  A weekly goal?  Whatever it is, know and understand what it is you are trying to achieve.

Killer instinct comes from discipline, and the confidence knowing that your trade will be ‘right’ more times than not.  You are trading the probabilities.  There are no guarantees, just like any other business.  You need to do your homework and execute your plan accordingly.

There are opportunities to make a profit every single day in the market.  And once you achieve that consistency, trading can be a lot of fun.  Most importantly – never give up.

Have a great weekend.  I’ll post my Stocktwits50 recommendations later today.

Lessons I learned from Trader Mike

When I started daytrading, I spent countless hours trying to find and learn from successful traders. I would search the internet and scour the forums to find experienced traders who have gone through the ups and downs of trading and were willing and humble enough to share those experiences with other traders. Of course, such magnificent traders are a dime a dozen on Stocktwits today. But a few years ago, one had to dig a little harder to find these traders.

One such trader was Trader Mike who has an excellent blog. It used to be a daily routine to visit his site, where I learned quite a bit about trading, Psychology, other traders (like Maoxian), keeping good records, self-analysis and keeping things simple. I also learned that many successful traders (if not all) follow quite similar paths of mistakes, experience and eventual success. One of my favorite posts is How I Became Such a Great Trader where he shares some valuable insight on his past experiences and some of the things he does to stay sharp.

Another lesson I learned is that while it is critical to focus on the technical and physical aspects of trading (trading plan, setups, charts, etc.), it is also very important to focus on the emotional aspects such as Psychology and self-affirmations. Now what's that you may ask? Trader Mike was not shy to share that he listens to a trade affirmations CD to make sure his mind stays 'right'. After purchasing the CD and listening to it, I understood why. I have converted the CD to MP3 and I listen to it as often as I can (on my iPod or PC). Here is a clip below:

Some golden nuggets of advice from Dr. Elder on Psychology

Dr. Alexander Elder has written some excellent and practical books on trading and psychology of trading, among them Trading for a living, and Come into my trading room. I’ve read his books and recommend every trader do the same.

However, in addition to reading his books, I also have Trading For a Living on CD and I make an effort to listen to it as often as I can. He emphasizes a lot on psychology of trading, as do many experts like Mark Douglass in Trading in the Zone (another must read).

Below is a clip from Dr. Elder’s book on Individual Psychology. In it, he offers some excellent advice for the average trader and some common mistakes that traders make (over and over again).

Some of my favorite quotes are along the following lines: The goal of a good trader is to NOT make money - it is to trade well. Money follows... Just because you have a successful system does not mean you will make money...

Anatomy of an Intraday Chart of CL

Good morning.

I wanted to post and analyze a 5 minute chart of the CL Crude December futures.  Earlier, I talked about rising trendline, breakout, false breakout, etc. and wanted to share what exactly I was looking at.  Below is a 5 minute chart of CL:

There are 6 areas I’d like to focus on:

1. This is a horizontal trendline at 81.60, which also coincided with a major resistance area.  Usually at 9AM EST, there is a heavy move in one direction, and the thought process was if it breaks this level on some volume, it would breakout.  Which it did.
2. After the breakout, the next candle formed a Doji right on minor resistance at around 81.75.  At that point, some profit was taken and stops moved to breakeven.  Subsequently, the next candle dropped the price right back below 81.50 and the initial breakout/resistance area, signaling a false breakout.
3. Shows the rising trendline Tweeted about, going back from around 3AM EST.  As soon as it closed below it after 9:30AM, it moved lower to the first support area of around 80.90-81, where it has bounced briefly.
4. Shows the are of minor support at 80.90-81.00.
5. Shows the next area of support at 80.50-80.60.
6. Shows the next area of support at 79.35-79.50.  This area is a major magnet should CL decide to break below 80.50.

I hope this was educational.  Whatever indicators you use in your trading, on whatever timeframe, introducing and using trendlines and support/resistance zones will greatly enhance your trading, not to mention money management techniques (knowing where take profits, etc.).

Please do not hesitate to drop me a comment or tweet if you have any questions.

Good trading.

Trading radar for Oct 21

Good morning.

NFLX - the juggernaut, continues on a tear.  So, far earnings this week have been well received.  The selloff on Tuesday appears to be an aberration as it was almost fully recovered yesterday.  This puts us back in up trend mode.

Futures are higher this morning but appear to be selling off a little bit, so we'll see what happens.

The following stocks are on my radar today:

Long:
ISLN
EBAY
ALXN
JBLU (or any of the airlines)

Short:
CRUS
PLCE
FITB
CY

CL recovery yesterday puts us back  in the range of 80-84 that we've been stuck in since early October. A break of this range either way will provide for a powerful move IMO.

I am looking for short opportunities in CL, 6E and GC today.

Good luck and good trading!

Some notes on trading style

I wanted to write a bit about how and why I post my trades on ST. My style is mostly day-trading and very fast-paced. Most of my my trades are placed using buy/sell stops - I wait for price to come to me. In a fast-moving market - I'll just jump in using market orders.

I might trade several instruments a day - EUR, GBP, CL, GC, TF and stocks. Overall, my strategy is to scalp 10-15 ticks at a time for 1 batch on the futures, and let the rest run. I trade in multiples of 2 contracts - minimum 2, and maximum 10. For stocks - it depends on the range and price of the stock, but the concept is similar. Depending on the market (trending, rangebound, counter-trend) - I am more selective with taking profits and may bail out at certain price levels. If a trade does not go my way after a few bars, I may bail out at break/even or small loss/profit.

Sometimes, I do not have time to post the prices that I am trading, or all my trades for that matter. The point is not to have other people go in at the same time and price as me. If any traders are using my calls to enter long/short the market - then I think it is a big mistake. You don't know what my plan is, or my strategy, or even my timeframe. You could be long based on hourly, and I could be short based on 1 minute, and we could both make money.

I use traders comments as confirmation of my signals - if some of my follows are short, and I get a signal to go short (which I will take regardless), then it is just that extra level of confidence. But if I am going long, and some of my strong follows are short, I am not going to switch just because they are - which actually happened today. I was long EUR and couple of excellent traders were short. I held and it ended up being a great winner.

Early last year, I wrote a post here on not blindly entering trades based on Stocktwits traders. The advice I gave back then still holds - even more so, as there many more traders now on ST, and some are truly fantastic follows. But unless you are paying for a subscription to some of these amazing traders, please use your own analysis and rules to enter and exit the market. Please make sure you have a trading plan. Not mine or anyone else on ST.

Good trading!

Breakout Alert! Now What...

What a day Friday was. You could tell from even before the market opened the bulls would not be denied. And did they ever deliver...

If you went short on Thursday, you were licking your wounds on Friday. A painful message to anyone who tries to step in front of a high speed train. Which is exactly the feeling that the permabears had yesterday. This is the same message that applies to those who try to pick a bottom during a downtrend. Don't try to be a hero - if the trend is up, find stocks that are going up and go long. I mean, it's so simple, even a caveman can do it ;-)

My countertrend trades are usually limited to very short time frames and the risk is managed very closely. I will usually bail out of a countertrend trade if I feel it is not moving in my direction. But when the path of least resistance is in a certain direction (up or down) - I just follow the trend. That's where the money is. I don't try to be a hero and catch the top or bottom - I usually leave that to two kinds of people: 1) those who are MUCH smarter than me and understand Macroeconomic conditions so well that they 'just know' when the top or bottom is in, and 2) gamblers.

The action last week was very encouraging. The previous week the $SPY closed with a doji, and last week, we closed higher on higher volume. The weekly chart shows we still have some room before we reach significant resistance around the 200MA around 120. The daily shows we are comfortably above the 200MA, but I have posted some resistance zones on the daily chart.







What I would like to see happen is some consolidation/pullback to digest these gains and NOT go into earning season overbought. But of course, the market will decide what to do and it is our job to keep studying and adapting to price action.

I will make another post on this blog with my recommendations for some long entries.

Have a great weekend.

ST - My (new) eyes to the market

I was actually hesitant to write this post for fear of being labeled a StockTwits Slappie now. I was asked recently 'I thought you quit ST' - I'll answer that question more specifically a bit later.

ST has quickly become an integral part of my trading routine. Whether it is during the day, at night, or over a lazy Sunday afternoon. I would argue that ST afterhours is absolutely jam-packed with information that can help you prepare for the next trading day/week. From tickerville's insightful videos, to daytrend's stocks that are trending up/down, and chartsandcoffee's excellent market commentary. So, I ask, what kind of an idiot would give up that kind of information?

During the trading day, ST is part of my arsenal for reading and 'feeling' the market - my new 'eyes' to the market. Just by looking at what others are discussing, trading, and 'feeling' helps me significantly assess the overall market. Mind you it does NOT SHAPE my assessment, it HELPS me in my assessment. There's a big difference, because I still rely on my TA, my interpretation of news and market internals to make my assessments and trading decisions.

When I first started using ST, it was actually a little difficult to use. I could not monitor EVERY single tweet that came in, while effectively keeping my eyes on the market for trades. Eventually, when I narrowed down the people I wanted to follow, I just concentrated on their tweets for the most part. During the lull periods, I go back and look for other tweets and try to discover some new 'gems' to follow. And make no mistake, there are some real gems out there - both discovered and undiscovered.

ST reinforced a couple of things about myself. Not only did my trading improve, but my discipline as well. Mostly, I find that my comments and tweets are really things that I am saying to myself, but also sharing it with literally thousands of people. Additionally, there is acually a sense of responsibility with making calls to buy and/or sell on Twitter. Especially when you have many people following and perhaps, just perhaps one took your call followed you on the trade. Tha't why I would also recommend my earlier post about how to take trades based on other followers.

The bottom line is that there are thousands of people on Twitter, with blogs, information, analysis, commentary, etc. that are MUCH more experienced and qualified than myself to discuss topics and issues related to the market and make stock picks. It will takes years for me to even be in the same league as some of these traders. So, I will continue to share my thoughts to whoever would like to listen, but more importantly, I will continue to learn and absorb what these traders are telling me.

Now to answer that question from earlier, what can I say? To quote Daffy Duck: I may be a little duck, but I am a greeeeedy little duck. In my case, I may be a hot-head, but I am a greeeedy (and occassionally nice) hot-head :-) I admit it, ST has made me a better trader. In the end that's what it's all about, isnt' it?

Good luck with your trading and I hope to see you on Twitter.

So, what's your bread and butter.

If you are a sports fan, you probably know how some pitchers have their 'pitch' - a slider, fast ball, whatever. Something they know they are extremely good at, and they can always come back to it and get batters out on a regular basis. Same concept in football - a team has a few 'signature' plays (except for the Detroit Lions of course) that they can use during a game, like a screen, a sweep, etc. It's their 'bread and butter'.

Trading is no different. Every trader should have a few 'signature' trades (at least one) that they can use at least once a day (for day traders). These can be something as sophisticated as MA Xovers, RSI/Stoch signals, or as simple as support/resistance plays. You know you can always count on making a living with these trades. You've studied, analyzed, backtested, tweaked, re-analyzed them until they gave you an excellent winning percentage. You use these on a regular basis and feel extremely confident taking these trades. These are YOUR bread and butter.

Jason Raznick was mentioning on StockTwits earlier today about how he learned over this last week to take fewer trades and only trade the ones that he had 'superior confidence' in. In other words, his bread and butter. Upsidetrader has his 5/20 trade, which I am sure is one of many - although I do not know what that particular trade is. So does alphatrends, Fari Hamzei, and many other great traders on StockTwits. The point is: find YOUR 'bread and butter'. Become REALLY good at it and use it over and over. You will notice something very interesting as well - you will start to hone in on the 'intuition' part of trading and find yourself anticipating signals and trades. This comes with practice, repetition, constant learning, hard work, and years of experience.

Today I took some nice gains from my 'bread and butter' basket. I was able to go long SDS several times today for 50c and $1 scalps. There were quite a few earnings releases after hours, including MSFT, AMZN, NFLX, SPWRA among others. Tomorrow should shape up to be another very interesting day.

Good luck with your trading.

I admit it - I AM A USER!

Yes, you read that right. I will use any stock, ETF, information on a stock, analysis and information of a stock by anyone, for my own financial benefit and gain. And I will use all the power necessary (legally :-) and within my means) to gain an advantage to know when to buy and when to sell a stock.

Bet that caught your attention. The point of this post is that stocks are meant to be used when the time is right. Do not get emotionally attached to a stock or ETF or even a conviction of market direction. Just because you 'think' or 'believe' a stock or sector should go up or down does not mean that it will. The market can be an emotional, irrational beast and will go where it WANTS to go. Not where we want it to go.

Notice how the good traders are always using stock price movement and market sentiment to their advantage? Go to StockTwits, and observe some of the excellent traders there. Notice how they don't let their emotions dictate their trading. They are swift, nimble AND quick to drop a trade when they feel it is not working, and have NO problem going in the opposite direction if that's where the action is. Don't let your conviction and emotions get in the way of your trading success.

Remember, trading is about making money and taking profits. The market gives you nothing but an opportunity. USE that opportunity wisely. It is a jungle out there and everyone wants YOUR money - no one cares about you. Not if you can do something about it.

I will say it again, above all else, make sure you have a trading plan, a strategy (or several) and a money management plan that protects your profits and limits your losses.

Good luck with your trading.