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.

Favorite setups from ST50 for week of 11/22

I hope everyone is having a great weekend.

Last week the market continued with a correction with a rough day on Tuesday, but stabilized and moved higher on Thursday and Friday.  The hourly chart of SPY is showing some resistance at 120.35 and 120.90.  If we can clear these levels, then I believe the uptrend resumes and eventually make new highs.  It is not uncommon for the Santa Rally to begin the week of Thanksgiving.

SPY Hourly:

SPY Daily:

There are some fantastic setups again this week from the Stocktwits50 list.  Way too many for me to include all in this post.  So I am picking what I believe are the best setups:

TRS: Long above 18

EXPD: Long above 52 with first target around 53

MSB: Long over 42.50 with first target around 45

AREX: Long above 19.25 with first target around 21

APKT: Long over 44.30 with first target around 45

CMI: Long over 94.50 with first target around 98

UAL: Long over 29 with first target around 30.50

LFL: Long over 31.80 with first target around 32.80

HUSA: Long over 16.30 with first target around 17.30

Please do not forget to do some more research if you decide to use any of these setups, such as any news announcements, earnings, etc.

Have a great week.

Favorite setups from ST50 for week of 11/15

I hope everyone is enjoying their weekend.

Well last week we had a pullback that lasted more than a single day.  Looking at the daily chart of the SPY, we actually had the worst week since early September.  Quite a pullback, huh?

Actually, there really is nothing to panic about yet.  We are still above the upper trendline on daily and weekly, and still above the 20MA on daily.  Volume was a little higher last week, but nothing that would raise all sorts of red flags.  The selling was not of the panic type on massive volume that we see in a top, or that would indicate a trend change.  So for now, it is my opinion that we are still in buy-the-dip mode.

ACTG: Bull flag setup on low volume pullback.  Long over 26.70 with initial target around 28-28-50

QCOR: Bull flag setup on low volume pullback.  Long over 13.20 with initial target around 13.70

MIPS: Low volume pullback.  Long over 14.90 with initial target around 16.50. Beautiful looking chart – earnings are out were great.

ATML: Low volume pullback.  Long over 10.25 with initial target around 11.  Massive gap is still intact.

PCS: Sideways consolidation on low volume.  This stock wants higher.  Long over 12.25 with initial target around 12.75.

AXTI: Bull flag setup with low volume pullback.  Long over 8.40 with initial target around 9.30.

AVGO: One day late in finding this stock.  Long over 25.85 with initial target around 26.50

CNH: Long over 44 with initial target around 46.

ROVI: Low volume consolidation.  Long over 53 with initial target around 54.50.

TZOO: Low volume consolidation.  Long over 36.50 with initial target around 38.

XXIA: Bull flag with low volume consolidation.  Long over 16 with initial target around 17.50.

As you can see, quite an extensive list tonight – and I’ve left out a few good looking charts too.  But these I believe look poised for continued up trend, unless the overall market decides to collapse next week.  As usual, please do your due diligence if you decide to pursue any of these stocks and watch out for news announcements, earnings, etc.

Good luck and good trading next week.

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.

Favorite setups from ST50 for week of 11/8 and other picks

I hope everyone is having a great weekend.  Last week the market reacted very positively to all the news events, from the election results, to the Fed to the NFP.  Some major resistance areas were cleared on the SPY and as the chart below shows, the next major resistance area is 126-127.

Most impressively, and importantly, the financials came life and broke out on huge volume as can be seen by the chart of XLF:

This not only validates the rally, but in my opinion, gives it new life.  I believe we are starting a new wave/trend up.  However, having said that, this market needs some consolidation period or slight pullback to digest these gains.  The market still needs new catalysts to go higher, and there is plenty of momentum to go up.

I took a look at the Stocktwits50 list today.  Twice.  All the stocks on this list have fantastic charts.  The only problem is that most (not all), are making new highs on lower volume, with some major divergence between price and MACD and/or Money Flow.  I am finding it very hard to get on board or recommend most of these stocks at these levels, without some sort of low volume pullbacks/consolidation.  The most promising ones I found for next week are below (only 2):

NXTM: Huge breakout last week on very strong volume. Long over 22.50 on volume.

VHC: Low volume consolidation the last couple weeks. Looks poised to go higher. Long on break of upper trendline around 19.20.

In addition to the picks from ST50, I believe we will see some of the stocks that are not at 52 week highs but broke out last week (like the financials) make a move in the coming weeks.  Some picks I tweeted late last night are:

COV
FWLT
HEV
IO
ITT
JEC
JRCC
KSS
WFC

I hope you have a great week of trading and as usual, please do your due diligence on any stock you wish to pursue, including earnings dates, news releases, etc.

Thoughts on trading this week

I wrote last week that I would not be trading much stocks because I felt we were at a critical point in the markets and I wanted to see the current levels of resistance broken before getting back into holding stocks for more than a day trade.

Well, not much has changed and this week is even more critical since the elections are tomorrow, the Fed on Wednesday and Non-Farm Payrolls on Friday.  If ever there was a catalyst to ‘sell the news’, it is this week.  Adversely, if the markets do not go lower, then we will see a new leg of the uptrend begin.

So, I am in wait and see mode and will concentrate on day trading the Crude Oil futures (CL) for the most part, perhaps some Euro (6E) and Russell (TF).  The plan is to trade smaller sizes and take quick profits.  If possible, finish early and take the rest of the day off.

I did not go through the Stocktwits 50 this week – I’ll resume next weekend once we get a clearer picture of how the markets want to move.

Please exercise your right, and privilege to vote on Tuesday.

Have a great week.

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...

Favorite setups from ST50 for week of 10/24

I hope everyone is having a great weekend.  As usual, there were some fantastic and endless ideas and analysis on Stocktwits this weekend.

Let’s start by taking a look at the weekly and daily charts of the SPY:

Price action is right at the weekly 200MA of around 119, and the resistance areas on the daily can clearly be seen on the chart as well.  The persistent trend keeps grinding higher in the face of some overbought conditions, but as we all know, that does not necessarily mean we will not go higher.

Personally, I will be exercising some caution next week and will not hold any overnight positions should the indexes exhibit any signs of weakness.  Regardless, there are still some great looking charts out there.

Please do you due diligence on the picks (such as earnings, news releases, etc.).  The recommendations are only meant as idea generation and my own personal analysis on these stocks.  Additionally, please use proper money management should you decide to get into any positions.  This are my weekly picks from the Stocktwits50 list:

APKT, UNP, INFA, CGNX, TIBX, INTU, CMG.  Entry points and commentary on the charts below:

Good trading and good luck next week.

Anatomy of an Intraday Chart of CL (Revisited)

I wanted to follow up on the post from this morning regarding CL December futures 5 min intraday chart.  Below is an updated end-of-day chart:

Points 1-6 were discussed in the previous post.  However, on point 6, the support zone has moved since the chart was in an uptrend all afternoon.

7. 7a and 7b show the price touching the support area around 80.60 with the occurrence of a divergence on the MACD.  A bounce from here would give very good odds for a long entry, which is exactly what happened.

8. Minor resistance area was taken out around 81.30.

9. Major resistance area was taken out around 81.60 and price continued to 82.10.

Strange action so late on a Friday afternoon for CL, but it is what is. All we can do perform the analysis and make real time decisions on what we see.

We’ll see what Monday morning brings.

Good trading.

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!

Trading radar for Oct 14

Good morning!

With OpEx tomorrow, and the SPY at dizzying levels, not looking to do a whole lot the next couple days. Smaller size, quick profits and not holding anything for an extended period of time.

The following stocks are on my radar today:

ZAGG
RVBD
ARUN
ARMH
APOL (Or any education stocks with good short setups)
AMED

I'll also be looking for short opportunities in EUR, CL and GC.

Have a great day and good trading.

Trading radar Oct 11

Good morning.

I hope everyone had a great and relaxing weekend. I am delighted the Detroit Lions got their first win (of many I hope), and they completely destroyed the Rams.

As usual, the ST stream was filled with fantastic trading ideas this weekend. If you are not tuning in, I highly suggest checking out the recommendations and charts - just awesome.

With the holiday and lack of economic news today, not sure we will have a very exciting session. The following stocks are on my radar today:

SOLF
ATPG
WCRX
ISLN
JAZZ

I'll update any stocks with good setups on twitter. Looking for short entries in CL, GC and EUR (6E).

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!

Trading radar Oct 1

Good morning!

I hope everyone had a great September - definitely a nice run. Yesterday, the markets had a 'failed breakout' and reversed hard after a strong open. Not sure if much emphasis can be placed on the action since it was end of month and end of quarter. Nevertheless, I am adding to my short watchlist and turning a it more bearish. Not bearish - the sky is falling bearish, more of a reasonable pullback before the highs are retested.

In any case, up or down, always ready to change my disposition on a dime based on the price action.

The following stocks are on my radar today:

GYMB
CCME
APWR
COGT
GMCR
WCRX


Also looking for pullbacks in CL, EUR and GBP.

Make it a great trading day and month!

Trading radar Sep 30

Good morning!

Employments and GDP numbers were better than expected and futures are up. There is a lot going on today - The Chief testifies today (Bernanke); End of Month; End of Quarter. Any trading I do will be good setups only, and perhaps smaller amounts than usual. It's been a great month and great week so far. No need to be a hero...

The following stocks are on my radar:

LLNW
APWR
JASO (Or any good solar setups)
MNKD
ENTR
CRUS
XRTX
TLAB

Good luck and good trading!

Trading radar Sep 29

Good morning.

Futures are somewhat down with a bearish tone. Gaps and dips have been bought in this market recently - so something to keep in mind.

The following stocks are on my radar:

GERN
SGEN
CRUS
ENDP
CHKP
GMCR
ATHR
NVDA

No trading CL futures until after report. GBPUSD looking for short entries and EURUSD looking for long entries - although it could go either way here.

Good luck and good trading today!

Trading radar Sep 28

Good morning.

Lots of candidates to the long and the short side. The following stocks are on my radar today:

RVBD
MPEL
LULU
ATPG
AMED
ENTR
AGNC
ANAD

Also looking for long entries in CL, GC and EUR - of course, I may also short if the setup arises.

Good trading.

Know thy timeframe

Picking a chart timeframe is perhaps one of the most important trading decisions you'll make as a trader. Your personality, trading style, risk tolerance, profit targets, and many more inputs will most likely dictate what timerames you use to trade.

Timeframes are to traders what maps are to navigators. Without the right map, you are going nowhere fast. If you are driving from South Beach to West Palm Beach, you need to look at a map of Miami/Ft. Lauderdale, NOT a map of the United States. Personally (and like 99% of traders), I am blind without looking at a chart. I use technical analysis almost exclusively to make my trading decisions. If you are like me, then you spend your entire trading day looking at charts. As such, a trader needs to pick a trading timeframe that is most advantageous to their trading results.

If you are a swing trader, perhaps you use the 60 or 30 minute chart and daily/weekly for trend. If you are an investor/long term trader, then you probably use the daily chart and weekly/monthly for trend.

But if you are a day trader, there are many more options to consider. It is not an easy decision to make. A trader really needs to assess what his/her goals are each day from the market. Are you a trend follower? Do you want to make 1-2 trades a day only? Are you a scalper and comfortable making 10-20 trades a day? How much are you willing to risk on each trade? How comfortable are you holding a position for a longer period of time - i.e. how patient are you? A higher timeframe will give you a higher risk (stop level) and more reward (profit target). But you are in a trade longer than you might like. Maybe most importantly, your system may give the best results at a specific timeframe. A lot of analysis, research, trial and error, and patience are needed to find that right timeframe.

Personally, I have tried them all. 1,2, 3, 5, 10, 15 minute charts for trading and 30, 60 and daily for trends. I have even used Volume charts as well. I have to admit, that up to about a month or so ago, I have been most successful using the 15 minute chart for my trade signals. However, I felt the need to explore other options for a couple of reasons. I am married to eSignal for my trading as all my indicators are customized in the native language (EFS). But I've had a lot of issues with their data service. As most of you who read my blog and follow me on twitter may know, I am constantly frustrated with the freezing of the application during heavy volume periods. The application is not true multi-threaded and it just stops responding. This happens with time based charts and volume based charts too.

The other, and more important reason, is that with summer doldrums here, I am finding that my usually reliable system was giving more false signals than I like. Whipsaws, headfakes, false breakouts are common occurrences during low volume periods. So, I have been experimenting with Tick charts. Right now my favorite settings are a 610 and 1597 Tick charts. Below are some samples of ES from Friday June 26 - the 5 minute, 610T and 1597T charts. What I like about Tick charts, is that you are no longer constrained by periods of low volume like lunch time. The bars form as fast or as slow as the price is moving, and the chart looks 'cleaner' and more symmetrical. On the 1597 setting a bar could take 2 minutes to form or 10 minutes, depending on the action.

The setting of the chart is irrelevant - 610 and 1597 happen to be Fibonacci numbers. It could be 100 or 5000 - it really does not matter. What matters is what you as a trader feel most comfortable with. The bottom line, is that you have to find the timeframe that works best for you. If 5, 3 or 1 minute charts work, then stick with it.

The best news for me is that my eSignal application problems have disappeared with tick charts. Don't know why, and I don't care to know why. That's just fine by me.

Good luck with your trading.