Let’s be honest, it’s so tempting to stay focused on finding entry points for trades… But how much time do you spend considering your management of open positions? It’s a weird one because the management of your trades is where you’ll almost always find (or lose) the discipline that makes or breaks your campaign. But […]...
There’s a bit of a learning curve you must go through with any skill worth learning. And trading is no different. A typical experience might be for a newbie trader to learn a trading strategy, apply it to a demo account (or paper trade it) and then take it live once he’s seen his virtual profits rack-up over a week or two. And that’s a perfectly sensible way to go about things. But… problems can soon arise as soon as REAL MONEY appears in the equation. It’s a strange phenomenon because in theory nothing has really changed… the markets still behave the same, the execution of trades is still carried out in the same way on the brokers software, the strategy rules are still valid… So why don’t all traders make the move from demo trading to live trading and.....
There’s a bit of a learning curve you must go through with any skill worth learning. And trading is no different. A typical experience might be for a newbie trader to learn a trading strategy, apply it to a demo account (or paper trade it) and then take it live once he’s seen his virtual profits rack-up over a week or two. And that’s a perfectly sensible way to go about things. But… problems can soon arise as soon as REAL MONEY appears in the equation. It’s a strange phenomenon because in theory nothing has really changed… the markets still behave the same, the execution of trades is still carried out in the same way on the brokers software, the strategy rules are still valid… So why don’t all traders make the move from demo trading to live trading and.....
It was like time travelling into the past… One of my boys enrolled into the local Cub Scouts pack last night and I went to watch the ceremony. The Cubs chanted as the flag was hoisted (“A-ke-la, we will-do-our-best”). And they made the same promise to do their duty to God and to the Queen I remember so well from years ago. The Scout hut even had the same dusty smell. And why change a winning formula? The thing is, as well as being great fun, all those meetings taking place in huts and church halls across the country are designed to generate specific results for the boys. It is hoped the Cubs will become keen to always to their best, to think of other people’s needs and feelings, and to create a feeling of camaraderie. And it’s all about those.....
It was like time travelling into the past… One of my boys enrolled into the local Cub Scouts pack last night and I went to watch the ceremony. The Cubs chanted as the flag was hoisted (“A-ke-la, we will-do-our-best”). And they made the same promise to do their duty to God and to the Queen I remember so well from years ago. The Scout hut even had the same dusty smell. And why change a winning formula? The thing is, as well as being great fun, all those meetings taking place in huts and church halls across the country are designed to generate specific results for the boys. It is hoped the Cubs will become keen to always to their best, to think of other people’s needs and feelings, and to create a feeling of camaraderie. And it’s all about those.....
If you’ve been reading my stuff for a while, you’ve probably heard me talk about the five essential parts of a well-rounded trading strategy. They are: what to trade, when to enter a trade, when to exit a winning trade, when to exit a losing trade, and finally – the bit we’re interested in today – how much to trade. How much to trade just means how much of your overall trading account you’ll be allocating against the trade. Depending on the market you’re trading, you might measure it by the number of shares bought or the number of futures contract bought. Or, when it comes to Forex spread betting, you might measure according to how much cash to stake against each pip of movement in the market. Position sizing – the medieval way The other night I was watching a.....
You know the first thing that gave me good, reliable trading results? It was looking for a simple candlestick pattern: the bullish and bearish ‘engulfing’ pattern. Of course, this only came along once I’d been through the mill a bit… I’d fallen prey to trading various ‘magical’ combinations of moving averages, overbought signals on oscillating indicators and all that stuff. I was well and truly searching for the Holy Grail of trading methods – you know; the magic system that NEVER loses. And I was getting some pretty horrible results, it must be said! So don’t worry if you’ve been there yourself – you might even be there at the moment. It seems to be a phase all traders go through as they learn their craft. But if you are going through a ‘seeking the Holy Grail of trading’ phase.....
What do you see when you look at a trading chart? ‘Price’ will almost certainly be there. ‘Time’ may or may not make an appearance (depending on which kind of chart you’re using) and there may also be your own personal selection of indicators and studies. But have you ever sat back to think what these pixels on your screen are actually showing you? The map is not the territory after all. No, what the chart illustrates is the aggregate position of every single participant in that market at a particular moment. Every trader, from investment banks throwing around their size all the way down to the micro-lot Forex trader placing his first order, bears influence on the way the chart develops and prints. And if we zoom in closer, we can divide all these players in the game into.....
I’ve just been reading about a fascinating trading experiment… It all started when Austrian financier Michael Marcovici kicked off his weird art project. He intended to show how highly paid jobs could eventually be replaced by machines but I think even he was surprised by the results achieved in the end. Let’s have a look at what he got up to… Firsthand experience of the financial markets led him to believe two key skills of trading success – pattern recognition, and the ability to act with discipline – could be performed just as well, if not better by other, more humble, entities than the traders. His point was it shouldn’t require a remuneration package the size of a small planet to successfully do battle with the markets. And with tongue firmly in cheek he drafted in a team of novice.....
Liverpool’s famous waterside skyline Did you know Liverpool had one of the very first futures exchanges in the world? You probably knew that importing and exporting was a big part of the city’s success in the nineteenth century. And sadly, the slave trade played a big part too. But I had no idea of the underlying history of futures trading there, and it’s only 25 miles from where I live! I love delving into the history of trading so it really grabbed my attention. The things you learn from the past really hammer home how trading can, and almost always should, be kept to a simple process. The fact is fortunes have been made in the markets consistently – right across the last two centuries – no matter how primitive we consider the technology of the day. So anyway, on.....
Remember the ‘Pyramiding’ lesson from Jesse Livermore I covered in last week’s issue? Well, it’s just about THE best way to build a long term trading position that offers huge potential profits from tiny initial risk. It’s a trader’s trick that goes against the ‘common logic’ offered in a lot of trading books. But you should only use it when you see the potential for a big move on the horizon. Scope out a decent run on the weekly or monthly chart, that’s ideally what you’re looking for. You can then use the daily – or even shorter – charts to fine-tune your entry point and set those tiny stop loss orders. So whereas most short-term trading books have you entering a trade with your full position and then scaling out of the trade as the market moves in your.....
As soon a trade starts to show nice profits do you get an urge to cash-in? Today, I’m going to show you two little tricks my mentors taught that helped me overcome this problem. They’ll be useful for you to know because cutting profits short is something almost all traders must overcome at some stage. It means you can then get on with maximising your profits instead of kicking yourself for jumping out too soon I’ve often heard traders say things like “you can’t go broke by taking a profit”. But I disagree… I think the key factor is how much money you might be leaving behind by bailing out too early. Leave too much behind on a regular basis and you can seriously choke your results. And the only way to really overcome ‘the urge’ is by over-riding the.....
At the weekend I watched this film about a crazy horse race in Italy… It was recorded in Italian with English subtitles but it had me hooked from start to finish (and since I speak barely a word of Italian beyond ‘ciao’ this was quite something). Twice a year, in Siena, they hold this extreme race called The Palio, they reckon it’s been running since the mid 1600s. It goes right through the middle of the medieval town while everything else grinds to a halt for days at a time. The entire population of Siena turns out to watch and cheer on the horse representing their local neighbourhood. And when I say cheer them on, I mean fanatically cheer them on… people overcome with emotion in floods of tears, marching crowds chanting bawdy songs, bouncing banks of spectators swinging coloured.....
At the weekend I watched this film about a crazy horse race in Italy… It was recorded in Italian with English subtitles but it had me hooked from start to finish (and since I speak barely a word of Italian beyond ‘ciao’ this was quite something). Twice a year, in Siena, they hold this extreme race called The Palio, they reckon it’s been running since the mid 1600s. It goes right through the middle of the medieval town while everything else grinds to a halt for days at a time. The entire population of Siena turns out to watch and cheer on the horse representing their local neighbourhood. And when I say cheer them on, I mean fanatically cheer them on… people overcome with emotion in floods of tears, marching crowds chanting bawdy songs, bouncing banks of spectators swinging coloured.....
“The trend is your friend (until the bend at the end)”… Have you ever heard that bit of old trading wisdom? It’s a bit tongue-in-cheek, I know. But isn’t it a thrill when you catch a reversal point in the market and watch the others scrambling for cover? It’s like the trading equivalent of smacking a golf ball 330 yards dead straight, over the lake and onto the green… You know it can’t happen every day. But when conditions allow, and you do hit the sweet spot just right, it can keep you grinning for the rest of the week. And hey, it’s certainly not a practice to be taken lightly. You don’t want to make a habit of trading against the trend unless you’ve got a really good reason! So what are the signs that can tell you the.....
