Secret Trading Tips - page 2
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Secret Trading Tip #19
Candlesticks & Engulfing
Candlestick charts have all kinds of potential patterns that technicians are watchful for. One of the easiest to spot is an engulfing pattern. This set-up consists of two candlesticks, one of which is “engulfing” the previous one. That means the body of the second candlestick is longer than the first one. It doesn’t have to extend beyond the wicks of that first candlestick, just the real body.
Spot an engulfing candlestick and you might be seeing a reversal signal
When the real body of a second candlestick extends beyond the previous one, the participants are behaving in a particular way. The candlestick is bigger because some combination of opening price and buying or selling pressure is making it bigger. These combinations can tell you if there is potential for an existing trend to change.
Candlestick fans are watching for an engulfing candlestick of a different color
The reversals are spotted when there is a hollow candlestick engulfing a filled one or vice versa (red and green if you are using a chart program with colors.) Don’t get caught up in anything involving a doji – those are pretty easy to engulf.
If the market was in an apparent uptrend and a hollow (or green) candlestick is engulfed by a filled (or red) one, this might be a signal of a bearish reversal. The second candlestick shows that the market opened above the prior closing price and then selling pressure came in and the market was pushed below the prior opening price.
Finding a hollow (or green) candlestick engulfing a filled (or red) one could be a bullish reversal signal in an established downtrend. In this case, the hollow candlestick would show that the session opened at a price below the prior close, where the real body starts below the filled candlestick from the previous session. Buying ensued and the market price moved through and above the prior opening price.
Engulfing patterns can be easy to spot – look for larger candlestick bodies to indicate firmer potential signals
Remember, watch for the real body of a second candlestick to engulf the first. If it is a contrary to the prevailing trend, you might have a reversal signal on your hands. Look at the buying or selling pressure as an indication of market direction. As with all technical chart patterns, keep an eye on the following trading sessions to confirm the move. Watch for further weakness after a bearish engulfing pattern or continuing strength on a bullish engulfing pattern.
Larry Levin
President & Founder- Trading Advantage
Zombie Part 2
(Like a Zombie, not much changes…) While comparing zombies and our current “walking dead” stock indices yesterday I said “…I mentioned the day’s preposterously low volume with a better close. By the way, at the close of the session, the ES had more aggressive sellers than buyers…and it managed to keep from liquefying into a bowl of zombie puss.”
NOTHING HAS CHANGED! BEWARE – ZOMBIES ARE ON THE PROWL.
Not only was Thursday no different, it was horrible by comparison. Volume, volatility, and the daily range once again pathetic. Total volume in the ES was just 1.179 million, which was 47% less than the rapidly declining recent average.
Even the heretofore non-investigative zombie reporters are wondering what is holding up this market.
Until something changes, the zombie horde is in charge.
Trade well and follow the trend, not the so-called “experts.”
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
Trading Advantage
(888) 755-3846
Larry Levin's Trading Advantage is a leading investment education firm that empowers traders to achieve and surpass their financial goals. More than 50,000 students have used Larry Levin's proven techniques for powerful results.
Value Areas:
ES 1401.50 / 1397.50
POC... 1400.50
YM 13147 / 13105
NQ 2719.75 / 2711.75
Sir may I ask a question. does take profit and market order the the same? how about stop order and stop loss? If not could you explain what's the difference between them? Thank you.
No SISImimi- Take profit and market order is not the same. These are two different terms with different meaning
Market order is an instruction given to a brokerage company to buy or sell a security. Execution of this order results in the execution of a deal. The price of a deal depends on theexecution mode, which depends on the symbol type. Generally, a security is bought at the Ask price and sold at the Bid price.
Take ProfitIf I tell my secret here it will be no longer a secret anymore hehehe..anyway I would just like to advice the newbies to be a determined person and have courage and confident to have a better trade
it’s because money pros regularly employ strategies that regular folk don’t even know exist. watch your weight. bonds with bonds, start dating, never trade without a net, don't skip homework or practice.
it’s because money pros regularly employ strategies that regular folk don’t even know exist. watch your weight. bonds with bonds, start dating, never trade without a net, don't skip homework or practice.
I didn't get your point, could you please explain it clearly?
1) Cut your losers; let your winners ride.
One important thing that every new trader must know before entering this highly profitable business is that life is not perfect, even in Forex land, and you should always know one fact: you will have losing trade.
If I tell my secret here it will be no longer a secret anymore hehehe..anyway I would just like to advice the newbies to be a determined person and have courage and confident to have a better trade
You're right. Although it's really tough to do, newbies should start having these traits on their demo accounts. They should trade as if they're in the live trading.
In the fallout from the 2008 global financial crisis, there have been moments that have been driven by pure fear. These are the moments when it can be hard to maintain your composure and trade your plan. Unfortunately, these big days are the times when you need that composure the most. Here is a quick lesson in why it is important to keep focused in a scary market and how to achieve that focus.
Market Basics
First let us understand some market basics. Markets exist to facilitate trade. From moment to moment the market offers traders the opportunity to profit from price movement. It's an environment where every trader has the freedom to create his own results, i.e. all the choices and the power to exercise those choices reside with the trader.
'Scary' implies fear, anxiety, or insecurity.
In his book, The Disciplined Trader, Mark Douglas addresses these issues in a no-nonsense, no holds barred way.
Let me give you an example of his views on this subject:
"It was only the lack of trust I had in myself to do what was needed to be done that I was really afraid of."
"The market is never wrong in what it does; it just is."
"The market cannot take anything away from you that you don't allow."
"In the trading environment the outcome of your decisions is immediate, and you are powerless to change anything except your mind. You have to learn to flow with the markets; you are either in harmony with them or you are not."
It becomes self evident that your trading success will be dependent on your ability to correctly perceive opportunity, to execute a trade arising from that perception and your ability to allow your profits to accumulate.
Are You Consumed by Fear?
Markets are inherently scary. If you are a trader consumed by fear, then the market will always be scary, and the only variable is how scary it is at any given time. When consumed by fear a trader is doomed to failure. Fear will twist your perceptions and blind you to the opportunities available. Fear will almost always drive us to make the wrong action, and it will without question make us totally incapable of accumulating profits that might be made. Even for disciplined and proven successful traders, the markets can be scary.
Objectively scary markets can be quantified by the Volatility index, the VIX - the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." Levels below twenty are associated with market complacency and over thirty with increasing market anxiety. Extremes are often excellent contrarian indicators.
Trading should be considered a business, and your rules should reflect good business practices. These would include adequate capitalization. Conservation of capital is your primary job. If you are under-capitalized, you are half way to the losers stall before you even start.
Over-Trading & You
Do not over-trade. This too will drain your energy, your attention to detail, your perception of price changes and the efficiency of your trade execution. Over-trading will inevitably drain your capital from your account to the guy on the other side of your trades, who you can be sure does not have his/her perceptions blunted. If you have this as your guiding star, chances are you will eventually succeed in this business. Preserving capital is closely associated with risk management, and I will address this in the five things you can do when there is evidence of market anxiety.
5 Rules to Trade By
1) Stick to a Trading System that has proved itself over time to be profitable despite losing trades. No system is 100% correct. It only needs to be correct 50% of the time if profits are substantially greater than losses.
2) Never Anticipate Your System. Let your system fully play out so that its various criteria are fulfilled before entering your trade. When in doubt keep out or if already in a trade, get out!
3) Always Use Stops; NEVER trade without them. Make it your practice to enter your stop loss trade before you enter your trade.
4) Never Let a Winning Trade Become a Losing Trade; use a trailing stop once your trade is showing a profit. Once a trade is showing a two-point profit, consider bringing in your stop to the entry price. Should the market unexpectedly reverse, it would be a scratch trade. After that, trail your stop two points for every two points prices move in your favor.
5) Trade with the Trend. Do not attempt to pick tops and bottoms to trade against the trend. Following these principles and spending the time necessary to create the psychological stability necessary to succeed is the most difficult part of this profession. Your goal should be to have the self knowledge and confidence that you unquestionably believe in your trades. Identify with Mark Douglas' dictum, "markets can't do anything to any trader who completely trusts himself to act appropriately, in his best interests, under all market conditions."
Best Trades to you,
_________
Larry Levin
Founder & President - Trading AdvantageOver trading is not good because if you are confident in your trade and you did not expect that you will lose your profit then you will be frustrated with it and that is not a good attitude of a trader.
Secret Trading Tip #2
Trade with a Plan – Setting Your Limits
I think trading with a specific plan is one of the most sensible things a trader can do. It helps you learn and identify key areas to watch for in a market. More importantly, it helps you avoid sabotaging yourself because it helps keep your emotions in check. One of the key components of a trading plan is knowing your exits. One way to close an open trading position is with a limit order.
Limit orders target a specific price level – they won't be filled unless the market trades there
Limit orders are pretty straightforward once you get the hang of them. They are contingency orders. The market has to trade at a specified price level before it is even possible for the order to get filled. Even then, there is no guarantee that it will get filled.
Limit orders say that the trade can be executed at a specific price level or better, but not worse
Buy limit orders are used for an exit strategy on open short positions. Use these if you sold a contract to enter the market. Sell limit orders are used in a plan to exit open long positions. They are employed if you bought a contract to initiate a trade.
Basic limit orders specify the market and the price level and the action to take.
For example:
Buy one December e-mini S&P futures contract at 1350.00 or better.
To be an effective limit order, the market would have to be trading above that price point at the time the order is placed. Why? Because if you were to put in an order like that and the market was already trading lower, it would already be a better price to buy at. That means the order would probably just be executed at the market.
The same kind of logic has to be played out when you are picking a price for a sell limit order.
For example:
Sell one December e-mini S&P futures contract at 1355.00 or better.
For this order to work as it is intended, the market must be trading lower than the limit price, otherwise it is already at a "better" price to sell.
Limit orders are likely the "happy" exit plan for a trade. They represent better prices than the market will be trading at the time you place them. That means if you enter a market and then place an exit order at a "better" price, you are probably aiming to exit at a profit.
Past performance is not necessarily indicative of future results.
Chart courtesy of Gecko Software.
Once the limit order has been placed (buy limit to close an open short position, sell limit for an open long position), it is just a matter of waiting to see where the market goes. This part of a plan can help traders avoid those mental traps where they ride trades just a little too long, hoping to scoop up extra. Limit orders can prevent you from getting greedy. If you have other working orders at the same time, don't forget to cancel them if the other orders are filled.
Traders can use limit orders as part of a complete trading plan that covers the potential for the good and the bad
Limit orders only come into play when the market trades at or through your limit price. Otherwise, they remain in waiting. If the market trades through the price, you can only be filled at your limit price or better. It's that simple. These contingency orders can also be used to enter a market position, but I often recommend they work as part of an exit plan for trade design.
Best Trades to you,
Larry Levin
President & Founder- Trading Advantage