David Faber Report on Stress Test / Danger For Regional Banks
April 23rd, 2009
What Spark the Global Financial Meltdown?
April 23rd, 2009
The Right Risk for the Trader
April 7th, 2009
It takes practice and experience to understand the difference between a calculated risk, and a careless and thoughtless risk. Being able to determine this is paramount to creating trading success as you should only take on trades that are within your risk constraint. Once you are able to both identify and act on appropriate risk trades, you will able to relieve yourself of the negatives of risk aversion or overly riskiness.
Risk aversion occurs when you are trading scared. By this it means you are shying away from trades because of the potential loss. Remember you will never know the outcome of your trade, but you can at least define the amount of risk you are willing to take. When you trade scared, you let emotions control you and often will stray from your trading plan. On the other end you can also become overly risky and end taking on trades you never should have. This occurs when you feel compelled to make profits and positive returns. You will force yourself in to trades and disregard whether or not they are right trade to make. In either state, the trader is letting emotions control them and ultimately hindering their trading progress and performance.
How to Handle with Risk Taking in Trading
April 7th, 2009
In the field of trading, there is a constant unknown. This unknown of course is the future movement of price. Although you may think you know where the price is heading, or what will happen next based on signals or patterns, there is no way to be 100% certain of this. However if you are able to come to terms with the fact you will never completely know what will happen, you can prepare yourself for what is ahead, and avoid the burden of worrying about the unknown.
An important part in mitigating risk of unknown is to have a set plan. Not only should your plan take in to account what you plan on doing right, but it should also take in to account the losing trades, bad weeks or months, and even forced and unforced errors. If you experience an unexpected loss that one thing, however when you also do plan for it or create room for error, then you place yourself in an area of extreme emotions and run the risk of adverse trading performance.
Learn to Love Losing
March 26th, 2009
Losses Happen, it is impossible to complete avoid losing trades. Accept the fact that you will have losing trades and focus more on how to cut your losses early. By doing this you allow yourself to limit your risk and ultimately increase your chance of succeeding as a trader.
Have you ever noticed how everything you read and see is geared on “how to make you money?” In trading however, it is many times more important to know how to not lose money than it is make money. This means focusing on controlling your losing trades, instead of having them control you. An old trading saying goes “Cut your losers and let your winners run.” If you can successfully do this, then you will drastically increase your chance of being a successful trader.
Even though you might know you should cut your losses, more times than not new traders have difficulty closing out losing position because they feel like a loser when they have a losing position. Instead of taking a small loss and moving on, they hope the position will turn around and disregard indications that the trade most likely will keep moving against them. In trading losing is a part of the game and not matter what you can not always be right. A good trader quickly realizes when they are on the wrong side of a position and quickly gets out. When you hold a losing position because you hope it will reverse, you are no longer trading, you are gambling, and in most cases the odds are stacked against you.
Learn to accept that you will not be profitable every trade, every day, even every week. In order to maintain any value in your account it is vital to control your losses. Have a limit to stop your losses before they get out of hand and stick to the limit. Take your emotional judgment out of the equation. Even if the trade eventually does reverse, it is better to get out and suffer a small loss than hang on and potentially suffer a devastating loss. The best traders are not always the ones who make the best winning trades, but more often than not are the ones making the best of their losing trades, and getting with as little damage as possible.
Focus Points for Successful Trading
March 26th, 2009
· Have a game plan. Without a plan or strategy you are ultimately ensuring your trading failure.
· Losing is a normal part of trading. Accept that you will have losing trades. Focus on how to control your losing trades, rather than trying to avoid making them.
· Stay true to your trading strategy. Focus more on sticking to your plan than making profit. If you have a sound strategy and stick to it, results will come.
· Learn to control emotions. It is impossible to completely eliminate emotions, however it is vital to understand how to have control over your emotions, and not have your emotions have control over you.
· Start slowly; do not rush your trading as it will affect your results. You will not get rich over night and until your are comfortable with both winning and losing you should
· Always manage your risk. Never risk more than you are willing or able to lose, you should always be prepare for the worst case scenario.
|
Top Tips to Maintain Your Psychological Edge While Trading |
||||||||||||||||
|
Average Swing
February 24th, 2009
It is always a good idea to know what an average swing on the stocks you trade. Calculation is very simple and gives you a good risk/reward ratio trades.
Study the last couple months on the stocks and write down how much a stock rallies before continuing its downtrend (from Low to a High) vise versa on an uptrend (from High to a Low) and then add them all up and average it.
You can use this number in 2 ways.
1) if you are in a trade and want to stay with the move, use a trailing stop little more then the average. (if your average swing is .35 use .40 or .45 as a trailing stop)
2) You can use it as an entry in a trending day. On an uptrend you can get long on a pullback when market gets close to your average and use a tight stop. ( if your average swing is .35 you can get long .30 pullback and risk .10 or .15. This is a high risk/reward ratio trade. You may be able to catch the next leg up.
What is a Squat Bar?
February 24th, 2009
Squat Bar is a good indication for a market reversal in a congestion market. Almost all charting programs have volume indicator, big volume in a small range bar (Range = H-L) creates a Squat Bar. The logic behind is very simple. If market can’t continue its trend with good volume, most likely it will reverse.
The psychology of trading
February 23rd, 2009
My name is Alberto Cruz and I am an instructor and senior trader here in the 5th Avenue Equity Trading Academy trading floor. My experience in the United States Air Force has given me the priviledge and experience of dealing with stress and emotions effectively, especially while overseas. However, the amount of training received in the military never prepared me for the constant fluctuations of prices in the stock market. Let me tell you right now that the ability to not be affected emotionally by the volatility of the markets isn’t an over-night achievement. Its takes time to become consistent in your trading and following by your specific trading rules with discipline. Its impossible to change human behavior and we will always be affected someway by our trades, but an astute trader will always meet his/her trading goal and know when to exit a trade regardless of market conditions.
The 5th Avenue trading floor gives junior traders the opportunity to learn alongside professional technical analysts who have over 20 years experience in the street. The guidence we offer is in real time while we ourselves have positions in the market and will always be available to uplift traders from uncertainty. The markets will always go up and down and the art of day trading allows a trader to profit not only while the markets go up, but also while the markets go down. Give it time and you will develop not only the discipline to pocket your profits and minimize your losses, but also to develop the confidence in your ability to trade.
Recent Comments