Trading Educators Blog

Everyone is allowed to make one mistake. When the same mistake is repeated a second time, caution should be noted. The third repetition of the same mistake constitutes self-destructive habitual behavior that must be reversed.All trading must stop immediately until the trader's self-discipline is thoroughly examined. Once the reason for the repetitive mistakes&nbs...

When traders are "hot" and seemingly cannot lose, when they make several trades that perform exceedingly well, there is a surge of human pride. They feel like the pitcher who strikes out the other side for all nine innings of baseball. They feel invincible, brilliant, and like "master traders," to say the least. When a trader feels like that, he thinks he can do no wrong and make no mistakes....

You pay a price for every profit you take with time and effort required to obtain it. Not to mention the years of experience upon which your knowledge and methodology have been constructed. The slippage, and getting knocked out of a winning trade by one tick, cause a cumulative mental attrition that can be offset only by constant profits, vacations, and other interests not market-related. Tim...

Of course not! We hope for exactly the opposite. Just about anyone who traders or who teaches trading will tell you two things early in your conversation, "Trading is speculative, so only risk capital should be used," and, "Limit your losses and let your winners run." It makes perfect sense. You have to wonder why, with something so logical, we still find traders "letting ...

Making a profit in the trading world is hardly a sure thing. How you deal with this fact of trading, though, depends on your personality. Some people take risks in stride, while others obsess over them. Which type of person are you, a natural born risk taker or an obsessive, fearful seeker of safety? Life is a matter of taking risks, but some people embrace it while others superstitiously try to a...

I can't speak for others, but it didn't help me much in the past when volume was "a day late and a dollar short," back when only daily charts were available unless you were a floor trader. But these days, now that live volume is at your fingertips, it can indeed be a very useful tool. At Trading Educators, we use both contract volume and tick volume as guidelines and filters for our trading. Here'...

During trading, it's easy to think that no matter what you do, you won't make a profit. The markets can be brutal at times, and it's tempting to fall prey to a "victim mentality". However, such beliefs may paralyze you. It's more productive to believe that if you take control, you'll make a profit. Even if you have no real control, it helps: you take action, you plan, and think of some sort of str...

Even the most exciting job can become boring at times. Trading is a tough business. If you lose your passion for trading, all it means is that you are human. Here's an obvious cure. Why not take the rest of the month off? Make it your own personal holiday season. Maybe you're just stressed out. A little rest will help put things back in perspective. Once you are rested, relaxed, and re-energized, ...

Do you ever make big plans for the trading day, but fall short of your expectations? Maybe during the off-hours you decide to make a dozen trades, but when you get down to actually doing the work, you end up making only one or two trades. Do you procrastinate, feel overwhelmed, and feel like you are ready to crack under the pressure? If you're feeling overloaded, perhaps you've taken on too much. ...

Do you have trouble pulling the trigger? Do you doubt your decisions, or close out a trade before your trading plans come to fruition? Do you over-analyze data and end up missing a major market move? How many profitable trades have you missed because you have frozen at critical moments? If you answered "yes" to any of these questions, you may have a problem with analysis-paralysis. Putting your mo...

The outcome of a trade is never a sure thing. There's always an element of chance. When going long, for example, all indications may suggest a strong and solid trend, but it's possible that an unanticipated, adverse event could ruin it all. You can never know for sure what will happen. But that's okay. You don't need to have everything fall into place every time you make a trade. It's not the outc...

Poor traders see every loss as a failure. But small losses aren't failures. They are victories – victories against big losses. You must avoid big losses at all costs. Few can survive a big loss. Good traders know this: Losses are part of the game, and small losses don't matter. As a trader, having an exit strategy is vital to your success. If you stick to your exit strategy, it can serve as a near...

In the 1992 election, the stagnant economy was on everyone's mind, and obviously, focusing on change was a sure vote-getter. But humans have a tendency to forget the obvious. We often think that life is more complex than the issues right in front of us, and that obvious solutions offer little solace when trying to find solutions to seemingly insurmountable problems. The markets are complex at time...

Winning traders approach the markets with a detached, unemotional, and rational mindset. As much as you've heard me say it time and time again in Chart Scan, it probably doesn't help to merely remind you of this fact. Cultivating such a mindset is easier said than done. If you are a novice trader, you're bound to get emotional when you trade. Your money is on the line, and you want to win. As much...

When your money is on the line, it's difficult to remain calm, rational, and in complete control. What happens if you lose? How will you recover? It's natural to become consumed with self-doubt and abandon your trading plan, or act irrationally in the midst of the chaotic market action. But winning traders control their impulses. They execute a trading strategy effortlessly and flawlessly, even un...

Q: I bought your e-book "Day Trading E-Mini S&P 500" in 2012. Are there any changes or updates to original text due to market character changes, higher volatility etc. since last 10 years?  A: YES, THE BOOK HAS BEEN UPDATED BUT CHANGES ARE MINOR. I have some questions especially to the concept of 2 timeframes - 5-minute and 1-minute charts: 1. Q: Are these 2 timeframes adeq...

Hey Joe! Last week in your article about MACD, you talked about signal lines. What is a signal line? Is it the same as a Trigger Line? I'm sorry, I forgot to tell you what Signal lines are. Signal lines are used in technical indicators, especially oscillators, to generate buy and sell signals or suggest a change in a trend. Oftentimes, signal lines are moving averages of a technical indicator, suc...

Joe! The markets seem to be so volatile. It's really scary with all those wild swings! I don't usually write about investments, but the question has come up with regard to volatility. The tricky thing about volatility isn't its wild swings. It's that we want to believe these wild swings are meaningful, and they're not. With reverence to colored bars and candles, when we see lots of green in the ma...

Hi Joe! Is there a difference between Technical Analysis and Chart Analysis? Technical Analysis is a trading discipline employed to evaluate assets and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysts, who attempt to evaluate a security's intrinsic value, technical analysts focus on pattern...

Hey Joe! I know you use Stochastics quite often and I want to know why. Is there some "magic" to it? Is a Stochastic indicator better than any other? First, let's define what a Stochastic Indicator is: Stochastics is a momentum indicator comparing a particular closing price of an under lying asset to a range of its prices over a certain period of time. The sensitivity of the oscillator to market m...