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Trading Educators Blog

#1 Trading Blog Site
Feb
22

Money Management

There are some common mistakes I've seen traders make in the area of money management. First, let's understand what money management is all about. Money management overlaps with risk, trade, business, and personal management, yet it has many aspects that make it unique, distinctly different from all of the other areas of management. In this chapter we want to examine some areas of money management...

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  64 Hits
Feb
15

Don’t Deny Reality

If you want to be a successful trader, you must make sure you do not deny reality in any phase of your trading. You cannot deny losses, price direction, mistakes you make, being undercapitalized, or a whole host of things you would rather not think about. Many traders think the best way to deal with unpleasant ideas, events, or personal character flaws is to shut their eyes and pretend they don't ...

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  196 Hits
Feb
08

Repetitive Mistakes

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...

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  226 Hits
Feb
01

Overconfidence

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....

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  277 Hits
Jan
25

Paying The Price

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...

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  285 Hits
Dec
21

Limiting Your Winners and Letting Your Losers Run?

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 ...

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  579 Hits
Dec
14

Protection Against Risk

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...

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  667 Hits
Dec
07

Does Volume Figure Into Your Trading?

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'...

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  536 Hits
Nov
16

Finding Success

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...

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  785 Hits
Nov
10

Trading is a Tough Business

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, ...

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  667 Hits
Nov
02

Getting the Job Done

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. ...

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  692 Hits
Oct
26

Paralyzed

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...

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  720 Hits
Oct
11

Fighting Well

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...

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  701 Hits
Oct
05

Stop Losses

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...

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  739 Hits
Sep
28

Accentuate the Obvious

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...

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  664 Hits
Sep
19

Trying to Stay Detached

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...

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  703 Hits
Sep
14

Controlling Your Impulses

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...

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  705 Hits
Aug
24

E-Mini S&P 500 Q&A

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...

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  706 Hits
Aug
24

Signal Lines

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...

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  871 Hits
Aug
17

Volatility

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...

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  757 Hits

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.