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Trading Educators Blog

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May
01

What is “walk-forward” testing?

What is “walk-forward” testing?
Walk-forward testing is the first real step in testing any system on live data. A trader should be somewhat confident that the system or method can produce results in line with the hypothetical results received from back testing. At this stage of testing, it's important to watch a trading system or method run over live data for a period of weeks or months until a large, statistically valid univers...
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997 Hits
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Apr
27

How to Handle Fear

How to Handle Fear
​The best way to handle fear comes in two steps: 1. A detailed trading plan 2. Risk control Let's look at risk control first. You have no doubt, read it many times: "Trade with money you can afford to lose." Here's another one: "Trade positions that are so small that you may think, "what's the point of even putting on the trade?"" One more: "Do not over-trade!" All of the above carry essentially t...
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Apr
22

Ready to Lose

Ready to Lose
Imagine what you would do in the following scenario. You have been looking at a position for a week. You had a clear and simple trading plan: Just wait for an announcement at the end of the week, watch prices jump, and then sell. As might be expected, things aren't working as you had planned. First, no clear trend has emerged; prices are moving chaotically up and down. Second, it's been two days s...
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881 Hits
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Apr
20

It's the Decision of the Market

It's the Decision of the Market
The market will tell you on any given trade how much money you are going to win (or lose, or break even). It will tell you this quite simply, by how well it is moving or not moving in your direction. If you think, contrary to this, that you have any influence on the outcome of the trade, or that you "deserve" to win more, you will probably overreach yourself. The market will let you know the range...
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680 Hits
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Apr
20

Being Flexible

Being Flexible
How flexible are you in your everyday life? When you are in a new city, do you worry about getting lost or do you just go your own way and assume that somehow and someway you'll eventually get back to your hotel? Do you get upset when you are told you are wrong, or do you welcome criticism or an opposing opinion? The ability to be open and flexible often makes the difference between winning and lo...
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Apr
09

Pulling the Trigger

Pulling the Trigger
"Sometimes I absolutely dread sitting down to trade. I have had so many bad experiences that I'm not sure I can pull the trigger. Anything I can do about it?"    What happens to us as we trade colors the way we see things in the market and influences the way we approach them. We take a big hit in a particular market and we decide never to trade there again. Or, when we have a great ...
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814 Hits
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Mar
23

Handling Success

Handling Success
In his book, "Trading to Win," Dr. Ari Kiev notes, "winning days are often followed by plateaus and losing streaks." Behavioral economist Dr. Terrance Odean observed that novice online investors who had a series of winning trades tended to have periods of overtrading. It's as if they believed they could take more risks, and potentially lose profits, since they had just made more than they expected...
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1042 Hits
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Mar
15

Take Advantage of New Market Opportunities

Take Advantage of New Market Opportunities
Something is usually going up when something else is going down. Therefore, good trading times may be just ahead. Are you ready? It's times like these when the right mental edge can make all the difference. If you want to take advantage of trading opportunities for the New Year, it's vital that you approach trading with the proper mindset. Be ready to work hard and do whatever it takes to come out...
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Mar
15

Pride Goes Before a Fall

Pride Goes Before a Fall
Next to lack of discipline, I find that pride has resulted in the destruction of many traders. Pride is a powerful emotion. Pride is what we feel when we've made a great trade or done something that makes us look good in the eyes of others. Trading is a tough business. Few traders succeed at it, so when you are doing well, you feel proud. But watch out! There come a time when pride can overpower y...
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1315 Hits
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Mar
07

Mounting Losses

Mounting Losses
There are at least three things you can do to avoid mounting losses: 1. Write off a relatively small loss 2. Admit your mistakes 3. Don't let the desire to protect your reputation interfere making logical trading decisions. The three are common human shortcomings, and you need to be aware of them. None of us are immune and if you are not aware of these weaknesses you will not be able to keep them ...
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1239 Hits
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Mar
01

Staying with Winners

Staying with Winners
When you are riding a winner, avoid looking at it all the time.Search out new trades in other markets.Absorb yourself with looking for opportunities elsewhere, if you are the type that must have market action.Diversification is the key word here.But remember, you can afford to take only the very, very best trades elsewhere when you are riding a winner.Don't blow away the profits you are making on ...
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996 Hits
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Feb
22

Finding a Balance

Finding a Balance
​Are you having trouble finding a balance between your trading and the rest of your life? Since you took up trading, do you seem to be possessed by it? Trading can be all-consuming. You don't seem to have time for your family, or any recreational activities. Is it always going to be that way? Have you gotten into something in which you are now trapped? What I'm describing is what happens to many p...
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1005 Hits
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Feb
22

Is trading futures gambling?

Is trading futures gambling?
​Trading futures is gambling only when you trade them without full knowledge of what you are doing. There is a good measure of self-knowledge required to choose the proper course to follow if you want to become a trader. It has even been postulated that many small traders in the futures markets, without knowing it, secretly want to lose. They jump in with high hopes—but feeling vaguely guilty. Gui...
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1240 Hits
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Feb
17

Safe Trading

Safe Trading
​Humans don't like taking chances with their money. If given the choice, they would take a sure thing rather than a gamble, even if it meant making relatively little profit. What do you think most people would do, take $100 right now or take a gamble in which they would either receive nothing or $200? Most people would take the $100 but would you? If you trade the markets as a short-term trader, y...
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1201 Hits
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Feb
17

Stress or just Excitement?

Stress or just Excitement?
There is a tendency to become overemotional when trading. Overcoming the propensity to play emotionally requires a conscious commitment to specific trading objectives. This entails choosing a target, developing a strategy, and finding a method for adhering to it. A goal enables you to keep a relatively even keel through good and bad periods, to sustain momentum, and to keep from becoming bored. Of...
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1009 Hits
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Feb
08

Why do some traders make money with seemingly effortless confidence while others sweat bullets every time they act?

Why do some traders make money with seemingly effortless confidence while others sweat bullets every time they act?
We sometimes delude ourselves into thinking that the most successful traders somehow were somehow born different from the rest of us. We imagine they were born to win no matter what they did. But if that were true, you would also have to believe that those who succeed tend to do so because of their genes, social background, or luck, and not because they pursued success with more diligence, patienc...
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1042 Hits
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Feb
07

Contagious Behavior

Contagious Behavior
​People have a natural affinity to follow others. It can be very adaptive at times. If you see someone slip on an icy sidewalk, for example, it would be wise of you to start walking slowly and carefully to protect yourself from getting hurt. People are so attuned to others that they mimic their behaviors without knowing it. Psychologists call this phenomenon contagious behavior. Contagious behavio...
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Feb
01

Seeing what you want to See

Seeing what you want to See
Some people live in a world of delusion and fantasy. They see what they want to see and ignore what they don't want to see. Traders are especially prone to this ailment. When your money is on the line, you are consumed with avoiding loss. Trading is a competitive business where few make it in the long term. This fact always lurks in the back of your mind, putting added pressure on you. In the back...
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989 Hits
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Feb
01

What should I do after closing out a trade?

What should I do after closing out a trade?
You must be disciplined in following the plan of your trade religiously. Once you have closed your position, you should record everything about the trade. Write down where you wanted to enter the trade, what you expected out of the trade, and what you actually did get out of the trade. Make sure to include notes that will help you learn from the trade, reasoning what actually took place once you e...
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1161 Hits
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Jan
25

Stress and Vulnerability

Stress and Vulnerability
Many traders underestimate the influence of stress. Stress is not only a psychological reaction, but a biological response as well. When you are stressed, your body reacts instinctively. You are agitated, on edge, and ready to lash out. Your attention is restricted. Your mind is closed and inflexible. The stress response has a specific biological, adaptive function: Your energy is channeled into m...
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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.