Time Duration Secrets to Profitable Day Trading

According to our extensive hands-on futures market research, most successful day-trades last about 7-minutes. That assumes the trader is using a reasonable profit objective and exiting the trade as his profit target is hit.

Most losing day trades last approximately 45-minutes on average, when the trader finally exits out of the losing trade. That’s because the trader relies on hope once he sees the trade losing money. The trader hangs-on to the losing trade position relying on hope the market will change trend and turn in his favor. However, eventually the equity loss becomes too large which finally forces the trader to exit the trade and take a big loss rather than possibly lose even more money by hanging on even longer.

Are you wondering how this little known information can help you trade the markets profitably? The short answer is at the end of 7-minutes in the trade you might consider getting out regardless of the fact your profit target was not hit or you have a loss at that time, keeping in mind the more past 7-minutes it goes the less likely the trade will be a winner.

Insights For Search Predicts Real Estate Collapse

In the past we have posted several times about how financial market traders can use relatively simple chart patterns involving higher-swing-lows and lower-swing-highs to successfully trade the stocks & commodities markets, options market and with other investing.

I was doing research on this powerful trading concept this morning and was thinking the incredible real estate market decline could be a good example of how well it can work. Therefore, I went to Google’s “Insights For Search” and searched for “MLS Listing” which is a widely used real estate term by home buyers and sellers.

This is the explanation of how Insights For Search works from Google: “Google Insights for Search analyzes a portion of world-wide Google web-searches from all Google domains to compute how many searches have been done for the terms you’ve entered, relative to the total number of searches done on Google over time. You can choose to see data for select Google properties, including Web search, Images, Product search, and News search.”

The Google Chart displays the most perfect long-term examples I have ever seen visually depicting the great power of swing highs and swing lows. Starting in 2004 the chart shows a series of 8 important swing highs and 6 major swing-lows. Of particular importance is the Dec 06 swing low which broke the old support level established Dec 05 by that major 2005 swing low. Once that old support level was broken in Dec 06 it conformed a major real estate bear market. The market is believed to be the most severely depressed real estate market of all-time, especially in areas of the U.S. such as Arizona, Nevada, California and Florida.

If you were buying/selling real estate the chart clearly shows starting in the year 2005 you should have been selling (not buying) real estate based on the important July 2005 swing-low (which you knew about at the end of August 05, and was confirmed Nov of 2005 which was the month the previous major swing-low was confirmed. The next series of 4 major lower-swing-highs which were in mid-2006, mid-2007, and early-2008 and 2009 confirmed the bear market was ongoing and getting even stronger.

The strong nationwide real estate decline started in late summer of 2005 in several Sunbelt states at the end of Aug 05 (at least according to my knowledge and statistics). However, it got underway a little later in other areas of the nation and the media often reports the bear market started during the year 2006. In my opinion this chart is one of the most picture book perfect and accurate examples of how powerful swing-highs an swing-lows can be. It is something you should always look at and take into strong consideration while trading the markets or investing.

Trading Method for Trading Stocks & Commodities

If there is one single trading technique which can best lead to profitable trading of stocks and commodities it would probably be the concept of using swing highs and swing lows, which is based on relatively simple chart patterns.

The swing high and swing low trading method is based on the observation if you look at a chart of any market you can easily see a down-market consists more of a series of lower swing highs and an up-market is mostly a series of higher swing lows (which swings are also known by the trading term pivot-points).

A swing-high is a high day (or price bar) with lower bars both in front and behind the high bar, thus forming a swing-high. This swing-high must also be under the prior swing-high which results in a lower swing high.

A swing-low is low day (or price bar) with higher bars both in front and behind the low bar), thus forming a swing-low. This swing-low must also be above the previous swing-low, which becomes a higher swing-low.

Buying or selling swing-lows and swing highs are used by many successful traders. This concept has been used by them for a very long time. Simply buying higher lows and selling lower highs by themselves can improve your overall trading results, especially when combined with other sound trading principles, including use of powerful drawdown minimizer logic stop-loss techniques.

Time Duration Trading Secrets & Statistical Validity

Secrets of time durations of profitable & losing day-trades

Most successful daytrades last approximately 7-minutes. That typial trade duration assumes the trader is using a reasonable profit objective and exiting the trade as his profit objectivegets hit.

Most losing day trades last about 45-minutes. That’s because the trader relies on hope once he sees the trade looking like a failure. So he hangs on to the losing trade hoping it will turn, finally the loss becomes too big forcing him to exit the trade after being in the trade for a much longer time than originally anticipated, mostly due to relying on hope.

How many trades are needed for good statistical validity?

Lots of stocks and commodities traders ask how reliable their track-record may be as far as statistical validity goes. They may see some statistics on seasonal trades showing a market was mostly uptrending from April to June during 12 of the last 14 years, for example. The same traders may have experience with their own trading system showing 8 of 9 winners following say a 5-unit moving average crossing over a 9-unit moving average.

None of those scenarios are valid from a statistical validity standpoint. That’s because according to mathematical experts and statisticians a minimum of 30 occurrences are needed for good statistical validity. Please keep this in mind when evaluating a trading system or trader metholodology. Anything less than 30 samples will not be statistically accurate.

Predicting Monday Prices Based on Friday Price

Does Friday’s Stock, Options or Futures Price Action Predict Monday’s Price Movement?

Is it possible a market trading methodology or trading system can be profitable based on a simple trading method involving Friday’s prices to successfuly predict the opening price on the following Monday?

This trading pattern does not appear every single week but it’s often reflected in the financial markets. And when it does appear, the following Monday’s prices tend to perform in a predictable manner, possibly leading to trading profits got you.

The trade setup uses the opening and closing prices on Friday to trend in the same direction. Interim price movements and trend directions are not relevant for this trading method.

Stocks and commodity price openings don’t need to go too far past the first several ticks, as a price-gap which quickly reverses is sufficient for the purposes of this trade method, but that’s the direction the closing price needs to trend.

Monday’s opening price is likely to first start trending in the same direction at the opening of tradding vs the pattern of the two prices Friday moving in the same direction as each other, then Monday’s open is likely to start trending in the same direction imediately after the opening occurs.

Do your own technical narket analysis of old market price action based in one-minute bar-charts or real-time tick-charts to view the price action and weekly market trading patterns. You will see it sometimes does not work all weeks but does appear to be better than 50% reliable.

This simple but interesting trading method may work particularly well involving commodity futures trading in addition to stock market and foreign exchange market trading of the Forex Futures markets. Iy has not been tested in the futures optiosn maret but there is a good chance it will work there too.

Simple but Excellent Commodity Trading Method

It involves buying so called higher swing-lows and selling so-named lower swing-highs. Also known as pivot-points. A definition of these swing-highs and swing-lows is appropriate here: A swing-high is a high bar with lower bars on both sides the bar. Whereas, a swing-low is a low bar with higher bars on both sides.

The more lower bars to the left of a swing-high the better. The more higher bars to the left of the swing-low the better. That makes them more significant and presumably more powerful swing points. However, only one bar on either side is still acceptable (but two or more to the left are usually stronger trade signals).

My trading methodology requires two (or more) consecutive swings, with the second one being a higher swing-low vs the preceding one for a buy. Alternately, the second swing-high needs to be to be a lower swing-high than the preceding swing for a sell signal.

The actual going long trade entry takes place on a buy-stop 2 ticks above the high price of the last bar (the bar following the swing-low pivot bar), for a buy. The short trade signal takes place on a sell-stop at 2-ticks under the lowest price of the last bar (the bar following the swing-high pivot bar), with a sell.

Your stop-loss order is placed 6-ticks under the lowest price of the last swing-low bar on a long trade. The short trade stop goes 6-ticks above the highest price of the last swing-high bar.

It’s possible for you to make excellent commodity futures profits from using this simple, but very effective trading methodology. Authored and Copyrights by David Green. All Rights Reserved.

Amazing Method for Reducing Trading Risk of Loss

This Special Report reveals an amazing method we can teach you to reduce risk of loss when trading the financial markets by staying in good trades, but trading with small stop-loss orders to avoid large trade losses.

Always using a stop-loss order is normally critical to commodity futures trading success. The most famous stocks and commodities trader of all time, Mr. William D. Gann, said repeatedly in his books and commodity course that it’s always critically important to place a stop-loss order on each trade you make. That way bad signals and losing trades will not likely wipe out your trading capital, thanks to your stop-loss order giving you some protection.

Most trading systems and trading methods require fairly large stop-loss orders. That is because stops are frequently based on one or more of the following logical (but frequently ineffective) trading methodologies:

Place a stop-loss order at a pre-determined percentage of the true daily trading range. For example, if the true daily range or average of recent true ranges (High minus Low, plus any gap between prior close and today’s low or high) is say 83 points, then the stop may be set at perhaps 120% of that range or about 100 points. In the Deutsche Mark that equals $1,250.00 stop, plus any price slippage..

Another method is by placing a stop-loss just under the last swing-low or pivot-low. Note: A swing-low is a low point with higher prices on each side. For example, if last swing-low was at 7650 and price moves up for a few days to say 7750, then triggers a buy signal, stop may be placed just under the low price of the low day, perhaps at 7649. Unfortunately, that example means a potential risk of over 100 points ($1,250.00+). Of course, the reverse is also applicable on a sell position, with the stop being just above swing-high.

Using a moving average penetration as a stop, i.e., place a stop on a long trade at just under a simple moving average, possibly based on a 9-day average. The trouble here is that if we entered long at about 77.50, by the time the moving average is penetrated by the price, the moving average may be well below the market (due to its inherent lag-time), at 7600 or so. That results in a stop-loss at 7599 stop, and a risk of about $1,900.00.

One more stop-loss trading approach is to place a stop order under last week’s lowest price. This method may be even riskier because last week’s low may be 7550. That requires a stop of 7549 or lower, and a risk in excess of 200 points or over $2,500.00.

Another simple and a completely unscientific trading approach is known as a "money stop." It involves setting an usually arbitrary stop based on either the maximum money you wish to lose, or stop based on a reasonable sounding number of points or dollars.

As an example, psychologically you may not want to lose more than $1,000 so you set your stop at a price equaling $1,000 loss potential. That number is arbitrary, so it may turn out to be either too small or too large, depending on the volatility and the market involved. For example, perhaps it’s too small a stop for T-Bonds when they’re volatile or too large when they are dull. If using the $1,000 stop-loss in the Corn market or another low-risk low volatility market, it may be too large a stop to use.

By now you may be asking if there’s a better way to set market stop orders more scientifically and with better reliability and accurately, thus enabling me to keep risk low and still avoid getting "stopped-out" needlessly and stay in the potential winning trade?

The good news is a big YES, there is a way to do much better. By using Webtrading’s "Drawdown Minimizer Logic." Drawdown Minimizer Logic is an amazing and proven way to set stop-loss levels very tightly to guard against large losses, yet keep the stop scientifically and strategically placed just far enough away to prevent premature hitting of the stop-loss; thus keeping you in most trades instead of being stopped-out at a loss. Don’t worry if this methodology seems too technical, because it’s basically simpler than it appears.

You may be wondering if our confidential “drawdown Minimizer logic” stop-loss methodology will be disclosed? Yes, we are willing to reveal this secret ingredient to commodity futures trading success to traders who sign-up to our news feed. That is how you can soon learn about our incredibly valuable information which can lead to making-money trading the financial markets…

In the upper right area of this web-page you will see a signup area which says “Sign up to receive breaking news as well as receive other site updates!” Simply add your email address and click go. We plan to reveal the details about how you can access the information in the near future, so please be patient as you wait. And by the way, I promise your email address will be kept confidential, never shared with anyone, or published anywhere and you will not receive too many emails.

Announcing 2 More New Websites Now Developed

We are announcing a few more websites which are now online. One of the new sites is a domain name we just obtained and revolves around daytrading of stocks, commodities and futures with the keywords in the URL working nicely since financial market traders are obviously always looking for the Best Daytrading Software The web site has its own free custom newsletter subscription link and a cool RSS Feed capacity plus some customized content. Go here: Best Daytrading Software…

Another site we are announcing is Commodity Daytrading This is actually a very old domain name we have owned since Dec 12 1999 which is almost like a light year as far as the fast moving Internet goes. For almost 10-years the domain name was used mostly as a forwarding domain which redirected to one of our other trading sites.

Recently we realized the great power of the two financial keywords (Commodity and Daytrading) so we developed the web site ouselves and will be adding more and more features and content to it as time goes by. Please pay a visit here to Commodity Daytrading where you can also get a free online corn market trading method which you possibly can use to make money with by trading the method.

The new site already ranks #3 in Google for the words “Commodity Day Trading” and ranks #1 for “CommodityDaytrading” with an extremely strong #6 ranking based on a staggering high 13-million results for Commodity Daytrading used without the tight requirements of using quotes. Here are the Google results

Technical Analysis Chart Pattern Trading Tips

Technical Tips from Dan Gramza. Hello everyone, this is Dan Gramza and welcome to Gramza Market Studies Technical Tip.

Well today we’re going to be talking about selling market rallies. Now what does it mean when people say “sell the rally” when you want to get into a commodity, stocks or options trade? Or they sell a pull-back? Or you hear things like, “The Trend Is Your Friend?”

We’re going to explore this here in just a minute. I want to show you the trading technique and I want to show you some examples of how these trading markets behave in those settings.

 I want to show you an example, but before I can talk to you too much about this example I need to define a few things for you.

First candlesticks technical analysis… the approach I use with Japanese candle charts, and that is what you’re looking at here, is not the standard approach. So from my perspective, I don’t focus on patterns, I focus on chart behavior. If we see a green candle that represents buying it means the closing price is higher vs the opening price.

If you see a red box which represents selling it means the closing price is below the opening price. If you see a white line on top that’s called a shadow, I think it represents selling. If you see a white line on the bottom that pattern represents buying. Now with that in mind, the sizes of the bodies and the shadows tell us about the degree of market buying or selling.

Now let’s talk about this trade set-up here… To get the rest of these trading-tips, please visit the link below and WATCH me here: http://www.ino.com/info/36/CD159/&dp=0&l=0&campaignid=9

A Money-Making Potential Futures Trading Method

This important commodity futures trading technique should help you greatly to trade the futures markets profitably (assuming it is applied correctly). This market structure trend direction prediction method is esentially a pattern recognition method which is basically simple but at the same time it’s powerful, with great potential for trading profits.

It’s the best way we have found to identify commodity market direction and define a bullishly or bearishly structured market. It is based on the observation that if you look at a bar chart of any market, you will see a bear market consists of mostly a series of lower highs and a bull market consists of mostly a series of higher lows.

These higher-lows and lower-highs are referred to by Commodity Traders Club as Swing-Lows and Swing-Highs, also known as Pivots, or Pivot-Points.

A swing-low is defined as a low day (or bar) with higher prices both in front and behind the low day (or bar), thus forming a swing-low. This swing-low must also be above the previous swing-low, thus forming a higher swing-low.

A swing-high is defined as a high day (or bar) with lower prices both in front and behind the high day (or bar) forming a swing-high. This swing-high must also be under the prior swing-high thus forming a lower swing-high.

The concept of buying higher swing-lows or selling lower swing highs is used by the most successful large futures traders. This concept has been used by them for a very long time. These traders don’t talk much about this simple but potentially profitable technique. Very few traders are familiar with this powerful, yet relatively simple trading technique.

Merely buying higher lows and selling lower highs by themselves can dramatically improve your trading results. You also need to know where to place a target so you can get out of the market once your profit objective is reached. You need to know where to place a protective stop-loss if the trade is wrong. For this we strongly recommend you use "Drawdown Minimizer Logic®" which is explained in detail in a prior CTCN Special Report. Drawdown Minimizer Logic is a mathematical method of sharply reducing drawdown based on past "adverse excursions."

A sample chart showing how to use swing-highs and swing-lows (a.k.a. market structure) to trade successfully is available on request.

The concept of only selling short providing a LOWER "Swing-High" has occurred, and only buying upon the occurrence of a HIGHER "Swing-Low" can be very profitable.

This method appears highly profitable when used on old charts, using a bit of subjectivity on the past data. Old charts and hindsight combine to make it look highly profitable. However, doing it in real-time trading is more difficult.

Selling, providing there are 2 or 3 lower days (or bars), instead of just one on each side of a high point qualifies as a more significant Swing-High, and can be very profitable. Of course, the reverse is true for a Swing-Low buy. The more days (or
bars) on each side of the swing day (or bar) is better to better define the Swing-High and Swing-Low.

The problem is the fact the more days (or bars) on each side there are, it’s likely more of the move is over by the time we can get into the market. Conversely, the fewer days (or bar-chart bars) of each side of the pivot bar means the move has likely not progressed far. However, it’s more likely to be a false or minor Swing-High/Low and consequently less profitable,
or an overall loser.

It’s fairly easy to identify and draw buy and sell arrows or dots at Swing-High and Swing-Low points on charts. However, doing it in real-time trading is not as easy as it appears on a back-data bar chart.

Nevertheless, the Swing-High and Swing-Low concepts (a.k.a. Market Structure) are in our opinion the best trend identification tool for trading the commodity futures markets successfully. It will "work" in any market, the actual market makes little difference. Of course, as always, trending markets make it work a lot better.

The concept of buying/selling Swing-Lows/Swing-Highs is simple and can be amazingly successful but needs to be combined with a good stop-loss method to give you protection on false signals. It’s recommended you use CTCN’s copyright "Drawdown Minimizer Logic®" to scientifically set stop-loss levels. "D.M.L." is used by CTCN’s Swing Catcher® technical analysis software system.

Amazing trading 100-yrs ago by William D Gann

It has been asked in phone calls and emails if there is a method to predict futures markets turning points based strictly on
numbers and charts. The only way we know how to do this is to Square Price & Time and to draw Geometric Gann Angles using “Square Charts”, as outlined in our W D Gann Trading Course.

We also have some great reprints of old articles about W. D. Gann, the most famous stocks & commodities trader of all time. Here is part of a fascinating article about Gann written in 1909 by a newspaper which later became known as The Wall Street Journal.
“It is very difficult for me to remember all the predictions and operations of Mr. Gann which may be classed as phenomenal, but the
following are a few. “In 1908 when the Union Pacific was 168-1/8, he told me it would not touch 169 before it had a good break. We sold it short all the way down to 152-5/8, covering on the weak spots and putting it out again on the rallies, securing 23-points profit out of an 18-point wave.”

“He came to me when United States Steel was selling around 50, and said, “This Steel will run up to 58 but it will not sell at 59. From there it should break 16 points.” We sold it short around 58 with a stop at 59. The highest it went was 58. From there it declined to 41-17 points.”

“At another time, wheat was selling at about .89¢. He predicted the May option would sell at $1.35. We bought it and made large profits on the way up. It actually touched $1.35.” “When Union Pacific was 172, he said it would go to 184-7/8 but not an
eighth higher until it had a good break. It went to 184-7/8 and came back from there eight or nine times. We sold it short repeatedly, with a stop-loss at 185, and were never caught. It eventually came back to 17.”

“Mr. Gann’s calculations are based on Natural Law. I have followed his work closely for years. I know that he has a firm grasp of the basic principles which govern stock market movements, and I do not believe any other man can duplicate the idea or his method at the present time.”

Early this year, he figured that the top of the advance would fall on a certain day in August and calculated the prices at which the Dow Jones Averages would then stand. The market culminated on the exact day and within four-tenths of one percent of the figures predicted.” “You and Mr. Gann must have cleaned up considerable money on all these operations,” was suggested. “Yes, we have made a great deal of money. He has taken half a million dollars out of the market in the past few years. I once saw him take $130, and in less than one month run it up to over $12,000. He can compound money faster than any man I have ever met.” (Editor’s Note: these figures are based on 1909 Numbers)

“One of the most astonishing calculations made by Mr. Gann was during last summer [1909] when he predicted that September Wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o’clock, Chicago time, on September 30th (the last day) the option was selling below $1.08, and it looked as though his
prediction would not be fulfilled.

Mr. Gann said, ‘If it does not touch $1.20 by the close of the market it will prove that there is something wrong with my whole method of calculation. I do not care what the price is now, it must go there.’ It’s common history that September Wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of trading, closing at that figure.”

So much for what Mr. Gann has said and done as evidenced by himself and others. Now as to what demonstrations have taken place before our representative: During the month of October, 1909, in twenty-five market days, Mr. Gann made, in the presence of our representative, made 286 transactions in various stocks, on both the long and short side of the market. 264 of these transactions resulted in profits – twenty-two in losses.

The capital with which he operated was doubled ten times, so that at the end of the month he had one thousand percent of his original margin. In our presence Mr. Gann sold US Steel common short at 94-7/8, saying it would not go to 95. It did not. On a drive which occurred during the week ending October 29, Mr. Gann bought Steel common at 86-1/4, saying it would not go to 86. The lowest it sold was 86-1/3.

We have seen him give in one day sixteen successive orders in the same stock, eight of which turned out to be at either the top or the bottom eighth of that particular swing. The above we can positively verify. Such performances as these, coupled with the foregoing, are probably unparalleled in the history of the Street.

James R. Koene said, “The man who is right six times out of ten will make a fortune.” He is a trader who, without any attempt to make a showing, for he did not know the results were to be published, established a record of over ninety-two percent profitable trades. Mr. Gann has refused to disclose his method at any price, but to those scientifically inclined he has unquestionably added to the stock of Wall Street knowledge and pointed out infinite trading and investment possibilities.

The complete William D. Gann article and others are located here

How to Obtain the “House Advantage” in Trading

How to Obtain the “House Advantage” by Dave Reiter.

I have received phone calls from several CTCN members who were interested in receiving additional information on my various trading methods and techniques. Therefore, I will try to expand on my previous article.

As I mentioned in my previous article, most of my trading is based on repetitive price patterns. My goal is to locate trades which will offer me a slight advantage over the markets. In other words, I want to “tilt the odds” in my favor on each trade that I initiate.

During the past four years, I have developed two trading methods based on the principle of repetitive price patterns. One method is based on long-term price patterns and the other method is based on short-term price patterns. Please allow me to briefly explain each method.

I’ve been trading my long-term method every day since 1992. As you know, from reading my previous article, this method generates about 8 -10 trades per month. On average, each trade is held 4 to 5 weeks.

The reason this method has produced consistent trading profits for the past 36-mos is because it’s extremely diversified. It trades many markets (currencies, energy, financial, grains, meats, metals and softs). Whenever I’m losing money in one sector, there usually is another sector that will “pick up the slack.” About two months out of each year, all of the sectors are making money at the same time. Obviously, that’s when I accumulate most of my yearly profits. Unfortunately, I’ll also experience a 2-mo period when each sector is losing money simultaneously.

It’s no “big secret, that a large number of commodities will move in a very predictable pattern during certain times of the year. However, I’m convinced that most traders are not completely aware of these trading patterns. For instance, most traders (particularly novice traders) probably think that grain prices rise during the summer (June thru August). However, this is simply not the case most of the time.

If you go back over the past 15 years and examine the price patterns for Corn (for instance), you will find that corn prices will have a definite bias to the downside over 70% of the time throughout the summer months. Therefore, l always look to short the Grains from June thru August because the “odds” are on my side. This is the underlying basis of my entire trading method.

This is just one example. I have dozens of other trading patterns that I use each year throughout all of the commodity complexes. The “secret” to success of this trading method is the fact that all of my trades have a greater than 50% chance of making money. Once again, the “odds” are on my side.

My short-term trading method is based on the belief that most markets will “gap open” in the direction of the previous day’s closing trend. To profit from the gap opening, I must find a simple way to determine the market’s current trend and establish a position before the market closes. My goal is to liquidate the trade during the next day’s opening range; hopefully with a good profit.

Of the two trading methods, I like the short-term method better because the equity curve is much smoother than the long-term method. However, the long-term method has greater profit potential and is much less time-consuming to trade.

In February, I sent Mr. Green a copy of my account statements and 1099 forms to verity that I have made over $150,000 during the past-36 months as a result of using these trading methods. However, I did (as Mr. Green stated) “cover up” the individual trades from my account statements.

Editor’s Note: I have found out that some members were somewhat suspicious or doubted the profit claims because the specific trades were blocked-off. The fact Mr. Reiter chose to block-off or cover-up the details of his trades on his brokerage statements does not necessarily detract or cast suspicion on his profit claims.

I did that because my trading methods (as you know) are based on repetitive price patterns. Therefore, many of the trades that I took last year, I will also takenext year. In order to “protect” my trading method, I “deleted” all trades from my account statements and simply showed the net profit/loss for each month. I am in the process of writing a trading manual, which will explain all of my various trading methods and techniques. When the manual is completed, I intend to send a copy to Mr. Green for his review.

I’m always looking for new trading ideas and methods. As you know, the markets are constantly changing and we need to keep up with those changes. Good luck with your trading.

The Truth About Trading – Traders Article #3

Still another reason traders lose, many follow Time Cycles. Cycles do in
fact exist in the markets. For example, Live Cattle may have a reliable long
term cycle of 9 to 11-months, low to low. The Stock Market, Wheat or T-Bonds
may have a short-term cycle averaging 28 to 30-bars, measured from low-to-low.

The problem is sometimes the cycles may come early or late, or skip a beat
entirely. For example, you buy on day number 30 at a price of say 3100,
thinking the low is now at hand because the average is 28 to 30-bars and the
market closed near its day’s high on day-30.

However, because of either fundamental or technical reasons the market’s
cycle this time will run 35-bars (a common occurrence). During those 5 extra
bars, the market goes down sharply to 2900 and below your stop-loss point
forcing you out of the trade at a large $1,000.00 loss. Shortly thereafter, the
cycle bottoms and the expected move occurs . . . but too late for you because
you are out of the market by then!

Alternatively, you buy on day number 30, but you did not realize the low
ALREADY happened (4-bars earlier) and at a lower price. You actually ended up
buying (without knowing it) 4-bars into the NEW cycle, and at a higher price.
Because of that, the market goes up only slightly higher for just 1-bar and
then drops sharply because a 12-bar cycle (you perhaps were not aware of or not
tracking) is now coming into play, and effecting the 30-bar cycle you are
trading. The 12-bar cycle makes the 30-bar drop down and forms a double bottom.

This forces you out of the market because of the sudden loss, stop being
hit, or lack of discipline, etc. If your thinking why not trade the 12-bar
cycle, forget it, because there’s likely a 6-bar cycle effecting the 12-bar
cycle, and a 3-bar cycle effecting the 6-bar, etc. Note: Many traders are not
aware of the fact there are usually one-half (50%) time-cycles within every
cycle.

Still another all too common happening is the cycle "skips a beat"
and simply disappears for one repetition. The next cyclic repetition works
perfectly, but by then you are out of the market with a loss and disgusted and
not even following the now working cycle!

Is there a way to solve these problems with cycles? Yes, don’t use cycles at
all, or perhaps use them in conjunction with other sound methods or technicals.

Still another reason many traders lose, they follow SEASONAL TENDENCIES or
subscribe to Seasonal Newsletters, or use Seasonally based Trading Systems.
There is no question that Seasonals exist in the markets. This is particularly
true in Agricultural where seasonals are very well documented. Seasonals also
appear in financials, but not as reliable as agricultural. Seasonals work
because of fundamental reasons, frequently tied to the growing season or the
weather.

However, it’s very hard to make money using seasonal data, regardless of the
history of the seasonal tendency. That is because like cycles, sometimes
seasonals can be early or late, or worse yet not work at all, also known as a
"contra-seasonal move."

A perfect example of a contra-seasonal move, are major bear markets in the
grains occurring a couple times during the past several years. According to
extensive and well-documented research going back to the 1800’s, the grains
should move up during late Spring and early Summer. However, at certain times
in the 1990’s they trended sharply down, when they should have been trending
steadily higher according to the seasonals.

Unfortunately, the seasonal experts will be mad about this, but probably the
best way to deal with seasonals are to ignore them, especially in markets other
than Agricultural markets. Note: Occasionally Seasonal characteristics may be
used successfully as a way to enhance or compliment other methodologies. There
is no doubt the commercials can tell if the seasonals are early, late or
contra-seasonal, but they keep that information to themselves!

Another major problem is you or your system can trade good, but selects the
wrong market to trade!

A very common happening. If the market is either far too volatile or on the
opposite extreme too dull or flat and sideways, the best system in the world
will have great difficulty.

Commonly a system or trader gets "married" to a particular market
or market group. For example, perhaps the system is advertised to trade only
Coffee or only S&P, etc. The System may do well if that particular market
is acting good or trending well or steadily. However, once that market gets
either too choppy or flat, that system, no matter how valid the algorithm will
very likely lose money or not make money.

What can be done about that problem? Figure out a way to trade only good
trending markets. Use software which has a built-in Portfolio Manager and
Automatic Trend Ranking Module which selects based on proven scientific
methodology, the best markets to trade.

One requirement to do that effectively is to have a trading system which
uses the same methodology (patterns) to trade all markets. Still another
requirement is the system should be able to select from widely diverse markets.
By tracking a number of diverse markets, you can expect about 30% (or more) to
be performing or trending well at any given time-frame.

At MarketClub, the mission is to help you become a better trader. To create superior trading tools to help you achieve your goals. No matter which way the markets moves we promise objective and unbiased recommendations not available from brokers. Click-Here for Market Club Tools For The Trader, Free Trial.

The Truth About Trading – Traders Article #2

Still one more common reason for a traders failure and trading losses, is you may be right on a trade, but don’t know when to exit the position and take your profits. More often than you would believe, a trader has excellent profits, but ends up giving back all or most of the open equity profits because of not knowing when to get out!

For example, a trader is long at 62.40 and the price moves to 63.90 for a huge open equity profit of say $1,800. He has held the position for a few bars, but after looking at the bar-chart and the powerful price up-move, he decides the market’should easily go to 64.40 within the next day or two. That way his profit will’be $2,500., much more than the current profits of $1,800.

Perhaps the next day the market goes to 64.30 (just slightly under his’objective) but ends up closing "weak" because it’s’"over-bought," and closes for the day at 63.92. The trader is mad’about giving up some open profits so hopes it goes back to at least 64.30 again’the next day. Unfortunately, some bad news comes out overnight and the market"gaps" down on the next opening and opens at much lower at 63.00.

The trader still hopes for an intra-day rally to get back some of his lost’open profits, instead it goes lower all day and the trader finally gives up’hope and gets out at a break-even price of 62.40. Because the market was "over-sold," over the next couple bars it eventually recovers back up’to the anticipated 64.40 price, but the trader is now out of the market with no profit! This type of scenario is all too common an occurrence. To varying degrees, this happens more often than you would believe!

One solution to this problem is for the trader to take small profits or not use specific targets and place very tight trailing stops just under the market. This is poor practice because you will end up getting stopped out with very small profits most of the time. That will result in your average winning trade being quite small compared to your average losing trade, resulting in poor results.

The best alternative is to use targets scientifically based on the market’s volatility. Unfortunately, not many trading systems do that. Ideally, a system should have each and every trade uses a specific and dynamic target price based on the market’s actual recent volatility. With a dynamic approach based on volatility and past bar size, the market itself will reveal how far a move should progress, based on actual movement and recent volatility.

Still another reason many traders lose, is because they are using a trade methodology or trading system which is NOT in actuality fully mechanical, but its trading track-record does not reveal it’s not mechanical. For example, a trading system’s advertising may claim 60%, 70%, 80%, or perhaps even 90% winning trades. However, these promotional claims are usually based on 20-20 hindsight and subjectivity, and not on real-time actual trades. Perhaps the system says buy or sell when there is divergence between the price and a Stochastics or RSI Study.

That divergence is very difficult to recognize in real-time trading, but easy to see with 20-20 hindsight looking at an old chart. Another popular but subjective approach is to watch for turning points at certain times, also known as time-windows.

This approach may say to enter or liquidate the trade after an obvious pivot-low or pivot-high occurs, and providing it’s during the
projected time-window. It’s mostly subjective and easy to do by looking at the past, but hard to do in actual real trading. However, some system developers have in fact used hindsight or subjectivity to arrive at their ridiculous percentage of winning trade claims.

Another popular but well over-rated trade method is Elliott-Wave trading. Elliott Wave methodology is popular because there are obviously waves in the markets and the idea of using market-waves to predict market turning-points and also riding these waves, is naturally very appealing to traders. What I am about to say may upset some proponents of Elliott Waves, but the plain truth is Elliott-Waves used by themselves are allegedly of little value in actual trading.

If you want evidence to back-up that statement of their questionable value, just do the following: Show the SAME identical chart to 5 traders (make it a mystery chart – rather than a widely published chart the trader may recall).

Next, ask the 5 traders to specifically define the number of waves they see on the chart. You you will likely end up with 5 different (frequently widely diverse) wave-counts. The chances of even 2 of the traders seeing the same exact elliott-wave-counts are extremely unlikely.

Why is this so? There are in fact "waves" in the markets. However, defining what constitutes a "wave" is near impossible, because a wave is largely a matter of visual interpretation and judgment and is highly subjective. It’s difficult for a mostly subjective technical analysis method like Elliott-Wave Counts to be used successfully in trading?

Is there a way to overcome these basically of little, if any value subjective approaches?

Yes! Use a Trading System, which does not rely exclusively on Elliott Waves and other subjective approaches. However, using Elliott Waves as part of a trading plan in conjunction with another time-tested trading methodology may work for you.

The Truth About Trading – Traders Article #1

There are many reasons why successfull commodities futures trading is so tough. Unfortunately, the majority of futures traders lose money … there are a lot of reasons for it. That’s the Bad News. However, the Good News is providing you can get in the small Winner’s Circle you too can achieve profitable trading. Then you may reap the rewards with the money lost by the many losing traders flowing to you and richly rewarding you for being a winning trader!

Since there are far fewer winning traders than losing ones, by being in the winning minority, you will be in a position to receive much greater profits than normally possible! This is especially true what with the great leverage involved with commodities trading, options trading and trading stocks on margin.

Read all about the major reasons so many commodity futures, stock market and options traders lose money (so you can avoid these problems). After reading this Special Report "The Truth About Trading and Trading Systems" Special Report, you may visit other areas of CTCN’s website and our links trading related links for more specific trading knowledge covering all aspects of commodity futures, stocks and options trading for traders & investors.

This Special Report was originally written by the Editor of Commodity Traders Club News a number of years ago. These common trading problems are just as evident (perhaps more so) going into the New Millennium as they were in the early 1990’s when this Report was originally written. The main difference in the report after over a decade of time is the fact the prices used as examples may be different. Actually, the eal price levels themselves make little if any difference to the validity of the discussion.

Also, originally Daily Bars were used for time-frame examples, as applied to daily bar charts. Since then daytrading is much more popular with commodity futures, stock market and options traders. Therefore, we have changed the word "Days" to the term "Bars," as in Bar-Charts. The Time Frames can by identified as inter-day (daily) bars, or intra-day tick-bars, like 1-min., 5-min., 30-min bars (bar-charts), etc. It really makes little, if any difference, as the concepts and theories are basically the same.

One reason for losing in the markets is the commodity futures, stocks or options trader is not really sure which time-frame or trend he is trading, or he is not matching his target objective price level to the time frames’ expected movement. Perhaps the trader wants to capture a move which he expects to take about 4-bars (or 4-days).

However, the volatility increases so the 4-bar (day) trend is actually over in 2 bars and he does not realize it and stays with the trade 2-bars too long. Thus, he gives up all or most of his profit, because he expected the move to last longer.

The opposite can occur … this happens when the volatility is low and after just 4 bars he gets tired of waiting for the expected move and exits the trade early, perhaps at a loss or small profit. Suddenly, over the next 2 bars the trend and move he anticipated happens; too late, as he is already out of the trade.

Of course, the 4-bar example above also occurs with traders expecting 2-bar moves which may occur in 1-bar, or vice versa. Also, 6-bar moves which end-up occurring over perhaps 8 or 9 bars, or vice versa, etc., and various intra-day time periods.

Another common occurrence, is the trader not using a specific stop-loss order. Thus, a small loss ends up as a big loss. For example, a trader believes a stop (loss) of $400 is reasonable, based on either technical analysis or on money-management rules. However, perhaps due to discipline problems the trader has, it’s not actually used.

Once out $400.00, he relies on HOPE the market will go back in his direction, and he fails to execute the planned exit point. Frequently, the market fails to move back in a profitable position and the trader is finally forced out of market with perhaps a huge $2,000 loss, instead of the maximum $400 loss anticipated.

Note: More often than not, it seems once the trader who over-stayed the position finally decides to get out, the market frequently reverses the exact day (or next day) he got out! That seems to be an uncanny and almost unwritten law!

The stop-loss order is used, but the stop is not sufficiently precise. More frequently than you can imagine, the stop is hit by just a very small margin. For example, the market may be at 54.60 and a long position stop is placed to sell at 52.50. The market goes down to 52.47 and then reverses back to beyond 54.60 very quickly after stop was barely hit.

Sometimes the stop price of 52.50 may end up being the EXACT low price for that swing . . . very frustrating and upsetting when this occurs! Why does this happen so often? Because many times the stop-loss price level happens to be a support area based on a trend line, gann angle, old bottom or old top formation, fibonacci numbers, a chart price gap, or just simply an obvious natural stop-loss area, such as a whole or even number.

Thus many other traders use the same logic to place stops at or near the same level. The market gets drawn to that area because that’s where orders are sitting that the market (and Floor Traders) wants to get filled. Because of those orders resting in that obvious place, the market price actually moves to that area, almost like magic or magnetic attraction.

Failure to actually place a stop-loss order with your broker (unless you are always closely following the market using real-time intra-day data, when you are in an open trade) will result in the great likelihood of you losing all or most of your money (eventually) due to one or a couple huge losses caused by the price continuing to drop after going thru your stop-loss price. Sooner or later (probably sooner) it’s almost certain to happen, if you don’t use and place stop-loss orders to you.

There is an exception for daytraders who employ real time market quotes and are closely watching their real-time quotes and price charts continuously. Sometimes a daytrader may achieve better overall trading success by using so called mental stops vs. actually placing the stop-loss orders with his/her commodity broker. More on that later.

At MarketClub, the mission is to help you become a better trader. To create superior trading tools to help you achieve your goals. No matter which way the markets moves we promise objective and unbiased recommendations not available from brokers. Click-Here for Market Club Tools For The Trader, Free Trial.

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