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AbeSmith

AbeSmith 7-23-07 YM

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Today’s trading was very bad for me. I spend much of the weekend reading and studying. I studied 6 different charts of YM, from 6 months charts to 2 day charts, trying to identify areas of support and resistance. I looked at the economic calendar to see if there are any upcoming events. I read news articles about how the coming week would be like. The articles I read painted a bearish picture for the week.

 

I also researched companies whose earnings were scheduled for today, but now I think I probably didn’t devote enough attention to these fundamentals. I heard an analyst on CNBC say today that fundamentals are the thing that moves the markets, and it made sense. So I’m thinking I should pay better attention to the major companies that move the Dow, especially if they are reporting earnings, because I think, I don’t know but I think that when a company reports earnings and there is major volume then it will have a significant impact on the YM. So shouldn’t I know which direction the volume is going? I’m wondering, and perhaps a fellow trader can tell me or lead me in the right direction, what is it exactly that moves the YM? How does my buys and sells of the YM affect the price? I know you might think that it is a stupid question, but if someone could at least point me to the right direction, like where I can go to find this out.

 

So, now I will go over my trades. I was ashamed to mention today’s trading here and mostly tired, but decided to go ahead and do it.

 

When the market opened I was feeling bearish given the articles and commentaries I read and heard. Psychologically I was feeling weak, as if something was in my mind and was pushing me towards failure, or rather, blocking me from success. As if my mind was not working the way I wanted it to. During the weekend I felt good, like a winner, because I had a winning day on Friday and so I felt really good about myself. I even showed off a bit to my family and said thinks like "A trader's life is not like everyone else because when other people go to work they know if they just do their job they will get paid. A trader goes to work and not only might he not make money, but he might lose money." So I was feeling successful, eventough I lost alot more money since I started trading then I won, after Friday I felt like I had made a major improvement on my trading, and ultimately my chance to make money. But the feeling of being successful soon faded as the market opened and I realized I have no clue where it was going to go. My trading plans seemed to have faded from my mind when the market opened. I had foreseen that this might happen, this forgetting of what I had planned. That’s why after I had once printed out charts and made plans and marked support and resistance areas, I went over the plans again Sunday night, and in the morning before the open I went over the papers again.

 

My first trade was a short on the YM at 8:34CT, at 13980, but then I chickened out and bought it back for a 2 point gain at 13978 at 8:35CT. Then I shorted again at 9:20CT at 13972, but it was a wrong move and the market went up. I bought back my short at 9:59CT, at 14017, a 39 point loss. Now that I look back I’m not sure what was going through my head. I think the reason I shorted was that I was looking at a minute chart, which made things look more dramatic, and there was a dip with a lower low than the previous dip’s low. But when it was not going in the direction I expected, I though about what I should do. Now that I look at the charts I should have never let it go past just above 14000. I think I was hoping that it would dip back so at least I could even out. Maybe I even though that I was invincible and it would come down below where I shorted, or that my self awareness depended on me sticking to my position. A lot of thoughts were going through my mind and I don’t remember all of them. When it went to 14017 I realized it was out of control and bought back the short. Now I see that the price came back to just below 14000 around noon E.T. But when I saw it go up to 14017 I didn’t know if it was even going to come down again and I was already above 2% down and though about never risk more than 2% and so I decided to get out of the trade. At that point I was not sad, but disappointed, and felt out of the loop. Although I already had a mental stop in place at just above 14000, which was just above the previous dips high, I did not follow it.

 

Then I shorted again at 10:03CT at 14020, but terminated the trade at 10:38CT on 14036. I though what if all these technical charts with support and resistance are worthless. What if it the market is moving simply because mom’s and pops are watching Mad Money and Fast Money and buying stocks. What if traders are simply watching individual companies and buying based on earning’s report and related news. Shouldn’t I be paying attention to these fundamentals that are moving the Dow?

 

The reset of my trades today were overall losing trades based on some technical area, emotion, and self discovery. In total I had 18 trades today, 9 roundtrips, with no major gains. A loss of 81 points. Overall profit loss, including commission, was $473. In the past I would relish about my winning day and show nicely labeled charts and details. But I’m not feeling good and will only show my executions summary, which probably you are not interested in. I guess I’m just too tired, ashamed perhaps.

 

executionsii2.jpg

 

 

I have read and heard from knowledgeable members here to place firm stops. But until now it did not register. I guess a man can only do what he thinks is best. Though I think that automatic stops might be good for some situations, I still plan on using mental stops, though firmer, because they are more flexible. I don’t mean to be a hard head and say my method is right and yours is wrong. Like you I’m searching for what works, and if your method works for you then it is right, and I’m always listening and open to new ideas about ways in which I can improve my trading and may one day adopt an automatic stop if my mind tells me to. But for now I feel more comfortable with this method.

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Abe

 

I've been reading your post. You had been given good advice but I can tell that you're still struggling. I would like to help. If you allow me, we can practice a simple yet powerful excercise using charts and price but I need your comfirmation first.

 

Awaiting response

 

Thanks

 

Raul

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hi Abe,

 

man, you sound down. believe me, I have been there. we have all been there.

 

first off, I almost never turn on CNBC and I almost never care what the fundamental news is -- I only care when the news is coming out -- not what it is.

 

my belief is that short-term trading is best left independent of fundamentals. fundamental investing works -- but it works over longer-term periods. don't bother trying to trade short-term by interpreting fundamentals 'better' than others.

 

I quote my favorite trading book of all time:

 

"Your biggest enemy in trading is going to be a directional bias, an opinion... Learn to concentrate on the 'right-hand side' of the chart - in other words, on the pattern at hand."

 

re fundamental news: "Logical thinking will lead you right to the poor house.... There is no trading edge whatsoever in trying to base decision on what the market should logically be doing. In fact, the more logical something is, the more likely you will lose when the market is moving the opposite direction of the prevailing logic."

 

Street Smarts by Rashke

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Hi Abe... dont worry be happy ¡¡ ;) you are more near to become a good trader ¡¡¡ WOW ¡¡ you know this type of days DO build a trader... so be happy man ¡¡

 

My two cents here... cnbc forget about it... it want make you a penny and yes it will distract you...

 

Second : this frase "feeling" bearish.... nope... no feelings here, pure technicals, you can get very wrong feelings about the market and you are having BIAS to one of the most unbiased bussiness in the world ¡¡¡... markets can go anywhere ¡¡ so Technicals will tell you very easy straightforward trend directions...

 

Third: Entry vs Stop vs Exit = RRR... live or die ¡¡ so before opening ANY position you must know what is your RRR or you will not be able to manage properly a trade...

 

Happy for you man, you are more near too success, you had the balls to share your hard times, in some weeks or months you will be sharing your success... keep it up ¡¡ cheers Walter.

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Abe, some simple yet powerful things to keep you on your toes as far as a short term bias...watch for market phases. The market always ebbs and flows and you want to be watching for the signs of those directional changes so you know where the best placement of trades *can* be. I've attached a chart for you to check out.

 

I'll write about the points I've outlined in the chart.

 

1) Market is currently in a rising phase. We're seeing higher highs and higher lows, the 20sma is above the 200sma, all is well with the world. Note, however, that the arrow is pointing to some action occurring on nice volume BELOW the 20sma. This is a sign of weakness. Will the market follow through on that weakness? It possibly could, it possibly couldn't. But we now have a clue to watch for something next.

 

2) In this box is a topping phase. Its rangebound and directionless. This is a real difficult area for me to trade, so I tend to stay out UNLESS I see where the arrow is pointing. That is a breakout failure. Those failures can be and often are very powerful. Note the near 200 point drop from that breakout failure.

 

3) Again, we're seeing price on good volume trade below the 20sma with it being extended from the 200sma. That kind of price action mixed with seeing a possible topping phase would lead us think the market has a very high likelihood of going down. And down it went.

 

4) Price breaks out of a bottoming phase box on good volume and is now firmly above the 20sma. A rising phase should ensue. Note how when price tests the highs, we get another rangey box. The slow price action from before led it to stall out there. There was once business being conducted at those prices and it seems as though there was still more business to be conducted up there. Note how price begins to trade (with good volume) below the 20sma. Weakness is starting to enter the market with a topping phase that has formed.

 

5) The gap down confirmed the topping phase and we should've been looking at only short positions. Note the hard reversal in the blue circle.

 

6) Price just cruises higher, breaks the 15min pivot there around 13920 and then trades with volume above the 20sma.

 

7) Price gapped higher this morning, looking like it might've wanted to make a run to the highs again. Price was firmly above the 20sma, and the 20 is above the 200sma, so long positions should be initiated while acknowledging that we've got heavy resistance right above so price isn't likely to break through that too easily. Today, price traded in a sideways action topping out at the bottom of the previous topping phase boxes. Price is trading below the 20sma a little bit, but not on real nice volume....yet. So far we've got two clues of going lower...the topping phase box. We are also seeing lower highs and lower lows on this 15min chart. Taking a quick glance at the volume bars (with red being down bars and blue being up bars) you can see the red bars are usually bigger than the blue ones.

 

So...tomorrow I'm going in looking for a possible gap down. If price does in fact gap down I want to see the follow through. This will show itself to me if price price breaks below the first pivot of 13990ish. Any rally up to that and I'll look to put a marker lot out. And break of 13965 on confirming volume will be a great reason to add to the position, or get into one if the first trade never sets up.

 

So, going into today long positions only should've been watched for IMO.

5aa70de77eb11_YM_15min_@YM(15m)15MinutesSession5-8.thumb.jpg.a199cc7c6cfacf31a72644a13a3213c2.jpg

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And also, to ditto what walter said. no feelings here. My coach said to me "You can't see to the right of the chart, correct? Then why worry about it?" Soooo true. We can see the left of the chart and thats all we have to go on. Never try and out-think the market. I've tried more times than I can count to do that and it never works.

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Abe

 

I've been reading your post. You had been given good advice but I can tell that you're still struggling. I would like to help. If you allow me, we can practice a simple yet powerful excercise using charts and price but I need your comfirmation first.

 

Awaiting response

 

Thanks

 

Raul

 

Thanks Raul. That's very nice of you. I would love to participate.

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hi Abe,

 

man, you sound down. believe me, I have been there. we have all been there.

 

first off, I almost never turn on CNBC and I almost never care what the fundamental news is -- I only care when the news is coming out -- not what it is.

 

my belief is that short-term trading is best left independent of fundamentals. fundamental investing works -- but it works over longer-term periods. don't bother trying to trade short-term by interpreting fundamentals 'better' than others.

 

I quote my favorite trading book of all time:

 

"Your biggest enemy in trading is going to be a directional bias, an opinion... Learn to concentrate on the 'right-hand side' of the chart - in other words, on the pattern at hand."

 

re fundamental news: "Logical thinking will lead you right to the poor house.... There is no trading edge whatsoever in trying to base decision on what the market should logically be doing. In fact, the more logical something is, the more likely you will lose when the market is moving the opposite direction of the prevailing logic."

 

Street Smarts by Rashke

 

Those are some awesome quotes. I think what you say about news and short term trading is true, because I've heard it before from other knowledgable people. But I can't help but to wonder, let's say I'm in a postion and then there is a huge move one way or another. What if that move is due to a major stock in the Dow reporting earnings? How will that stock affect the YM? If it has a significant impact on the YM then isn't it better for me to be aware of the timing of that earnings news and be prepared to not necessarily trade based on that news, but at least get out of a losing position before the stops are breached?

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Hi Abe... dont worry be happy ¡¡ ;) you are more near to become a good trader ¡¡¡ WOW ¡¡ you know this type of days DO build a trader... so be happy man ¡¡

 

My two cents here... cnbc forget about it... it want make you a penny and yes it will distract you...

 

Second : this frase "feeling" bearish.... nope... no feelings here, pure technicals, you can get very wrong feelings about the market and you are having BIAS to one of the most unbiased bussiness in the world ¡¡¡... markets can go anywhere ¡¡ so Technicals will tell you very easy straightforward trend directions...

 

Third: Entry vs Stop vs Exit = RRR... live or die ¡¡ so before opening ANY position you must know what is your RRR or you will not be able to manage properly a trade...

 

Happy for you man, you are more near too success, you had the balls to share your hard times, in some weeks or months you will be sharing your success... keep it up ¡¡ cheers Walter.

 

Thanks Walter. It's very nice to hear you positive comments.

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Abe, some simple yet powerful things to keep you on your toes as far as a short term bias...watch for market phases. The market always ebbs and flows and you want to be watching for the signs of those directional changes so you know where the best placement of trades *can* be. I've attached a chart for you to check out.

 

I'll write about the points I've outlined in the chart.

 

1) Market is currently in a rising phase. We're seeing higher highs and higher lows, the 20sma is above the 200sma, all is well with the world. Note, however, that the arrow is pointing to some action occurring on nice volume BELOW the 20sma. This is a sign of weakness. Will the market follow through on that weakness? It possibly could, it possibly couldn't. But we now have a clue to watch for something next.

 

2) In this box is a topping phase. Its rangebound and directionless. This is a real difficult area for me to trade, so I tend to stay out UNLESS I see where the arrow is pointing. That is a breakout failure. Those failures can be and often are very powerful. Note the near 200 point drop from that breakout failure.

 

3) Again, we're seeing price on good volume trade below the 20sma with it being extended from the 200sma. That kind of price action mixed with seeing a possible topping phase would lead us think the market has a very high likelihood of going down. And down it went.

 

4) Price breaks out of a bottoming phase box on good volume and is now firmly above the 20sma. A rising phase should ensue. Note how when price tests the highs, we get another rangey box. The slow price action from before led it to stall out there. There was once business being conducted at those prices and it seems as though there was still more business to be conducted up there. Note how price begins to trade (with good volume) below the 20sma. Weakness is starting to enter the market with a topping phase that has formed.

 

5) The gap down confirmed the topping phase and we should've been looking at only short positions. Note the hard reversal in the blue circle.

 

6) Price just cruises higher, breaks the 15min pivot there around 13920 and then trades with volume above the 20sma.

 

7) Price gapped higher this morning, looking like it might've wanted to make a run to the highs again. Price was firmly above the 20sma, and the 20 is above the 200sma, so long positions should be initiated while acknowledging that we've got heavy resistance right above so price isn't likely to break through that too easily. Today, price traded in a sideways action topping out at the bottom of the previous topping phase boxes. Price is trading below the 20sma a little bit, but not on real nice volume....yet. So far we've got two clues of going lower...the topping phase box. We are also seeing lower highs and lower lows on this 15min chart. Taking a quick glance at the volume bars (with red being down bars and blue being up bars) you can see the red bars are usually bigger than the blue ones.

 

So...tomorrow I'm going in looking for a possible gap down. If price does in fact gap down I want to see the follow through. This will show itself to me if price price breaks below the first pivot of 13990ish. Any rally up to that and I'll look to put a marker lot out. And break of 13965 on confirming volume will be a great reason to add to the position, or get into one if the first trade never sets up.

 

So, going into today long positions only should've been watched for IMO.

 

Thanks Tin for sharing your trading plan. I have printed it out and will study it carefully. You seem to be very knowledgable about trading. I know you're a beginner but I'm very impressed by your technical knowledge and dedication to rational trading.

 

 

And also, to ditto what walter said. no feelings here. My coach said to me "You can't see to the right of the chart, correct? Then why worry about it?" Soooo true. We can see the left of the chart and thats all we have to go on. Never try and out-think the market. I've tried more times than I can count to do that and it never works.

 

That's so true. Why worry? It is very irration to worry. And I find myself to be less worried than usual. I know I lost alot of money today, but I feel that worrying will only interfer with keeping a cool head. Thanks so much for the advice.

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Just one piece of advice for Tue Abe - DO NOT REVENGE TRADE.

 

You will want to get your money back from Mon and then some. Just be careful to not fall into a 'gotta get my $$$ back' mentality. Trade whatever setups you are trading.

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Just one piece of advice for Tue Abe - DO NOT REVENGE TRADE.

 

You will want to get your money back from Mon and then some. Just be careful to not fall into a 'gotta get my $$$ back' mentality. Trade whatever setups you are trading.

 

That is so true Brownsfan.

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Also wanted to point out from my note last night...futures are currently down about 50 points. A breakout from that topping phase box (with a lower high, too) should lead you to look at short positions for the high odds trades today.

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Abe,

 

I'm going to be frank here. Stop trading with real money. You are on your way to losing all of your trading capital.

 

Keep studying, Keep reading, Keep trading....

 

But don't use real money. Your account will go broke.

 

If someone would have said that to me during my learning curve it would have saved me ten's of thousands....

 

I find it outstanding that you are willing to share your trials with the forum, it shows you have a real want to become a trader. You just have to do it the right way. :)

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Thanks for allowing me to help

 

We're going to do a simple exercise. But there's some things you should od so this can work good.

 

1) As everyone mentioned here...don't look at CNBC for sometime.

2) Forget about fundamentals

3)Forget about yesterday's price. We're going to focus on what's happening now.

4)Clear your charts of any indicators, pivot points etc. Just plain ol' naked charts. Could be pinbars, candlesticks, etc.(no renko/volume bars or any of that crazy good stuff)

5)clear your head. Calm down. We're going to start from square one.

6) stop trading live for a period of time…

 

6) we're going to use 5 minutes charts. Not too fast, not too slow. Don't worry, eventually you will use the timeframe/tickframe of your choice

 

7) we start at 9:30...no overnight trading please!!!!!

 

 

 

If you have instant replay or steaming replay on your software will be nice, If now I want you to do this in real time mode. No hindsight stuff allowed.

 

 

We're looking identify ebbs and flows on price. But I want you to do it ****as is happening**** . Don't take any point of reference in the past...the market is HERE AND NOW.

 

Observe points of exhaustion. Look closely at the bars. The market is heading in one direction and you see that is kinda losing steam. Look at the next bar. Now you notice that is breaking the higher/high lower/low of the preceding bar in the opposite direction. Place a marker (line, dot etc) at the spot from where the market started to turn.

 

Now we look at the next bar

 

1) is it moving fast/slow at the other direction??

 

2) is it getting really long as compare to the preceding bar??

 

3)Do you see sudden "jumps" in price? Like the market is eager to change course??

 

 

now at the close of that bar, observe the next one

 

is it breaking the higher/high - lower low of the preceding bar(the bar of change)??

 

at the end of the day, we're going to check this "turning points" and quantify what happened

 

How many times the market turned?

 

 

What would you do at any of these turning points?

 

we're dealing with three bars here

 

1) heading up/down at the direction of the flow

 

2) one that exhausts and turns the other way

 

3)another that's confirming the change as is breaking the higher/high/lower low of the bar of change.

 

You will practice as much as you can that no rush yourself into anything. Take your time

 

Markets are just plain shifts between demand and supply. Nothing more. Understanding this is crucial for every trader, despite whatever system/strategy you use. Other than that is very much like be on a ship with a bunch of drunken sailors.

 

Think about swings first and then you will understand trends and the validity of them But swings comes first.

 

Again, this is going to be in real time…after all no hindsight will save you when you’re in a trade in real time .

 

Here’s some tips and some constructive criticism with the utmost respect.

 

 

Personally I use two elements in my trading - observation and reaction.

 

If the market reach x level/price = I have a plan (could be a resting order depending on market conditions)

 

If the market deteriorates and go south after my entry - I have a plan

 

If the market gets on a coil (consolidates) after my entry = I have a plan

 

Let's assume you decided to get in at the third bar. There are some possible outcomes of the trade

 

1) the market will go your way fast (sweet) reaching your targeted destination = profit $$$$$$

 

2) the market will go your way but will give you some heat.

 

3)The market will get stuck in a coil, but eventually reach your desired point of destination

 

4) the market will get stuck in a coil an eventually go against you

 

and

 

5) there's a slight possibility that the market turns the other way fast after your entry.

 

At any of these elements I mentioned, you MUST have a plan. A course of action

 

 

 

As I read your post I notice there's some issues we need to address respectfully of course

 

1) You have an overload of information in your head - Is good to read books, listen to news etc. But sometimes we need to stop, as we get all confused with so many options. So much stuff in your head will only gives you the following :

 

A) headache

 

B)unforced error by the time of trading – You have a chart in front of you and you see a possible trade . There’s some many things you can do based on the information floating in your head that you just go blind and pull the trigger. Then you feel like the ground is moving. Something like “ oh crap I should wait†or “ oh man I should bought instead of sold because “The sentiment index†was bullish†and then you say “oh man my P&L is going to go south†all of the sudden all this emotions takes over and you….exactly, make a mistake.

 

 

2) CNBC - Sometimes they invite good guest, like John Preston, etc. But you have no idea how much misleading information this single network delivers to the masses. My favorite two is their so called "fair value" and the booya fool (oh boy I don't recall the name of that clown.)

 

3) The heat - I can see that's a problem. My suggestion before you trade – You need to determine how much heat you can handle. Work on that before you go back to trading, otherwise you'll be feeling like a beheaded chicken everytime you put a trade.

 

4)Fundamental analysis and technical analysis - There's a big debate and I personally think both has it's merit and purposes. But let's face it, you're a daytrader. You probably don't have zillions of dollars to dump in the market to hold a position for three months or more. You just mentioned that you heard something on CNBC and your "sentiment" was bearish and you were looking to go short and then you got screwed up etc...remember???

 

So as you see this has nothing to value for you.

 

Is good to keep an ear on the ground. Be careful on reports as you know they move the markets.

 

As I mentioned, you're a daytrader. Trade what you see. Stick to your plans. Make it easy. All you need for trading is right there at your fingertips. Back in the day, people draw charts and technicals "by hand" That was really hard brother.

 

5) Emotions - Allow me to quote you with all respect

 

"My first trade was a short on the YM at 8:34CT, at 13980, but then I chickened out and bought it back for a 2 point gain at 13978 at 8:35CT. Then I shorted again at 9:20CT at 13972, but it was a wrong move and the market went up. I bought back my short at 9:59CT, at 14017, a 39 point loss. Now that I look back I’m not sure what was going through my head"

 

 

1)Why it was a wrong move?? because you got some heat?? I know the market went up eventually, but where’s your plan for that??

 

2) why did you chickened out? smells to me no plan of action whatsoever

 

3) Why you let the market take 39 points away from you??

 

Of course you're trading based on emotions. You're probably "hoping and praying†that the market turns your way

 

This is a no-no...You call the shots, not the market.

 

"Now that I look at the charts I should have never let it go past just above 14000. I think I was hoping that it would dip back so at least I could even out. Maybe I even though that I was invincible and it would come down below where I shorted, or that my self awareness depended on me sticking to my position."

 

see what I mean??..You don't "hope"...you act.

 

A lesson to learn off this comment – Everytime you see the DOW or S&P reaching a significant level AKA 14k Serious cash will be dumped in the market. So what you see apparently as a “counter move†is nothing more like everyone running away like chickens from a horny rooster, looking to save their sorry asses. Of course, somebody has to be at the other side of the trade don’t you think?

 

 

“That’s why after I had once printed out charts and made plans and marked support and resistance areas"

 

You know /S/R areas, pivot points, etc. Everything that's forward-thinking is a great way to trade but is plagued with plenty of -stop-hunters waiting for newbie’s on the breakout, forcing them to bail out as they push the market to either side. A plain observation at the pivot points will be enough to see what I mean. Just notice how speed increases when the market reach these levels.

 

 

A word of caution - always have some sort of confirmation before jumping in whether the market breaks or bounces off these levels.

 

 

who's moving the markets.??

 

here's what you say

 

"What if it the market is moving simply because mom’s and pops are watching Mad Money and Fast Money and buying stocks. What if traders are simply watching individual companies and buying based on earning’s report and related news. Shouldn’t I be paying attention to these fundamentals that are moving the Dow?"

 

Do you think that moms and pops are moving the market because they're buying stocks??

 

You're trading indices my friend. Futures is THE leading market. Equities just follows. Futures are STILL controlled by the pit. Floor traders STILL looks at the futures market for clues. Is not the other way around. Sometimes I buy shares on QQQQ having a NQ(Mini Nasdaq) chart side by side looking for soft spots on the cubes. It works pretty good.

 

"But the feeling of being successful soon faded as the market opened and I realized I have no clue where it was going to go."

 

 

My question is, why would you need to have a "clue" of where the market might go?? Wouldn’t be better to have a bag of options? like...if the market reach here, I would do this....if the market reach there, I would do that

 

"My trading plans seemed to have faded from my mind when the market opened. I had foreseen that this might happen, this forgetting of what I had planned"

 

Because you're making plans with an overloaded head, still thinking about fast money, The DOW, GOOG, the booya fool (still can recall his name) sectors, vectors, etc…all these elements which will not help you at all and ultimately, as you look at the REAL PRICE ACTION (which by nature is intimidating) YOU feel like a deer in the headlights.

 

You can’t beat the market but you can manage your trade. Think about it.

 

 

A word about stop-loss

 

 

Stop-loss has brought so much heated arguments and discrepancies among traders, somehow similar to "Fundamental vs. Technical" stuff.

 

Here's my own personal-subjective point of view about stop loss.

 

I do use stop-loss. But they don't manage my trade. Some traders use them as a part of a system, I was part of that school long time ago until I realized that my equity curve was pretty flat.

 

My stops get hit from time to time, yes. But they're my last resort.

 

See, more than stop loss, I have a real expectancy on my trade once I have an entry. Of course I carry some risk allowing my trade to get some heat. But for how long and how much??? Where’s my tolerance zone?? Something you need to find out by yourself

 

39 point loss for a total of 81???

 

don't you think you should bail out at 20??

 

You must pre-determined your stop loss and where is a possible spot on the charts in where you just simply bail out in order to have a second look at the situation.

 

I use a hard-stop loss, away from noise and a soft stop when I see the market turning the other way in momentum. Sometimes the market spikes. You must protect yourself in those situations

 

Using a soft stop loss allow me to get out, either with a small profit or small scratch and have a better perspective on the situation. Many times, market conditions gets better and I trade again, with better results. Or sometimes I just call off for the day, which is a valid position.

 

 

Abe, you're going to hear many good advice form this site. Here's plenty of traders willing to help and we're going get you going. Sooner or later you will get it and you WILL make it I have no doubts. But ultimately is you and the market. You're the one who call the shots. It's your responsibility to have an educated guess on your entries but at the same time you're the careholder of your funds. Just think about it.

 

I will post some charts for you later on. The pain is taking a toll on me today

 

Hope it helps

 

Raul

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Abe,

 

I'm going to be frank here. Stop trading with real money. You are on your way to losing all of your trading capital.

 

Keep studying, Keep reading, Keep trading....

 

But don't use real money. Your account will go broke.

 

If someone would have said that to me during my learning curve it would have saved me ten's of thousands....

 

I find it outstanding that you are willing to share your trials with the forum, it shows you have a real want to become a trader. You just have to do it the right way. :)

 

Yes, Paul. I think you're right. I need to stop trading with real money.

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Abe, you probably won't listen... but just be aware that you are acting in self-destructive mode by trading in something you do not understand at all....

 

it takes 9-12 months of intense study for most traders to do anything more than breakeven.

 

if you want to learn, I would suggest trading 50 shares of DIA (the etf)... it will track the futures and print the same patterns -- albeit it won't be as clean -- but you will not be able to lose -$500 in a day doing this and you shouldn't really by trying to make money yet.. you should be trying to break even. once you have a single profitable month of trading, then maybe raise the stakes a bit.

 

after a few months of trading, you will realize how little you know right now. you will be pissed about how much money you just gave away during this time. a dollar saved is a dollar earned.

 

realize that you are entering something this is just extremely complex and dynamic. if you want to learn, do it on the super-cheap for at least the first 9 months --- you have probably a year before you have a chance to actually make money.

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Thanks for allowing me to help

 

We're going to do a simple exercise. But there's some things you should od so this can work good.

 

1) As everyone mentioned here...don't look at CNBC for sometime.

2) Forget about fundamentals

3)Forget about yesterday's price. We're going to focus on what's happening now.

4)Clear your charts of any indicators, pivot points etc. Just plain ol' naked charts. Could be pinbars, candlesticks, etc.(no renko/volume bars or any of that crazy good stuff)

5)clear your head. Calm down. We're going to start from square one.

6) stop trading live for a period of time…

 

6) we're going to use 5 minutes charts. Not too fast, not too slow. Don't worry, eventually you will use the timeframe/tickframe of your choice

 

7) we start at 9:30...no overnight trading please!!!!!

 

 

 

If you have instant replay or steaming replay on your software will be nice, If now I want you to do this in real time mode. No hindsight stuff allowed.

 

 

We're looking identify ebbs and flows on price. But I want you to do it ****as is happening**** . Don't take any point of reference in the past...the market is HERE AND NOW.

 

Observe points of exhaustion. Look closely at the bars. The market is heading in one direction and you see that is kinda losing steam. Look at the next bar. Now you notice that is breaking the higher/high lower/low of the preceding bar in the opposite direction. Place a marker (line, dot etc) at the spot from where the market started to turn.

 

Now we look at the next bar

 

1) is it moving fast/slow at the other direction??

 

2) is it getting really long as compare to the preceding bar??

 

3)Do you see sudden "jumps" in price? Like the market is eager to change course??

 

 

now at the close of that bar, observe the next one

 

is it breaking the higher/high - lower low of the preceding bar(the bar of change)??

 

at the end of the day, we're going to check this "turning points" and quantify what happened

 

How many times the market turned?

 

 

What would you do at any of these turning points?

 

we're dealing with three bars here

 

1) heading up/down at the direction of the flow

 

2) one that exhausts and turns the other way

 

3)another that's confirming the change as is breaking the higher/high/lower low of the bar of change.

 

You will practice as much as you can that no rush yourself into anything. Take your time

 

Markets are just plain shifts between demand and supply. Nothing more. Understanding this is crucial for every trader, despite whatever system/strategy you use. Other than that is very much like be on a ship with a bunch of drunken sailors.

 

Think about swings first and then you will understand trends and the validity of them But swings comes first.

 

Again, this is going to be in real time…after all no hindsight will save you when you’re in a trade in real time .

 

Here’s some tips and some constructive criticism with the utmost respect.

 

 

Personally I use two elements in my trading - observation and reaction.

 

If the market reach x level/price = I have a plan (could be a resting order depending on market conditions)

 

If the market deteriorates and go south after my entry - I have a plan

 

If the market gets on a coil (consolidates) after my entry = I have a plan

 

Let's assume you decided to get in at the third bar. There are some possible outcomes of the trade

 

1) the market will go your way fast (sweet) reaching your targeted destination = profit $$$$$$

 

2) the market will go your way but will give you some heat.

 

3)The market will get stuck in a coil, but eventually reach your desired point of destination

 

4) the market will get stuck in a coil an eventually go against you

 

and

 

5) there's a slight possibility that the market turns the other way fast after your entry.

 

At any of these elements I mentioned, you MUST have a plan. A course of action

 

 

 

As I read your post I notice there's some issues we need to address respectfully of course

 

1) You have an overload of information in your head - Is good to read books, listen to news etc. But sometimes we need to stop, as we get all confused with so many options. So much stuff in your head will only gives you the following :

 

A) headache

 

B)unforced error by the time of trading – You have a chart in front of you and you see a possible trade . There’s some many things you can do based on the information floating in your head that you just go blind and pull the trigger. Then you feel like the ground is moving. Something like “ oh crap I should wait†or “ oh man I should bought instead of sold because “The sentiment index†was bullish†and then you say “oh man my P&L is going to go south†all of the sudden all this emotions takes over and you….exactly, make a mistake.

 

 

2) CNBC - Sometimes they invite good guest, like John Preston, etc. But you have no idea how much misleading information this single network delivers to the masses. My favorite two is their so called "fair value" and the booya fool (oh boy I don't recall the name of that clown.)

 

3) The heat - I can see that's a problem. My suggestion before you trade – You need to determine how much heat you can handle. Work on that before you go back to trading, otherwise you'll be feeling like a beheaded chicken everytime you put a trade.

 

4)Fundamental analysis and technical analysis - There's a big debate and I personally think both has it's merit and purposes. But let's face it, you're a daytrader. You probably don't have zillions of dollars to dump in the market to hold a position for three months or more. You just mentioned that you heard something on CNBC and your "sentiment" was bearish and you were looking to go short and then you got screwed up etc...remember???

 

So as you see this has nothing to value for you.

 

Is good to keep an ear on the ground. Be careful on reports as you know they move the markets.

 

As I mentioned, you're a daytrader. Trade what you see. Stick to your plans. Make it easy. All you need for trading is right there at your fingertips. Back in the day, people draw charts and technicals "by hand" That was really hard brother.

 

5) Emotions - Allow me to quote you with all respect

 

"My first trade was a short on the YM at 8:34CT, at 13980, but then I chickened out and bought it back for a 2 point gain at 13978 at 8:35CT. Then I shorted again at 9:20CT at 13972, but it was a wrong move and the market went up. I bought back my short at 9:59CT, at 14017, a 39 point loss. Now that I look back I’m not sure what was going through my head"

 

 

1)Why it was a wrong move?? because you got some heat?? I know the market went up eventually, but where’s your plan for that??

 

2) why did you chickened out? smells to me no plan of action whatsoever

 

3) Why you let the market take 39 points away from you??

 

Of course you're trading based on emotions. You're probably "hoping and praying†that the market turns your way

 

This is a no-no...You call the shots, not the market.

 

"Now that I look at the charts I should have never let it go past just above 14000. I think I was hoping that it would dip back so at least I could even out. Maybe I even though that I was invincible and it would come down below where I shorted, or that my self awareness depended on me sticking to my position."

 

see what I mean??..You don't "hope"...you act.

 

A lesson to learn off this comment – Everytime you see the DOW or S&P reaching a significant level AKA 14k Serious cash will be dumped in the market. So what you see apparently as a “counter move†is nothing more like everyone running away like chickens from a horny rooster, looking to save their sorry asses. Of course, somebody has to be at the other side of the trade don’t you think?

 

 

“That’s why after I had once printed out charts and made plans and marked support and resistance areas"

 

You know /S/R areas, pivot points, etc. Everything that's forward-thinking is a great way to trade but is plagued with plenty of -stop-hunters waiting for newbie’s on the breakout, forcing them to bail out as they push the market to either side. A plain observation at the pivot points will be enough to see what I mean. Just notice how speed increases when the market reach these levels.

 

 

A word of caution - always have some sort of confirmation before jumping in whether the market breaks or bounces off these levels.

 

 

who's moving the markets.??

 

here's what you say

 

"What if it the market is moving simply because mom’s and pops are watching Mad Money and Fast Money and buying stocks. What if traders are simply watching individual companies and buying based on earning’s report and related news. Shouldn’t I be paying attention to these fundamentals that are moving the Dow?"

 

Do you think that moms and pops are moving the market because they're buying stocks??

 

You're trading indices my friend. Futures is THE leading market. Equities just follows. Futures are STILL controlled by the pit. Floor traders STILL looks at the futures market for clues. Is not the other way around. Sometimes I buy shares on QQQQ having a NQ(Mini Nasdaq) chart side by side looking for soft spots on the cubes. It works pretty good.

 

"But the feeling of being successful soon faded as the market opened and I realized I have no clue where it was going to go."

 

 

My question is, why would you need to have a "clue" of where the market might go?? Wouldn’t be better to have a bag of options? like...if the market reach here, I would do this....if the market reach there, I would do that

 

"My trading plans seemed to have faded from my mind when the market opened. I had foreseen that this might happen, this forgetting of what I had planned"

 

Because you're making plans with an overloaded head, still thinking about fast money, The DOW, GOOG, the booya fool (still can recall his name) sectors, vectors, etc…all these elements which will not help you at all and ultimately, as you look at the REAL PRICE ACTION (which by nature is intimidating) YOU feel like a deer in the headlights.

 

You can’t beat the market but you can manage your trade. Think about it.

 

 

A word about stop-loss

 

 

Stop-loss has brought so much heated arguments and discrepancies among traders, somehow similar to "Fundamental vs. Technical" stuff.

 

Here's my own personal-subjective point of view about stop loss.

 

I do use stop-loss. But they don't manage my trade. Some traders use them as a part of a system, I was part of that school long time ago until I realized that my equity curve was pretty flat.

 

My stops get hit from time to time, yes. But they're my last resort.

 

See, more than stop loss, I have a real expectancy on my trade once I have an entry. Of course I carry some risk allowing my trade to get some heat. But for how long and how much??? Where’s my tolerance zone?? Something you need to find out by yourself

 

39 point loss for a total of 81???

 

don't you think you should bail out at 20??

 

You must pre-determined your stop loss and where is a possible spot on the charts in where you just simply bail out in order to have a second look at the situation.

 

I use a hard-stop loss, away from noise and a soft stop when I see the market turning the other way in momentum. Sometimes the market spikes. You must protect yourself in those situations

 

Using a soft stop loss allow me to get out, either with a small profit or small scratch and have a better perspective on the situation. Many times, market conditions gets better and I trade again, with better results. Or sometimes I just call off for the day, which is a valid position.

 

 

Abe, you're going to hear many good advice form this site. Here's plenty of traders willing to help and we're going get you going. Sooner or later you will get it and you WILL make it I have no doubts. But ultimately is you and the market. You're the one who call the shots. It's your responsibility to have an educated guess on your entries but at the same time you're the careholder of your funds. Just think about it.

 

I will post some charts for you later on. The pain is taking a toll on me today

 

Hope it helps

 

Raul

 

Wow, Raul. Thank you for the detailed and thoughtful analysis of my trading and instructions. As Paul pointed out so thoughtfully, I need to stop trading with real money and learn with my paper account until I'm able to be profitable consistently.

 

I will print out your excellent post and study it. It is a true gem. Thanks again.

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Abe, you probably won't listen... but just be aware that you are acting in self-destructive mode by trading in something you do not understand at all....

 

it takes 9-12 months of intense study for most traders to do anything more than breakeven.

 

if you want to learn, I would suggest trading 50 shares of DIA (the etf)... it will track the futures and print the same patterns -- albeit it won't be as clean -- but you will not be able to lose -$500 in a day doing this and you shouldn't really by trying to make money yet.. you should be trying to break even. once you have a single profitable month of trading, then maybe raise the stakes a bit.

 

after a few months of trading, you will realize how little you know right now. you will be pissed about how much money you just gave away during this time. a dollar saved is a dollar earned.

 

realize that you are entering something this is just extremely complex and dynamic. if you want to learn, do it on the super-cheap for at least the first 9 months --- you have probably a year before you have a chance to actually make money.

 

You are so right Dogpile. I need to stop trading. It was truely self destructive and I see that now. Thank you.

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Guest cooter

I have read and heard from knowledgeable members here to place firm stops. But until now it did not register. I guess a man can only do what he thinks is best. Though I think that automatic stops might be good for some situations, I still plan on using mental stops, though firmer, because they are more flexible. I don’t mean to be a hard head and say my method is right and yours is wrong. Like you I’m searching for what works, and if your method works for you then it is right, and I’m always listening and open to new ideas about ways in which I can improve my trading and may one day adopt an automatic stop if my mind tells me to. But for now I feel more comfortable with this method.

 

Every trader initially thinks that the "rules of trading" don't apply to him or herself.

 

And one of those cardinal "rules" is that is often overlooked by newbies is:

 

NEVER TRADE WITHOUT

REAL STOPS IN PLACE :teacher:

There will come a time when you will forget about that so-called "mental" stop, and the market will run away from you. Big loss.

You may continue to search for the holy grail a little while longer with stops in place, than without.

 

How comfortable will you feel when you get that margin call because your account is now in debit. Yes, debit.

 

Oh, wait! No one ever told you that you could lose more than your account balance trading futures, did they?

Remember, stops are your friend.

 

 

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Every trader initially thinks that the "rules of trading" don't apply to him or herself.

 

And one of those cardinal "rules" is that is often overlooked by newbies is:

 

NEVER TRADE WITHOUT

REAL STOPS IN PLACE :teacher:

There will come a time when you will forget about that so-called "mental" stop, and the market will run away from you. Big loss.

You may continue to search for the holy grail a little while longer with stops in place, than without.

 

How comfortable will you feel when you get that margin call because your account is now in debit. Yes, debit.

 

Oh, wait! No one ever told you that you could lose more than your account balance trading futures, did they?

Remember, stops are your friend.

 

 

 

Thanks Cooter. I will keep that in mind. I will do paper trading from now on and if the firm stop proves to be better then I will have no choice but to adopt it.

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Abe,

 

I feel for you man. It's a rude awakening when the market does its thing on you and takes you to the cleaners. What happened to you does not make you a bad person, only human. Realize that the market operates in a fashion to take money from the majority of the participants. How does it do this? By tapping deeply into the weaknesses of our human nature that, without proper training, we spontaneously resort to when we find ourselves under market duress. The more duress the more we tend to resort to instincts. The less trained our instincts the more we react by our raw nature. The more we do that the more we lose. That's what the markets try to do, because that's the only way they can exist.

 

Think about it. The markets have been in operation for centuries and they keep on going even though the vast majority of the participants lose. How can this be? Why didn't the operation shut down long ago? Because 1) the world needs the markets and 2) the only way they can go on is by most participants losing. If most win where would the money come from? So the market must shuck and jive and rise and fall and fake and break in a manner which causes you to become rattled and make a bad decisions. It tries to do this to everybody and it succeeds with most. No trader is immune to the allures, taunts and threats the markets endlessly waves in our faces.

 

There is only one way to beat it: Have a solid plan that you do not deviate from. You cannot trade by emotion or impulse. When trading the markets you must be like Odysseus when he sailed past the sirens. You must lash yourself to your trading plan and do your dead level best to ignore the almost irresistible calls to succumb to your feelings and impulses, to fear, greed and hope.

 

You can do it. But it takes time to program yourself to not do stupid things. The only way to succeed is to have a trading plan you truly believe in and can execute without hesitation. So focus on building a solid trading plan in a market you feel comfortable it. Don't feel like you have to trade YM or ES. Trade corn if it fits you better. Try to find a place of comfort and ease. If you are too stressed by trading something is wrong. There is probably always going to be some tension in trading. But if your heart is pounding and your palms are sweating you need to focus on building your confidence in your plan.

 

But don't beat yourself up. Realize what the market did to you it has done to all beginners. What will separate you from the beginners who blow up and flame out is to accept personal responsibility for your losses and resolve to learn whatever it takes to eliminate those errors. Don't trade real money again until you have made some real progress in this area.

 

You can do it if you really want to. It will be the hardest thing you have ever tried. But once you get there no one can take it away from you. And you will become one of the few who truly took control of their own destiny. As the Trading Doctor says, not by looking without but by looking within.

 

Good luck and keep us abreast of your progress

 

Gary

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Abe,

 

I feel for you man. It's a rude awakening when the market does its thing on you and takes you to the cleaners. What happened to you does not make you a bad person, only human. Realize that the market operates in a fashion to take money from the majority of the participants. How does it do this? By tapping deeply into the weaknesses of our human nature that, without proper training, we spontaneously resort to when we find ourselves under market duress. The more duress the more we tend to resort to instincts. The less trained our instincts the more we react by our raw nature. The more we do that the more we lose. That's what the markets try to do, because that's the only way they can exist.

 

Think about it. The markets have been in operation for centuries and they keep on going even though the vast majority of the participants lose. How can this be? Why didn't the operation shut down long ago? Because 1) the world needs the markets and 2) the only way they can go on is by most participants losing. If most win where would the money come from? So the market must shuck and jive and rise and fall and fake and break in a manner which causes you to become rattled and make a bad decisions. It tries to do this to everybody and it succeeds with most. No trader is immune to the allures, taunts and threats the markets endlessly waves in our faces.

 

There is only one way to beat it: Have a solid plan that you do not deviate from. You cannot trade by emotion or impulse. When trading the markets you must be like Odysseus when he sailed past the sirens. You must lash yourself to your trading plan and do your dead level best to ignore the almost irresistible calls to succumb to your feelings and impulses, to fear, greed and hope.

 

You can do it. But it takes time to program yourself to not do stupid things. The only way to succeed is to have a trading plan you truly believe in and can execute without hesitation. So focus on building a solid trading plan in a market you feel comfortable it. Don't feel like you have to trade YM or ES. Trade corn if it fits you better. Try to find a place of comfort and ease. If you are too stressed by trading something is wrong. There is probably always going to be some tension in trading. But if your heart is pounding and your palms are sweating you need to focus on building your confidence in your plan.

 

But don't beat yourself up. Realize what the market did to you it has done to all beginners. What will separate you from the beginners who blow up and flame out is to accept personal responsibility for your losses and resolve to learn whatever it takes to eliminate those errors. Don't trade real money again until you have made some real progress in this area.

 

You can do it if you really want to. It will be the hardest thing you have ever tried. But once you get there no one can take it away from you. And you will become one of the few who truly took control of their own destiny. As the Trading Doctor says, not by looking without but by looking within.

 

Good luck and keep us abreast of your progress

 

Gary

 

Wow Gary. I'm very impressed by your meaningful post. It makes excellent sense. :bow down:

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