TimRacette

I agree in that when you begin to draw profits out the account each week or month trading takes on a whole new meaning. Even if it's $100, physically removing those profits from your trading account, actually touching the money and depositing into your checking account to pay bills and (one large enough) use for other investments, it really becomes tangible.

One idea is to simply trade the same strategy except cut your position size in half and double your stop and targets. This allows for the same risk/reward, but prevents you from getting taken out due to the increased vol.

The number one way new traders fail is in counting their trading profits, or the money that could be made on the trade before the trade is even placed. Pro traders know you should be focusing on how much they could lose on the trade. To succeed you must be able to accept the risks and apply money management techniques such as stop loss orders, max daily loss limits, and account draw down rules. Think Risk First, Then Reward When you focus on, and accept the risk of losing, the doorway to profits will open. A saying I use is, when in doubt, wait it out. If you’re in a position and are feeling anxious and want to get out early, it usually leads to taking profits too soon. Here are 3 ways you can limit the losses to keep more trading profits: 1. Set Hard Stop Loss Orders In order to limit downside risk, a stop loss must be placed on every trade. It is imperative to your long term success that you do this. There is no getting around losing trades, we all have them. The key is to keep those losers as small as possible, and give your winners a chance to take shape. Be quick to exit when the position is going against you, slow to exit when it’s going you way. Two crucial rules for stop loss orders Stops must be placed at the time of entry A stop can only be tightened, never widened 2. Establish a Max Daily Loss Limit To prevent the dreaded “blow up” of your account you must place a max daily loss limit on your account. Don’t just write it down on a post it. I recommend setting a hard loss limit with your broker to ensure this rule will be followed. When we are at our weakest is when our rules become the most important, yet the hardest to follow. Limit your max daily loss to no more than 5% of your account balance (and this is even a high number). Still, this ensures that you will live to trade another day and not lose everything on what is in some cases, one bad decision or mistake. 3. Adhere to Draw Down Rules Another way to limit your risk is to cease trading after 2 full stop outs on the day. If you have two stop outs, the market is telling you that it is not conducive to your setups that day and you need to stop trading. There are methods for scaling out of your positions in which you may sell half at a smaller profit target. If you get taken out of the remaining portion of your trade after this first target is hit I do not consider that a full stop out. Does Your P/L Statement Look Like This? Chances are your profit/loss statements are made up of a handful of average days, a few big winning days and a few big losing days. If you can eliminate the big loser the profits can emerge. Once you can successfully manage your losses your trading profits will follow. What other ways can you think of to limit losses?

Jim-- I've found the simpler the strategy the better. Then spend more time focusing on detaching yourself mentally from the money associated with winning and losing. A simple strategy helps be extremely objective and focused. That was my experience anyways.

Browns Fan - here's an article about sleep cycles from Life Hacker 90 Minutes Sleep Cycle there are a lot of scientific studies on sleep as well you can find in medical journals, etc. As for music, I'm a big fan of Pandora radio, great selection and I don't have to worry about picking songs.

Trading full time can put a strain on your body. Waking in the early hours of the day and keeping your focus throughout the entire session can be a challenge. Here are 6 tips to help you feel more alert and focused during the trading day. 1. A Little Caffeine Can go a Long Way[/b] If you've ever found yourself overwhelmed with too many tasks I'm sure you've wanted to know how to concentrate better. Nothing cures that lack of productivity bug like a little caffeine. While I am not a coffee drinker, every so often I do take a shot of espresso or crack open a Pepsi for that extra burst of motivation and energy. Scientific studies do show that caffeine improves focus and concentration. While I wouldn't recommend jumping on the 3 cups a day of coffee a day wagon, every so often it can be the perfect pick-me-up to improve your productivity. 2. Why Exercise Benefits the Brain Not only is exercise good for the body physically, it is also a great way to stimulate the brain and boost your mood. After you've finished exercising for 45-mins or so you probably notice you're in an upbeat mood, can think clearly, and generally feel good about yourself. When you do things like go on walks, take part in a sporting activity, or even household choirs like gardening and maintaining the lawn, you are helping your body combat diseases, control your weight and boost your energy. Exercise releases endorphins which are the body's natural feel good chemicals. The body also releases serotonin, dopamine, and adrenalin which help to alleviate stress and keep you in good mental health as you age. 3. Feed Your Body Right Garbage in garbage out. Feed your body right and it will reward you. A glass of orange juice or something sweet with breakfast can help boost alertness and mental ability. Pair that with a healthy breakfast of granola cereal, wheat toast, egg whites, and some fresh fruit and you'll be set for the mornings trading. Berries, nuts, whole grains are great snack foods and will keep you going throughout the day. Celery and Almonds are especially good for an added pick me up during the afternoon. For dinner, fish, broccoli, green beans, brown rice, and a glass of milk is a great way to cap off the trading day and keep the body motoring through the week. Most importantly, don't forget to stay hydrated! Water flushes out the body and keeps you healthy. 4. Distract Your Mind with Music Listening to music during a mundane or dull task increases our focus and creativity. With soft music in the background, the part of our mind which becomes easily distracted is now occupied with the music. I've found that listening to music without lyrics is most effective. My choice while trading is techno, but I also enjoy jazz and even classical. I urge you to give it a listen! 5. Sleep in 90-min Cycles While it may be obvious that sleep is important, most people don't realize how much sleep their body actually needs. As we age our bodies require less and less sleep, however your activity level plays a large part in the amount of sleep you need. Sleep helps reduce stress, improves memory, and keeps your heart healthy. An average sleep cycle takes approximately 90-mins to complete. This varies for each person, but not by much, maybe by a couple minutes. Try this exercise... Time your sleep habits for a week. Set your alarm so you wake up just after 6, 7.5, or 9 hours of sleep. This ensures that you've completed a full cycle and aren't waking up in the middle of REM sleep causing you to feel groggy and tired. Give it a try and let me know what you think! 6. Bring the Outdoors In Studies show when people live and work in a well lit environment, they are happier, healthier and overall more productive. In addition, cracking a window and letting the sounds of the outdoors into the office is something that I find really enjoyable. Natural light also reduces eyestrain, a vital issue when starring at a computer screen all day long. If you don't have access to natural light, utilize short 5-10 minute walks outside during the day to recharge and alleviate any stress on your eyes. Sitting in a dim lit room on a sunny day is simply no fun. What tips do you have to help stay alert and focused during the trading day?

Trading in the Zone by Mark Douglas

The best traders in the world will tell you success begins with a trading journal. This is the fastest way to speed up your learning curve. Here, I'll provide some great options for record keeping using trading journal spreadsheets. Greg Thurman has created hands down the best Trading Journal Spreadsheets around. This is a great way to get the most functionality out of your trading journal without the hassle of creating the spreadsheets yourself. Here is a slideshow highlighting some of the cool features. An alternate to record keeping in Microsoft excel would be the highly popular StockTickr web based software. Various Options and Pricing Yes, there is a cost associated with these spreadsheets, but in my experience it is the best purchase you will make as a trader. Trading Journal Spreadsheets Pro $97 Trading Journal Spreadsheets Elite $197 StockTickr Pro $49.99 /mo StockTickr Elite $199.99 /mo StockTickr does have a free trial of the Pro version, as well as a free stripped down basic version. Check them out and decide which you like best! My personal excel based spreadsheets are available in my post Ideas for Building Your Personal Trading Journal. We are constantly reminded of the benefits of using a journal to record our trades, so don't put it off, get started building your own trading journal today.

This is an excerpt from a piece by Oliver Velez and I thought it would be very fitting for sharing on Traders Laboratory. Do you know the fastest way to fail as a trader? Jump on the bandwagon. Imagine a bandwagon that is rolling forward at a quickened pace. Music that is very pleasing to the ear is being played from speakers on each side of this bandwagon, and a few people currently on the back of the wagon are partying, having the time of their lives. The music, loud and clear, starts to attract many other onlookers that happen to be idly standing on the sidelines. These onlookers, unable to resist the sweet sounds being played, run to join the party that seems to be going on. Progressively, more and more onlookers jump on the back of this bandwagon, and those few who were initially enjoying the first phase of the party begin to leave. As the crowd of new party animals on this bandwagon grows larger, the bandwagon finds it harder and harder to move forward at the same pace. It slows, enabling more and more late onlookers, witnessing the great fun, the chance to jump on. The crowd grows even larger. Larger and larger this crowd grows, until the bandwagon, heavily laden with the bodies of drunken party animals, can no longer move forward. It finally comes to a complete stop. Now that the bandwagon is at a complete standstill, more people jump on. And why not? At this point, joining the fun is easy. Absolutely no work is required, for individuals wanting to join the crowd no longer have to run to jump on board. The nature of the bandwagon is to move forward. Its motionless state is unnatural, and therefore cannot last. It tries to move forward again, but can’t. The crowd, piled on back, is much too large. It must free itself of the heavy burden. And it does. It quickly shifts into reverse, and jolts backward, knocking a few of the party animals off the back. The music stops. Puzzled faces from the crowd begin to emerge. Before anyone figures out what’s going on, another backward jerk takes place, only this one is more violent. Another large group of people gets thrown off the back. Now, reality sets in. The fun has turned into a nightmare of epic proportions, and panic begins to run rampant. Some decide to jump to their deaths. Another thrust backwards sends an even larger group of drunken, off balance people, hurling to the muddy ground. It doesn’t stop. The jolts backward continue, each successive one more violent than the last. At this point, only a few die-hard wagon dwellers are holding on, their very lives hanging in the balance by a very thin thread. Failing to be completely free, the bandwagon angrily puts the pedal to the metal, and this final thrust backward is so vicious that its front wheels lift high off the ground, momentarily suspending the wagon in a perpendicular position. The last of the hangers-on crash to the ground, broken and maimed to no end. At this point, a new group of onlookers emerge from the nearby woods. They are clean and serene. Each movement they make is deliberate and powerfully energetic, for they did not take part in the tragedy that just transpired. Or did they? A few of the dejected souls lying on the ground take a closer look, a look that reveals something very interesting. This seemingly new group is not new at all. It is the same group that was seen quietly exiting the party before it came to its violent end. An even closer examination by a few more beaten-down onlookers reveals something even more stunning. This group not only exited the party early, they were the originators of it! “My God,” someone exclaims. Paralyzed, and unable to move freely, all these dejected souls can do is watch, as the masters of the game go to work, again. No sooner does the bandwagon’s wheels hit the ground than this professional platoon bolts for the wagon. In a flash they are on board. Easy. The bandwagon, now free of the larger crowd, can move forward freely and gracefully, comfortably carrying the more astute group with it. Its pace quickens, and before long a smooth elegant stride is in place. After a few miles of uninterrupted movement, someone from this masterful group flips on a switch, and suddenly the loud sounds of entertaining music start again. Someone yells, “OK everyone. Here they come. Let’s do it again.” Within moments, those who were the former victims of the backward crash become interested again. The music almost calling them from the grave. And once more, the never-ending cycle repeats.

Another method not too commonly used are Heikin Ashi candlesticks on tick charts to help better identify the trend changes.

"Trading is a hard way to make an easy living"

tburd-- I think that's a great angle to come into trading with. I like currency futures because it trades in very wide ranges. The ES and TF are also good instruments but don't move as much as the Euro does.

And that's undoubtedly the answer to achieving objectively in your trading and being able to follow your setups the same way every time.

Less is more. Great comment.

To take the other side of that argument in playing devils advocate, the indices (NASDAQ for instance), is made up of individual stocks, the NASDAQ internals therefore are made up of data from those stocks so I still would consider them connected.

That's interesting I have not tried that. I'll play with the idea a bit. Thanks.

Yeah, originally for TradersLog.com, but I also posted it on my blog EminiMind.

I guess I simplified it too much.

We’ve all heard the saying… “The trend is your friend until the end” In this post I outline techniques for identifying the trend, getting in, and staying in until it fails. How do we Define a Trend? An uptrend can be defined as higher highs and higher lows, while a downtrend can be defined as lower highs and lower lows. As an exercise, each night print out a 5 or 15-min chart of the market you are trading and identify the key highs and lows of the day. After a few weeks you will become better able to define the trend during the day. Methods for Identifying the Trend Moving Averages Regardless of the time frame you’re trading, moving averages are a great way to quickly identify the general trend of the market. I place more weight on larger time frames such as the daily and weekly and then look to trade with that trend on the smaller intraday timeframes. A 20-period Exponential Moving Average is a great tool for intraday trading. A 20 Period Exponential Moving Average (in blue) helps quickly identify the larger trend. Using a 5-min chart, the 20-EMA keeps us aware of the larger trend. Candlestick Patterns As talked about in the book Japanese Candlestick Charting Techniques, candlestick charting is a great way to identify market sentiment and trends. The candlestick pattern is made up of an open, close, high, and low price. These candlestick patterns have a lot more to say as compared to a bar chart. To get an even clearer picture of the trend try switching to a Heikin Ashi chart. Methods for Entering the Trend Fibonacci Retracements Buying on a retracement as opposed to chasing the market is a great way to enter a trend. This reduces the likelihood that your stop will take you out. Once you have identified a new trend try drawing from lows to highs (in an uptrend) and waiting for a pullback to the 50% of a Fibonacci retracement before going long. Entering a trade at a 50% Fibonacci retracement is a low risk method of getting into the trend. This allows you to enter on a pullback rather than chasing the market. The NYSE Tick This is by far my favorite tool for intraday trading. To learn more I will refer you to my prior post on the NYSE Tick. Reversal Patterns Buying over the high of a low bar (in an uptrend) or shorting the low of a high bar in a down trend is a great way to get in the new trend close to a reversal. These patterns accompanied with a moving average or other momentum indicator can be a sound strategy with very good risk/reward ratio. Whether you’re an intraday trader or use a weekly chart, being able to identify the trend, get in, and stay in will yield the greatest return over time. Do you have other methods for identifying the trend? I’d love to hear from you.

But the market doesn't MAKE you do anything. You are in complete control of your trades and most importantly how much loss you take. Things like doubling down and trading too big for your account size will most certainly cause you to blow up your account. The ability to detach yourself from emotions of winning and losing money are the result of finding that dollar amount that does not eat away at your gut when you place a trade because you're hoping that you won't be stopped out. It should 'feel' as though you just bought a cup of coffee, indifferent.

Your absolutely right, market internals are one of the most fundamental instruments to gauge market sentiment and are not at all used enough by traders.

smlcap, setups are simply criteria you are looking for that triggers action to place a trade. For instance a setup might be, a pullback to halfway back in a range. So when a stock moves from $40 to $50, your setup is to enter long at $45.

Oh I completely agree Mystic, I should add into the post that you can solve the problem of trading too big for your account size by limiting your risk per trade to 1% of your total account balance and stop trading after 2 stop outs on the day. That's my philosophy anyways.

You may have successfully changed my view with that comment. Interesting.

@light I agree with all that, although I would like to play devils advocate and say that I do find John Carter and Hubert to be legit. At least he trades size