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LESSONS & TRADING RULES 

 

$ Millions Of Dollars Have Been Lost Before.

Do Not Become Part of The Statistics and Do Your Homework!

I have chosen to be a day trader.  It is a matter of preference.  Also, it limits risk to the days' news, events and price action.  A day trade, may develop into a swing trade but that is not the initial plan.

The market provides each an every day trade entry opportunities for the day trader.  That is not the case for the Swing trader.  For Example, on Friday 4/20/2018, Gold (/GC), Standard and Poor's 500 (/ES) and Oil (/CL) provided opportunities with significant profit potential.

One must also wait and be patient to allow a set up to develop, test areas of support or resistance, allow back tests to occur and then take the failed moves rejecting the level tested.  

As a Swing Trader, extreme patience is needed. You must wait for days, sometimes weeks for a proper set up to occur.  This is one of the reasons, Swing Traders trade several symbols.  Sometimes they trade 10 to 20 symbols so that there are opportunities a couple of days a week.

Depending on your trading plan, geographic location, risk tolerance, account size and trading style, your rules will vary.

Each Symbol (ie: /ES, /CL, etc) Has their own rhythm. You Must Learn to Trade to their music!

How Can A Trader Learn any Symbol's Rhythm? by hours and hours of studying charts. This is only obtained with effort and experience.

Deciding on what sessions to trade will depend on your location.  I am located in Miami, FL.  This makes it easy for me to trade the US Session.  I have been studying the European session for over 8 months.  Getting up at 2:50 AM each and everyday.  This is not fun.  At least not for me.  But it has been a great education.  There is a ton of opportunity when you are able to trade the European and US Sessions.  Moving to Spain would be ideal for me!

When Day Trading both sessions (Europe & USA), one will get easily 3 to 5 trades with significant profit potential.  For example, my trading plan for Oil (/CL) targets moves from $0.30 cents up to a $1 or two if the setup is strong.  The goal is to trade with a tight stop (usually $150 per contract) but increase the number of contracts and take profits or adjust stop proactively. 

This is a lesson learned from Marty Schwartz

You want to hear your cash register each and everyday.
Smaller moves with multiple contracts, tight stops plus aggressive management.

blackFLAG Calculating your stop loss 2018-04-22_7-19-02

Trading All Sessions?? is it possible?

Yes, there are teams created for that purpose.  This will occur within  companies were a group of 3 to 4 traders work around the clock to monitor and manage positions overtime.  For the individual technical trader, this is just not possible.  

Find Trade Entry Opportunity

Calculate Stop Loss

Manage Stop To Breakeven Plus

Locate a strong Support or Resistance level.  Find one where price has come to before and rejected at least two times.  Ideally, you want to draw channels and use channel walls as the guide.

Gold Long Entry Alerts

Manage Profits

Once a trader figures out a system that allows to protect capital, eliminating a "Big Loss", then the focus becomes how and when to manage profits. 

A traders success is measured by their ability to select a proper entry, protect capital without being taken out too early from the trade and the ability to stay with the trade to an optimum profitable point of exit.   If exiting a trade early, you can always get back in when retracement to support / resistance level occurs.  

Determine a dollar amount that you are willing to risk on the entry.  ie. $100 per contract etc.  In my case, my stops range from $150 (best option) to $200 per contract maximum.  Some traders with large accounts and a significant level of experience will use much larger stops and take longer to adjust their stops into break even.  

From The Start - Set Your Stop and Profit Levels. Adjust Stop to protect profits only.

Use Pre Set Orders With Built In Profit Targets and Stop Loss Protection

Sell Order ThinkOrSwim TD Ameritrade

My number one GOAL of a trade is to bring it to break even plus.  Once the trade starts to develop as expected, adjust the stop to protect more profits.  Continue this process as long as price action is agreeing with your expectations, if price action / trend fails to continue, adjust the stop or close the trade.  

If after entering a trade based on your analysis, price does not move as expected, either adjust the stop or close the trade.  

Buy Order ThinkOrSwim TDAmeritrade

Adjust your Take Profit Target if Momentum Stops or Speeds up. Manage Profits.

Adjust Stop To Protect More and More Profits.

Thousands of traders lose fortunes in the process of learning these lessons.  It is actually harder than you think to implement consistently the lessons learned by traders before us and stick to your rules overtime. 

It is quite simple to read a concept and think, it is easy to follow thru with them.  The market will teach you a lesson each and everyday.  Stay humble and respect the market.  If not, the market will take control of your account.  Once your psychology starts to work against you, you are in big trouble and in some cases paralyzed.  Once you react to a market move, you have lost thousands dollars.  

Position Size

New traders must stick to 1 contract maximum.  After months of profitable consistent trading, 2 contracts assuming that the account is large enough to handle it.  Stop Loss of $150 per contract.  

Account Size

Preferred Minimum Account Size $100,000 and higher.

Maximum Acceptable Loss / Day

It is a good idea to have a maximum amount of loss you are ok with a day.  If that amount is reached, stop trading for the day.  If your market analysis is not working out due to outside forces, be it news, politics, volume, etc, it best to STOP TRADING and wait for the next day.  There is no rush to put money at risk without proper trade performance.

Scaling Up

Once a position is entered and the stop is at break even plus, if there is a dip in the market, you may add another contract with its $150.00 Stop Loss in place.  As price continues to move in the direction of the trend, adjust the stop to break even plus as well.  

Scaling Out

Taking profits is as important as a proper entry.  An experienced trader understands the importance of support and resistance levels and plans ahead for possible areas where the price trend may face a challenge.  It is at these points or prior to that, one must consider taking profits on a portion of the position or close the trade depending your your analysis.   

DO NOT TRADE DURING US. HOLIDAYS

I prefer to trade only when the European and US markets are opened.  During US Holidays, volume is usually low and price momentum is minimal.  It is not worth risking hard earned money or working capital during these times.

LOW VS. HIGH VOLATILITY

As a trader, one must have experience trading during different market conditions as they change overtime.  In the past several years, the VIX has been extremely low and stable.  Trading when the VIX is a 9 or 12 vs 50 is quite different.  For example, the DOW JONES Futures /YM can swing 200 to 400 points in a matter of seconds.  It is extremely volatile and it is best to stay out of the market.  As a trader, one must look for pretitable moves and not speculate as to what may happen.  Trading with a high VIX or Implied Volatility of the instrument to be traded should be left for highly experienced traders.