Jimmy's Trading Diary

URZ Trade

2010-07-30T20:21:00.000-07:00

Time To Start Accumulate AUD

2010-06-04T20:44:00.001-07:00

Just look at the commercials trader is buying now...same as Jan'09

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ZION Open Trade

2010-01-10T01:41:00.000-08:00

The Marcus Grading System

2010-01-06T06:26:00.001-08:00

trader who turned $30,000 into $80 million shares the “secret” to his success – and you can make use of it too.

One of the best trading books of the past few decades is the original Market Wizards by Jack Schwager. (In fact, some would say it ranks up there with Reminiscences of a Stock Operator as one of the best trading books of all time.)

Schwager went on to add more books to the Market Wizards series, based on the success of the first. But the original (published in the late ‘80s) is still the one to beat. The book is a series of interviews with top traders – many of whom went on to become legends in their own time. (Not household names that the public would recognize, but legends in the more intimate world of trading.)

One of the traders featured in Market Wizards is named Michael Marcus. By his own account, Marcus turned $30,000 into $80 million over a number of years (on top of substantial fees and expenses). Schwager’s introduction gives some flavor:

Michael Marcus began his career as a commodity research analyst for a major brokerage house. His near-compulsive attraction to trading led him to abandon his salaried position to pursue full-time trading. After a brief, almost comical, stint as a floor trader, he went to work for Commodities Corporation, a firm that hired professional traders to trade the company’s own funds. Marcus became one of their most successful traders. In a number of years, his profits exceeded the combined total profits of all the other traders. Over a ten-year period, he multiplied his company account by an incredible 2,500-fold!

Early Challenges

Michael Marcus was not successful right off the bat, though. He opened his first trading account with a thousand dollars and consistently lost. There was a period of frustration where, day after day, Marcus just felt that he couldn’t do anything right.

At one point in the interview, Schwager asked Marcus if he had ever thought about giving up. Marcus replied:

I would sometimes think that maybe I ought to stop trading because it was very painful to keep losing. In “Fiddler on the Roof,” there is a scene where the lead looks up and talks to God. I would look up and say, “Am I really that stupid?” And I seemed to hear a clear answer saying, “No, you are not stupid. You just have to keep at it.” So I did.

Obviously, the persistence paid off. Marcus went from being a trading failure to a spectacular trading success, earning “at least 100 percent a year for years and years.”

The “Answer”

When Schwager asked Marcus for the “answer” – what he figured out to turn himself around so dramatically – here is what Marcus had to say:

I think the secret is cutting down on the number of trades you make. The best trades are the ones in which you have all three things going for you: fundamentals, technicals, and market tone. First, the fundamentals should suggest that there is an imbalance of supply and demand, which could result in a major move. Second, the chart must show that the market is moving in the direction that the fundamentals suggest. Third, when news comes out, the market should act in a way that reflects the right psychological tone. For example, a bull market should shrug off bearish news and respond vigorously to bullish news. If you can restrict your activity to only those types of trades, you have to make money, in any market, under any circumstances.

Marcus himself would trade more frequently than his strict guidelines suggested. But the thing that “saved” him, he said, was a willingness to “enter five to six times the position size” when all his criteria were met, versus other trades that “broke even and kept me amused.”

The Marcus Grading System

Your humble editor is determined to improve as a trader every single year (if not every single month, week or day). One 2010 resolution is to make fuller use of Michael Marcus’ wisdom in terms of trade selection... and to implement that wisdom in a specific, concrete way.

To that end, yours truly now introduces the “Marcus Grading System.” The Marcus Grading system – inspired by the Market Wizards interview – is a simple means of “grading” potential new trades, based on the key factors Marcus cited: fundamentals, technicals and market tone.

The below table shows how it works:

The Marcus Grading System
Fundamentals	Technicals	Market Tone
• Rate 1-9 • 1 = max bearish • 5 = neutral • 9 = max bullish	• Rate 1-9 • 1 = max bearish • 5 = neutral • 9 = max bullish	• Rate 1-9 • 1 = max bearish • 5 = neutral • 9 = max bullish
Max Bearish Example: 111	Neutral Example: 555	Max Bullish Example: 999

The Marcus Grading System uses a simple zip-code type approach. The “grade” itself is just a three-digit number... each digit corresponding to fundamental, technical and market tone rank (in that order).

As you can see from the table, “1” is maximum bearish and “9” is maximum bullish. If you are looking to go short, you want a grade tilted toward low (bearish) numbers. If you are looking to go long, you want a trade tilted toward high (bullish) numbers.

A “9” is not necessarily better than a “1” in this regard (unless you have a problem with going short). The thing to avoid, though, is the muddle in the middle. A “5” is the equivalent of saying “hard to say either way.”

Let’s walk through some quick examples.

Max Bearish Example: 111

A trade with a rating of “111” (three ones) would be maximum bearish. The fundamentals would be coyote ugly – huge oversupply, grossly overbought, disaster looming, et cetera – and technicals and market tone would be correspondingly ominous. For instance, imagine a clear breakdown from a rolling top formation as uneasy hope morphs into dull panic.

This type of shorting opportunity is rare indeed... like pocket aces on the button in a poker tournament.

Neutral Example: 555

A trade with a Marcus rating of “555” would be pure blah (and best avoided).

With neutral fundamentals, neutral technicals and neutral market tone, the next directional move becomes a coinflip proposition... more or less anyone’s guess. You want to stay away from trades that wind up in this neutrality “dead zone,” because there is little point participating in the market (and incurring transaction costs and slippage) without a clear edge. The more fuzzy (i.e. neutral) the trade, the smaller the size... if you even play it at all.

Max Bullish Example: 999

A trade with a Marcus rating of “999” would be maximum bullish. An example of this type of trade might be a deeply oversold market, having just registered a high-volume breakout from a consolidated base, with some type of aggressive fundamental catalyst fueling a radical shift in investor perceptions.

Again, max bullish trades are not very common... but when they come along, you want to back up the truck (within the context of risk management parameters of course).

Rare Extremes and Intuitive Feel

If you elect to use the Marcus Grading System on a regular basis, you will not see very many “max bullish” or “max bearish” opportunities. A more realistic grade might be something like “876,” where fundamentals are strong but not screamingly so, the chart looks decent but not fantastic, and market tone is modestly positive.

The idea is not to assign an overly precise number to every trade. Instead, the Marcus Grading System acts more like a filter... a means of expressing intuitive feel. If one of the numbers looks especially off, then maybe that is a sign to not take the trade... or to wait things out a bit and see if conditions improve.

On the whole, the Marcus Grading System could improve your trade selection (if you choose to use it) by reminding you to always check in on the “big three” factors – fundamentals, technicals, and market tone – and also by acting as a sort of pre-flight checklist, filtering out potentially hasty or unwise trades.

Last but not least, it’s important to note that conditions change. An open position can see its Marcus Rating change too, perhaps significantly so, over time. By routinely assessing open positions with a fresh eye via the Marcus Grading System, the trader has better odds of spotting a problem early. If you want to see it in action, Macro Trader will be applying the Marcus Grading System to all open positions in 2010.

If you found this idea helpful, or have any other trading-related topics or questions you would like discussed, let us know:

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More Euro Losses Ahead : Ashraf Laidi

2010-01-05T20:41:00.001-08:00

Technically, euro bulls cannot ignore the time-tested fact that monthly downward reversals greater than 4% have led to multi-month declines of at least 15% since the inception of the currency in 1999. The December decline of 5% (biggest since Jan 2008) is likely to reinforce our forecast for $1.37 before quarter end.

More Euro Losses Ahead : Ashraf Laidi

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MORGAN STANLEY INVESTMENT OUTLOOK: STOCKS ARE SET TO DECLINE IN 2010

2010-01-01T04:04:00.001-08:00

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The Financial Fortress

2009-12-18T18:07:00.001-08:00

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Telstocks

2009-12-14T05:35:00.001-08:00

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Gold Seasonal

2009-08-07T18:31:00.001-07:00

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Crude Oil Seasonal

2009-08-07T18:27:00.001-07:00

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Natural Gas 10 Years Seasonal

2009-08-07T18:21:00.001-07:00

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Announcing New Currency Pairs

2009-08-04T07:23:00.001-07:00

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Second-tier-div-stocks-6-25-09

2009-06-26T05:44:00.001-07:00

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Top-tier-div-stocks

2009-06-26T05:43:00.001-07:00

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Dividend Trade List

2009-06-21T01:30:00.001-07:00

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Where is the bottom

2009-06-19T17:33:00.001-07:00

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Dialing It in

2009-05-29T19:19:00.001-07:00

like James Stewart. He has written some interesting books, but he is dialing it in here. An excerpt: As the economy shows signs of improvement, I plan to gradually shift out of defensive positions like consumer staples and health care and into more growth-oriented positions. Meanwhile, I still have the cash position I raised by selling stocks in April. With benefit of hindsight, that sale was premature, a decision for which I nonetheless remain unapologetic. As I’ve said many times, no one can time the market perfectly. I’m in no rush to put that money back into stocks. Last week’s drop was a reminder that even bull markets suffer declines. Eventually there will be a 10% drop, which will be the trigger for me to put more money into stocks. No doubt by then, fear will again have made its presence felt.

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Minimum Profit Objective & 10% Rule

2009-03-21T23:25:00.001-07:00

MPO=(100-(win Rate))/Win Rate

For average $100 risked on average trade, skillfull trader realize about $10,000.0 in income per year.

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Trader Goal

2009-03-21T20:48:00.001-07:00

Your job as a trader, is not to pick winning trades, but instead to pull profits out of the world's market, As is often the case in this perverse business, the biggest edges and most dramatic profitability come from th low accuracy/high risk to reward trading strategies. I strongly suggest you ignore the false idols of accuracy and win rates, and pull all of your time and focus during the strategy development process into larger risk to rewards ratios.

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Volume Trade

2009-02-27T00:57:00.001-08:00

Selling Climax Day is volume expands by at least 20 percent or more compare with before and other. Selling Climax day is not the buy signal, buy signal occur the test of the low of the the selling Climax day with at lest 8 percent shrinkage in volume, follow by a close above the low of the selling climax day.
False break out, volume shrink by 8% on break to new high.Sell signal triggered on close below previous high.
tested previous low on 3% less volume with implies decline should continue.
3% to 8 % no trade.

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Crash Course

2009-02-17T05:49:00.001-08:00

Embedded Video

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Earnings Will Get Even Worse

2009-02-14T18:10:00.001-08:00

Last week I said that 2009 as-reported earnings estimates for the S&P 500 would be dropping. 2008 earnings had dropped to $29.57 as I wrote the letter. They are now down to $28.60. One of my favorite analysts is David Rosenberg of Merrill Lynch. His forecast for reported earnings for 2009 is now down to $28. That puts the P/E for the S&P 500 at 30.

He also projects "operating" earnings to be $55 for 2010. And, as he writes today:

"For those looking for a silver lining, at least we are going to have a deeper bottom to bounce off. Applying a classic recession-trough multiple of 12x against a forward EPS estimate of $55 would imply an ultimate low of 666 on the S&P 500, likely by October if our estimate of the timing for the end of the official downturn is accurate."

That is a 20% drop from today's close of 829. That is not what you will hear from "sell-side" managers who want you to invest in their mutual funds and long-only management programs.

I noted the problem with the rest of the world earlier. 40% of the earnings for the S&P 500 are from outside the US. It is hard to see how those earnings are not going to be deeply affected. Let me reiterate my continued warning: this is not a market you want to buy and hold from today's level. This is just far too precarious an economic and earnings environment.

Given the probable ongoing bad news from financial and consumer stocks, plus the depressing news on bank losses coming down the road, why take the risk?

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Oil Price Projection

2009-02-13T04:55:00.001-08:00

Lower oil prices should provide a modest offset, boosting consumers’ discretionary spending power. Our commodities team expects WTI crude to average $35/bbl over 2009 − lower than today’s $40/bbl − while recovery will lift quotes back to $55/bbl in 2010 (see Global Oil Outlook – 2009: The Global Engine, Stalled and Flooded, February 2, 2009). Lower oil prices are only one factor behind the plunge in inflation. The deepening downturn has intensified the risk of deflation, as rising economic slack increases the prospective US output gap to more than 7%. Slack overseas will put downward pressure on import prices, and the dollar has strengthened. We think aggressive monetary policy, a global rebound, and increased commodity prices will prevent US inflation from slipping below zero − but the risks, especially over the next year, are tilted toward lower inflation.

Morgan Stanley - Global Economic Forum

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Forecast 2009

2009-01-10T18:45:00.001-08:00

: Deflation, Deleveraging, and the Stimulus Effect For a very long time, I have been adamant that deflation is in our future. In the next few pages I outline how inflation might come back, but I doubt it will be this year. For now, deflation is the economic factor that the Fed and central banks will be battling. And believe me, it will be a very large and controversial battle.
Many auto plants, both in the US and abroad, are simply going to have to be closed. "Super-efficient Toyota expects its first operating loss in 70 years in the fiscal year ending March 31. Weak sales in China will probably force many of her 80 automakers to merge. Russian sales dropped 15% in November and 25% in Brazil from a year earlier." (Gary Shilling)
Just as there are too many auto dealers and too much auto manufacturing capacity, there are too many stores for a country whose consumers are in retreat. Consumer spending could easily drop 7% as the saving rate heads back up to 5% (or even more). It is estimated that over 70,000 retail stores will go out of business in the next six months. That would be in line with the 140,000 that closed doors last year. The economy and its businesses have to adjust to a new level of spending that will be the first serious consumer recession in 26 years.
Unemployment could rise to 9-10% or more this year and on into 2010. That means we could easily see another 3 million lost jobs over the next year. That is going to put a lot of negative pressure on consumer spending. It also means that wages are not likely to rise, and we have already hard evidence of wages falling in many industries as companies try to find ways to remain solvent.
I would be a buyer of quality bonds, both corporate and municipal. The key is to have a bond analyst who knows what they are doing and not just looking at ratings. There are some real values in the bond market today.
I would not be a buyer of US government debt. Treasuries, if not in a mini-bubble, have little upside potential and just don't yield enough. Why would I hold a ten-year treasury for 2.39%? I like TIPS at these prices. TIPS are pricing in deflation for ten years and, as I outlined above, I don't think the Fed will allow deflation to take hold.
With all the massive printing of money, you would think I expect the dollar to crash. I don't. The question is, what will it fall against? The euro? Really? The pound is better valued, but England and Europe are going to have to cut rates and apply massive stimulus as well. Every developed country will have problems. I can see holding Canadian, Australian, and other commodity-country currencies, but the leverage needed to make it a reasonable investment potential is too risky for individuals.
I can't see the Japanese letting the yen get too much stronger. China seems to want to halt the rise of the yuan, and the rest of Asia will devalue their currencies to maintain whatever they think of as a competitive advantage. Longer term, I like Asian currencies.
After a year of bouncing around, gold may be poised to rise against all major currencies. We could easily see new highs in the next year.
I think oil is going lower (and maybe much lower -- can you say $1-a-gallon gas?) in the near term. As I have written about before, oil is now in the steepest contango on record. That means oil is cheap today and more expensive in a few months. That is not normal. Oil is bidding for storage. You can make 20-25% on your money in a few months if you can buy oil and find somewhere to store it. At least 25 supertankers have been leased to store oil, and sources say another ten are being bid for. It remains to be seen if OPEC can really cut enough to make a difference in the near term.
As for the other metals, I think it is quite likely copper and its industrial allies will fall in price at least for the near term, until production can be cut and demand in Asia begin to rise again. I would not be a buyer of long-only commodity funds for the near term. Someday the bull market in commodities will return, but not until Asian demand picks up.

Thoughts from the Frontline

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The Oracle of 2009

2009-01-07T06:16:00.001-08:00

The SPX should rally to 1150 or so and then decline to at least 600It is likely that we will reach the 1994 previous wave lows of SPX 430 before this Bear ends in 2010 to 2011, but in 2009 a more realistic target is the next support area near the 1996 lows of SPX 600.

Since we dropped 50% from the highs in 2008, we will probably do the same in 2009 and that means a rally to the SPX 1140-1200 level in the first half of the year before we decline to the 550-600 level in the second half. Since this Bear is more severe and unfolding faster than I expected, we must also consider a darker scenario that sees the highs of 2009 closer to the 1000 area and a second half decline to the SPX 500 level in 2009.

Safe Haven | The Oracle of 2009

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Stock Market Forecast and Strategy for 2009

2008-12-31T17:57:00.001-08:00

Going forward for 2009 then the best way I see to make money will be to short the market averages once/if the S&P 500 rallies above the 1,000 level. If this rally continues into the first week of January I'd expect it to come to an end by mid-February at the latest. If we get in on the short side then cover and take profits on a move back down near the November low.Then sit back and see how the sectors evolve. If they still don't perk up short the next rally. If more of them get into bullish configurations then do the research on individual stocks and companies with a plan to buy in big. If the bear market is over then on a retest we'll start to see some sectors stop falling with the market averages and a positive divergence begin to firm in the NYSE advance/decline line. That will be a sign that we need to shift our attention to buying individual stocks in the best sectors to prepare for a new bull market.

Safe Haven | Stock Market Forecast and Strategy for 2009

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6 New Ways to Triple Your Exposure With ETFs

2008-12-22T05:38:00.001-08:00

Direxion Large Cap Bull 3X Shares (BGU)

Direxion Small Cap Bull 3x Shares (TNA)

Direxion Energy Bull 3x Shares (ERX)

Direxion Financial Bull 3x Shares (FAS)

Direxion Large Cap Bear 3x Shares (BGZ)

Direxion Small Cap Bear 3x Shares (TZA)

Direxion Energy Bear 3x Shares (ERY)

Direxion Financial Bear 3x Shares (FAZ)
Developed Markets Bull 3x Shares (DZK)
Developed Markets Bear 3x Shares (DPK)
Emerging Markets Bull 3X Shares (EDC)
Emerging Markets Bear 3x Shares (EDZ)
Technology Bull 3x Shares (TYH)
Technology Bear 3x Shares (TYP)

6 New Ways to Triple Your Exposure With ETFs | ETF Trends

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S&P Key Support

2008-11-14T04:06:00.001-08:00

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Market Bottom

2008-11-05T05:14:00.001-08:00

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Where is the Bottom

2008-10-10T19:00:00.001-07:00

The best case scenario would be a bottom like that seen in 1974. The consolidation period was shorter than the one seen after the 2002 bottom. After the bottom came in 1974 there was a quick lived rally and then a retest of the low. The market then went into a new bull market. One thing to note here is if you wanted to buy and hold you would have been better to do so on the retest, because you would have been able to buy the stocks that held up during the retest - they became the market leaders of the next bull market.

On the 1974 bottom the DOW was about 30% away from its 200-day moving average. Just like in 2002 - and just like at this moment.

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Three Trading Rules

2008-09-29T06:28:00.001-07:00

It has cost me a huge amount of money to formulate these "trading laws", if you will, and I offer them up - as I do everything on this blog - for free, with the hope that it will help some of you. If one day I can follow these three rules absolutely consistently, I'll be a much better trader for it.
* Never Lack a Stop Price - The moment I have bought into a position, I immediately whip right around and set a stop price. There is no delay. Always have a stop price in place for every single position (based, naturally, on good charting). No exceptions. For options, using a contingent stop.

* Never Do an Ad Hoc Close - So what's with the Latin, Tim? OK, four years of high school foreign language has got to come in handy somewhere, right? But seriously, this is my most important rule, and what it means is simply this - don't close on a spur of the moment decision. There are two things that should do your closes for you: (1) a stop price (2) the successful achievement of a pre-determined target price. Impulsively jumping out of a position almost never works to your favor.

* Never Act in the First Thirty Minutes - There's something weird about the first thirty minutes of the trading day. Just trust me on this. Do nothing. No opens. No closes. No nothing. Your stops should be in place, and they can do their job, but for you - follow this new spin on old saying: Don't Just Do Something! Sit There!

Slope of Hope with Tim Knight

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Trade Rules

2008-09-14T02:00:00.001-07:00

1. Trade pullbacks with the trendThat means:
a. Never sell a low

b. Never buy a high

c. You go long a test of a higher low in an uptrend

d. You go short a test of a lower high in a downtrend (see 10 tick gold chart)
2. Control
a. Buyers are in control as long as the market is making Higher Lows
b. Sellers are in control as long as the market is making Lower Highs
3. Support and Resistance
a. Resistance will be found, when the market is in an uptrend but is unable to make Higher Highs. As long as you see Higher Lows being made you might expect that resistance to be taken out eventually
b. Support will be found, when the market is in a downtrend but is unable to make Lower Lows. As long as you see Lower Highs being made you might expect that support to be taken out eventually
4. Trend
a. You see identical chart patterns develop on all timeframes.
b. Uptrend: Market is making higher Lows
c. Downtrend: Market is making lower Highs
d. To determine the trend you take a higher timeframe and then take the entry signal from the shorter timeframe
e. The longer the timeframe giving the entry signal, the stronger the move. (See example on the Chart I posted above) (30min chart showed a 50% pullback on the Easter Gap
5. Consolidation versus Trend
a. Markets swing between trend phases and consolidation phases. What looks like a trend in one timeframe can be consolidation in another usually higher timeframe.
b. Markets go from equilibrium to equilibrium. Usually the range covered in a trend phase stays constant within limits. If you know the contract you trade, you know when it has reached an extreme of a move. Take the Euro for example: A trend move usually goes 100 to 120 ticks. If on any given day a trend goes beyond that to say 150 to 200 ticks, you should expect a consolidation phase to start. That does not mean you blindly take a counter trend trade, but if you see Resistance not taken out and say a Double Top forms or even better price is unable to retest the former High, then you go short with a Stop above the highs in case the trend resumes.
c. Consolidation in a longer timeframe trend usually retraces 50% (minimum 33%, maximum 66%) of the previous move, before the trend resumes. If you see a smaller retracement, expect the trend to resume strongly.
d. What is an extreme move in one contract, might be just normal in another. So you need to know the contract you trade.
6. Stops
a. Trading without stops and instead adding contracts at a loss to get the average nearer to price works, as long as you are able to get the average entry price within the next consolidation price range. Say Euro makes a 100 tick move. You can expect Euro to eventually retrace 40 ticks from that high, so you need to get your average entry to less than 40 ticks below the high. But that means you are staying in a losing trade, which becomes more expensive with every tick against you. Even if eventually you might close the trade at a small profit or breakeven, you will have invested huge amounts of emotional energy. Not talking about the missed profits, because you stayed in that losing trade
b. Trading with Stops hurts immediately, something most traders like to avoid. But it has advantages:
You are emotionally free to step back and take a new look at the market
You get immediate feedback whether you are in sync with the market. I have as a rule: 3 Stops in a row and I’m out for the day. Tomorrow is another day and it will provide fresh opportunities.
You make sure you stay in this profession for the long run by protecting your account.

c. The disadvantage is, that you can bleed your account to death by a 1000nd Stops. To avoid that problem, you have to make sure, that when your Stop is hit, the entry signal was not a valid trade setup, meaning the possibility that the trade will come back is remote.
The better a trader you are, the smaller your stop can be without the risk of getting thrown out of a valid trade. (At least that’s what I assume)
The less wiggles the contract you trade shows, the easier it is to define where a stop needs to be placed to be sure a trade signal is no longer valid.
If you are still on the path to the expert level, you need to stack the cards in your favor to make sure you have a very high probability of the individual trade to be a winner. Only then will you be able to pay the unavoidable stops and still come out a winner.

7. Profits
a. Let the profits run.
b. Don’t give profits back.
c. Say you are long, the trend is up and the trade is showing you a profit. Where do you exit? Buyers are in control until Sellers are able to take control from them. That means you exit
at Resistance on a longer timeframe, because resistance usually is not taken out on a first try, or it would be no resistance.
If the market is making a Double Top. That means you need to sit through a pullback first. This pullback should have its low above your entry. That’s why we have the rule: Never go long at a top. If the market is unable to take out the previous high, you exit
If you trade (just) 1 contract, you take profits at certain targets, which have been proven in the past to be the average maximum range a trade goes before you see a pullback. It’s better to build your account step by step. The home runs are for a time, when you have mastered trading 1 contract.

d. I use an achievable daily goal of 375$/day per contract traded. Once I reach that, I stop trading,
if I’m at it for more than 6 hours,
if I have taken already 5 or more trades,
if I feel like I want to do something else. I trade to have free time for other things, so you need to take that time or the ultimate goal is not a real goal.

e. If I make my daily goal in one or two trades, I continue trading and see what the day will bring further. I limit my loss in that case to the profits made so far. A day in green, where you made your daily goal already should never end red, as that’s a big emotional blow to your trader psyche. It’s like a contract making a new all time high and then reversing to close below yesterdays lows.
8. Number of contracts
a. If you can’t trade 1 contract profitable, why do you assume you will be able to trade multiple contracts profitable?
b. With 1 contract you can achieve a daily goal of 500 to 1000$ / day by taking 3 to 8 trades a day. To build your account that’s for sure good enough. On the other hand you protect your account from overleveraging yourself in case something goes terribly wrong. And it teaches you to trade for bigger gains, which makes it easier to pay for the unavoidable losses.
c. I use an internal Margin of 7500 $ / contract traded unless the contract needs a higher intraday margin, then I use at least that margin (eg: the DAX is traded with an internal margin of 17000$. So I allow myself trading a second DAX contract only when my account statement shows at least 34000$)
9. What to trade
a. Trade what speaks to you. It really doesn’t matter what you trade. You need to be comfortable with the contract you trade, you need to know it in and out.
b. Trading different contracts is fine. But it will extend the learning curve as you need to learn not 1 contract in and out but multiple contracts. Each has its own quirks, each his own personality. Compare a Bond chart with an oil chart. It’s something totally different. There are groups of contracts which behave similar. Most indexes will move in a similar fashion, most currencies, a lot of commodities show comparable moves. But just because one contract is rising another must not fall or rise in sync. If you trade different contracts be sure you know the correlation between these contracts or you will be fooled by the markets.
c. If you trade Forex or currency futures be aware how each currency trades against each other. There is no longer 1 major currency in the world. We have 3 major currencies (US Dollar, Euro and Yen) and moves in one pair can be expressed in the other two as well. You might take a EUR/USD trade, but you might as well take a EUR/YEN and USD/YEN trade to get the desired position. The cross rates (major ones are EUR/YEN and GBP/YEN) need to be watched these days, as the carry trade was and is made or unwound in these currencies (If the interest rate differential between the EU and the US widens the new carry trade will be the EUR/USD, something we are already starting to see in the high Euro / USD exchange rate)
That’s it for now I think

Globetrader: Trade Rules

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Become Your Own Trading Coach: Contributors to The Daily Trading Coach

2008-09-14T01:50:00.001-07:00

My greatest thanks goes out to the 18 trading professionals who will be contributing their perspectives on self-coaching in Chapter Nine of the new book. They offer dynamite advice to developing and experienced traders; they also offer quality insights through their websites, which I've linked below:Henry CarstensChris Czirnich

Become Your Own Trading Coach: Contributors to The Daily Trading Coach

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JYN

2008-09-07T01:38:00.001-07:00

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FX TRade

2008-09-04T06:49:00.000-07:00

SPX500

2008-08-27T07:18:00.000-07:00

Housing Trade

2008-08-19T06:05:00.000-07:00

GERMAND30 (News Jobless)

2008-08-07T06:37:00.000-07:00

FX Trade ( News - Jobless Claim )

2008-08-07T06:36:00.001-07:00

GERMAND30 (News-Personal Income/ Spending)

2008-08-04T05:37:00.000-07:00

FX Trade ( News - Non Farm )

2008-08-01T07:54:00.001-07:00

GERMAND30 (News-GDP)

2008-07-31T06:58:00.001-07:00

GERMAND30 (News - Consumer Confident)

2008-07-29T07:17:00.000-07:00

GERMAND30

2008-07-28T07:41:00.000-07:00

News That move the Stocks Market

2008-07-25T21:22:00.001-07:00

Unemployment : Nonfarm payroll
Retail Sales : Durable and non durable
Producer Price Index and Consumer Price Index
Housing Numbers
Productivity
Durable Goods
Consumer Confidence
GDP
The Federal Reserve

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GERMAND30 (US Jobless claim)

2008-07-25T07:26:00.000-07:00

GERMAND30 (News)

2008-07-25T07:03:00.000-07:00

FX Trade ( News-Home Sales )

2008-07-24T07:29:00.000-07:00

FX Trade

2008-07-22T07:18:00.001-07:00

GERMAND30(1 min, US Leading Indicator)

2008-07-21T07:17:00.000-07:00

FX Trade ( News - Jobless Claim )

2008-07-17T05:53:00.001-07:00

GERMAND30(1 min)

2008-07-16T07:15:00.001-07:00

FX Trade ( News - CPI )

2008-07-16T05:39:00.000-07:00

GERMAND30

2008-07-16T05:37:00.000-07:00

GERMAND30

2008-07-08T07:22:00.000-07:00

FX Trade ( Swing )

2008-07-04T05:44:00.000-07:00

FX Trade ( Swing )

2008-07-04T04:01:00.000-07:00

GERMAND30 (News)

2008-07-04T03:30:00.001-07:00

FX Trade ( News - Non Farm )

2008-07-03T06:44:00.000-07:00

FX Trade (ISM Manufacturing)

2008-07-01T07:06:00.000-07:00

X Trade

2008-06-26T07:26:00.000-07:00

GERMAND30

2008-06-23T07:24:00.000-07:00

PotentialSG Market Trading List

2008-06-21T19:45:00.000-07:00

Mercator - Resistance at 0.50, intra day trading, long at 0.505, target 0.515/52, cut loss 0.495.
CPL - Long if price open less than 6.08, and break above 6.08.
SAR.SG - Monday may insider bar pull back before further down trend, if not, intra day short if price break below 3.46.
Wilmar - Intra Short just break below 5.0 .

FX Trade ( News - Jobless Claim )

2008-06-19T07:25:00.000-07:00

RS2000

2008-06-18T07:36:00.000-07:00

FX Trade ( News )

2008-06-18T07:35:00.000-07:00

FX Trade ( News )

2008-06-17T06:52:00.000-07:00

FX Trade

2008-06-16T08:00:00.001-07:00

FX Trade ( News )

2008-06-16T07:25:00.000-07:00

Kelly Criterion For Investors

2008-06-15T03:01:00.001-07:00

In investment we often come to problems like this:Company A is currently researching 3 different new products. In an upcoming convention, we know that A might going to announce the launch of one of the new products. We can also estimate the impact of different outcomes on the stock price:Launching Product 1: 30% increase in stock price (ROI = 30%). Chance of happening: 20%.Launching Product 2: 10% increase in stock price (ROI = 10%). Chance of happening: 15%.Launching Product 3: 12% increase in stock price (ROI = 12%). Chance of happening: 25%.Failure to launch: 15% decrease in stock price (ROI = -15%). Chance of happening: 40%Now you have $100 dollars in your bankroll, how much would you invest in A's stock so that your bankroll can have maximum growth in the long term?The Kelly Criterion, solving similar problems in gambling, cannot be directly used because it assumes binary outcome. That means it limits the outcomes to be either WIN or LOSE.

Advance Stock Pattern Scanner -- Kelly Criterion For Investors

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Back to Basics -The RSI indicator; one of my favorites

2008-06-15T01:29:00.001-07:00

Back to Basics -The RSI indicator; one of my favorites

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Potential SG Market Trading List

2008-06-13T19:57:00.000-07:00

Noble Group (NGLS.SG) - Double Top, short if close below 2.15.
NOL.SG - Double Top, neckline 3.45 , short near to neckline, cut loss at 3.56.
YZJ.SG - Potential double Top , neckline 0.89.
SPC.SG - Long at 6.50, cut loss at 6.37, First Target 6.75.
FerroChina - Friday closed below 1.26, bearish, next support 1.19. Monday need to be a white candle for it to turn bullish, 50% probability.

T3B Screen List :

IndoAgri - Watchlish, narrow BB.
RafflesMed - Long at 1.36, Target 1.45, cut loss 1.33.
StraitsAsia - Short at 4.00, Target 3.75, cut loss at 4.07

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FX Trade ( News )

2008-06-13T19:12:00.000-07:00

RS2000

2008-06-09T07:39:00.000-07:00

FX Trade

2008-06-09T07:38:00.001-07:00

S&P Futures Index Key Numbers

2008-06-06T20:22:00.001-07:00

Some historically important numbers on the S&P Futures Index
02	32	52	75
06	35	55	77
09	37	57–58	81
12	42	63–64	84
15	45	69	87
27	47	72	92
	50		98

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Dow Futures Index Key Numbers

2008-06-06T20:19:00.001-07:00

Historically key numbers on the Dow Futures Index
00	25	50	75
Expect the market to exert major support or resistance at the 50 and 00 levels and minor support or resistance at the 25 and 75 levels. For example, 10,400, 10,500 and 10,600 and 10,450, 10,550 and 10,650 are numbers that will exert major influence and 10,425 and 10,475, 10,525 and 10,575 will exert minor resistance or support.

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US Market Trade Zone

2008-06-06T20:17:00.001-07:00

Trade zone one 9:00 A.M.–10:15 A.M.

Trade zone two 12:30 P.M.–1:15 P.M.

Trade zone three 2:15 P.M.–2:45 P.M.

That is not to say that I never trade outside these zones. If the market direction is very clear, I may enter the market at 8:45 A.M., but I very rarely enter between 10:15 A.M. and 12:30 P.M. or between 1:15 and 2:15 P.M. The waters are just too treacherous and I do not like throwing my money away. Also, if I am in the market at the end of a trade zone, I may hold my position, but, I keep a protective stop in place to prevent me from taking a beating if there is a sudden market shift.

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FX Trade ( News - Non Farm )

2008-06-06T09:02:00.001-07:00

SPX500

2008-06-05T07:20:00.000-07:00

FX Trade ( News - Jobless Claim )

2008-06-05T06:49:00.000-07:00

FX Trade ( News )

2008-06-05T05:07:00.001-07:00

FX Trade ( News )

2008-06-03T06:51:00.000-07:00

FX Trade ( News )

2008-06-02T07:53:00.001-07:00

Potential SG Market Trading List

2008-05-31T19:37:00.000-07:00

CapitalLand ** - Long if price closed above 6.60, Target 7.00, support at 6.25.
CapitalMall ***- Short if price closed below 3.28 , Cut loss at 3.45.
CityDiv ** - Long if price closed above 11.50, Targe 12.50, Cut loss at 11.24.
COSCO - Neutral.
DBSbank - Neutral.
F&N * - Long if price closed above 5.0, cut loss at 4.86.
GenInt ** - Short if intra day price out of BB by min 1 cents, target profit 1 cents.
HKL - Neutral.
Jardince ** - Long at price near to the cut loss price of 16.32 with good risk and Rewards ratio.
JSH - Neutral.
Kep Corp - Neutral.
Kep Land - key support at 5.25, long if MACD turn up.
Noble ** - Short if intra day price out of BB by min 10 cents, target profit 10 cents.
NOL ** - Short if intra day price out of BB by min 10 cents, target profit 10 cents.
OCBC - Neutral.
Olma ** - Short if intra day price out of BB by min 10 cents, target profit 10 cents.
SIA - Neutral.
Semb co - Neutral.
SemdM - Neutral.
SGX - Neutral.
SIA Eng - Neutral.
Singtel * - Long near to th cut loss price 3.69, Target 3.90.
SPH - Neutral.
ST Eng - Neutral.
UOB** - Long near to th cut loss price 19.85, Target 20.45.
Wilmar ** - Short if intra day price out of BB by min 15 cents, target profit 10 cents.
YZJ - Neutral.
Yanlord -Neutral.

FX Trade ( News )

2008-05-30T07:51:00.000-07:00

FX Trade ( News )

2008-05-29T07:01:00.000-07:00

Gold

2008-05-28T06:42:00.000-07:00

FX Trade ( News )

2008-05-28T06:41:00.001-07:00

FX Trade

2008-05-27T07:18:00.001-07:00

FX Trade ( News )

2008-05-27T06:53:00.000-07:00

FX Trade ( News )

2008-05-22T07:14:00.001-07:00

SPX500

2008-05-21T07:01:00.000-07:00

FX Trade ( News )

2008-05-20T07:18:00.001-07:00

2008-05-19T07:28:00.001-07:00

FX Trade

2008-05-19T05:32:00.000-07:00

FX Trade

2008-05-19T04:19:00.000-07:00

FX Trade

2008-05-19T04:17:00.000-07:00

Potential SG Market Trading List

2008-05-17T20:40:00.001-07:00

FX Trade

2008-05-15T07:18:00.000-07:00