Subtleties of Trading

The Subtleties of Trading

Patterns for Profits Newsletter - January 5, 2008

Before becoming at all serious about trading live online, one must acknowledge that it is the subtleties of trading online that make or break the day-trader. This is because when performing daily online trading of securities and futures contracts, your ability to consistently notice and act on profitable trends will determine whether or not you are successful. The difference between making money trading daily online, or not, is going to be made through your day to day actions and decisions. Much of the learning required to be successful will to come from observations you make about the markets you are trading.

We talk a lot about patterns here on TradingLiveOnline.com, as they are the core of successful day-trading whether it be the standard SP 500 E-mini futures contracts, or other securities, futures, or commodities. Looking for these patterns is a major component of daily online trading, and is where experience plays its greatest role. With experience comes both the ability to properly identify actionable patterns, and the speed necessary to maximize the potential profits in these patterns. With experience you will learn to differentiate between wastes of time and opportunities to make real profits.

One of the major subtleties in trading SP 500 E-mini futures contracts is the minute differences between patterns that are progressing in a really profitable manner, and smaller versions of the same patterns that do not really yield much return. When first starting out trading, you are probably going to either jump at every opportunity to make even a few cents, or be too conservative to act on even the biggest fish. Although the commitment in day-trading is short-term, the risk is still very real, and many people have a hard time opening up their bank accounts to make some really good money. Others are much too eager and wind up missing the best trades of the day because they committed too early or on the wrong contract or security. This is OK. After you have either jumped the gun and tied up your funds, only to watch a real moneymaker go by, or sat there and watched that moneymaker without any of your money invested, enough times, you will learn to recognize real opportunity when you see it.

“So what?” You ask. Why does it help to know that I am going to make all these mistakes and miss a bunch of great opportunities if I'm going to do it anyway? Because simply acknowledging that you WILL make these mistakes and that trading live online is a complex art with many subtleties, will help you improve at a much faster rate. Just because you learn the basic patterns, you are not guaranteed to make money hand over fist your first week. But by observing how we work in the live trading room, you can learn learn to tell the subtle differences between red-herrings and really profitable patterns.

Remember to keep a log of what you traded each day and how well it worked. Then at the end of each day, week, and month, take a little while to review and evaluate what worked and what didn't. You can also use your log to compare your trading to our own and see where you may have acted too quickly or too slowly, as well as when you properly identified and acted upon a really profitable pattern. By consistantly critiquing yourself, you will gradually learn the subtleties of trading live online and make fewer and fewer mistakes. No matter what kind of trading day you have, just keep working at it and your discipline will begin to pay off by producing profits in correlation with the effort you are putting in.

Patterns for Profits Market Watch

The indexes started the New Year with a strong selling day and trend day down across all indexes. There is an old saying – As January goes, so goes the market. It will be interesting to see how the first month of 2008 closes.

The longer term charts suggest more down side coming with potential pattern completions below December lows and August 2007 lows. We will be watching these levels and patterns in the days and weeks to come.

There are also potential Head and Shoulder patterns on the daily charts of some of the indexes. Should this pattern break we could see more substantial downside. It has been a long time since the indexes have seen any substantial correction. Of course we focus on short term intra -day setups, but it is prudent to be aware of longer term price movement.

Patterns for Profits Trading Tips

Trading Distractions

At times, everyone gets distracted from following their trade plan, whether it is family events and issues, other professional commitments, sickness or even simply just the phone ringing during the trading day. Any distraction large or small can cause the trader to lose their focus. Not only is strict discipline necessary for any long term approach to the markets, but the attention to pertinent detail necessary to exploit your ‘edge' cannot be reduced by the outside distractions of everyday life.

Outside distractions can cause a multitude of trading problems such as:

Missing entry setups that are part of your trading methodology
Placing orders too late and missing out on a price move
Improperly analyzing your data
Missing key factors that are part of your trading system
Making mistakes in tracking your positions.

Long term success of any trader is based upon a sound trading plan, and being able to consistently follow it. Outside events are part of life, but here are a few tips to help you manage the distractions and follow your plan.

Have a trade plan that is written out; the more specific it is the better it will be.
Set aside uninterrupted time regularly to review that plan and critique how well you are following it.

(Preferably when the markets are closed)

Set a consistent daily routine that works for you and your trading environment.
Set rules for when and how you will address the outside events that occur during your trading time.

o matter what market or timeframe you trade, by taking the time to properly address the checklist above, you will further strengthen your level of focus and discipline; and thereby improve your odds for long term consistent success!

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Leslie Jouflas
Kelly Hill