Archive for category: Trading System

Capital Preservation: 10 Trading Tips

21 Nov
November 21, 2014

 

As a trader, your #1 goal is to keep your current trading capital safe and secure. Your goal as a a trader is to make money and not lose money. Many new traders lose their trading capital in the first year, but these ten tips will help you keep your capital intact so you can make it grow.

  1. Do not start trading until you have fully educated yourself. Trading tuition is expensive when you trade first and learn later.
  2. Do not trade an account so small that commissions will end up being a big drag on your returns.
  3. Do not trade until you have a well developed trading plan.
  4. Trade a position size that does not cause your emotions to become so loud you can’t hear your trading plan.
  5. Only trade in markets you fully understand.
  6. Only take valid entry signals and do not chase. Let your entry point trigger first.
  7. Only trade in liquid markets so bid/ask spreads do not devour your account.
  8. Never risk losing more than 1% of your total trading capital on any one trade through proper position sizing, and by placing stop losses at the correct price levels.
  9. Never expose your total trading account to more than a 3% loss of total trading capital at any one time, on one day.
  10. Never move a stop loss. Take the exit the first time it is triggered.

5 Trading Timeframes

18 Nov
November 18, 2014

 

The answer to the question, What’s the trend? is the question What’s your timeframe? -Richard Weissman

One of the biggest misunderstandings among traders is the time frame on which they trade. A day trader can believe a stock is going down and be bearish on the intra-day chart, while a longterm stock picker is buying to hold for six months (or longer) through a few earnings announcements. Trend followers are making money buying and selling off the 200 day moving average, while swing traders are buying dips and making money. 

Here are some basic types of traders and timeframes.

Swing Traders
The swing trader wants to buy low and sell high, and this is the trading method many are comfortable using. Swing taders buy and hold their positions over multiple days or weeks. This works best in markets that have defined price ranges. The key to swing trading is buying support and then selling into resistance in an up-trending market. However, they may also go short into resistance.

Day Traders
Day traders buy and sell on the same day, and close out all positions when the market closes. They do not carry any positions over into the next day. Day traders attempt to profit on the price moves that happen in one day, using intra-day charts to capture intra-day trends.

Trend Following
The key to trend following is having trades positioned on the right side of the market, primarily buying or selling trends on the longterm timeframes of weeks, months, or longer. Trend followers use longterm moving averages like the 50 day and 200 day to stay on the right side of the trend for as long as possible.

Position Traders
A  position trader builds longterm positions in markets. Many who follow this method make entries and exits once a week, using weekly charts, and only trade weekly or monthly. 

Stock Traders
A stock trader can hold a stock for months, and even years when it is moving upwards. While stocks can be traded in all timeframes, someone that only trades stocks is usually trading them for the longterm move, based on the future potential of the company. Most stock traders are stock pickers and look for the companies that they believe will provide the earnings to drive the stock price higher and higher after each earnings announcement.

Money can be made trading on any timeframe by following a disciplined trading system while successfully managing risk. 

3 Trades Explained $DIA $IWM $SPY

17 Nov
November 17, 2014

 

Trade #1

  1. I shorted $IWM three days ago by buying $TZA at $13.02 when $IWM was near the 70 RSI on the daily chart.
  2. My stop loss was to exit if $IWM closed above the 72 RSI.
  3. My trailing stop is to stay short unless $IWM closes above the previous day’s high.
  4. There is a potential that the 5 day ema acts as intra-day resistance.
  5. It is possible that $IWM goes to the 50 RSI or the 200 day moving average.
  6. I am currently up 6% on the capital at risk in this trade.

Trade #2

  1. I went short $DIA today by purchasing $SDOW at $21.67 as the $DIA chart was near a 72 RSI.
  2. My stop is a close above all time highs.
  3. If $DIA begins to pull back and the trade goes in my favor, I will use an end of day stop of a close above the 5 day ema.
  4. $174 is my potential first target.

Trade #3

  1. I sold $204 $SPY weekly calls for $1.20 and bought $207 weekly $SPY calls for .10 cents to create a $1.10 bearish credit spread when $SPY was near its 70 RSI. 
  2. If $SPY closes below $204 on Friday I will make $550.00 with the five contracts. This is a small trade for my account sizes.
  3. My stop loss to exit this trade is if $SPY closes over the 72 RSI on any day before expiration.

$SPY Chart With 10 Facts 11/16/14

16 Nov
November 16, 2014
 chart courtesy of stockcharts.com
  1. The long term up trend is still in place.
  2. All indexes are with-in striking distance of all time highs which remains bullish. $SPY $QQQ $IWM $DIA
  3. With all stock indexes pushing against the 70 RSI on the daily chart the potential upside is very limited putting the odds on limited momentum taking us to higher prices from here.
  4. $SPY has been in a $203 support $205 resistance price range for the past 5 days.
  5. In the past five days the 5 day ema has stopped being the intra-day support.
  6. The next line of support on the $SPY chart is the 10 day sma then the $200 price level.
  7. The risk/reward ratio here has skewed in favor of short selling  plays and call option sellers.
  8. All Time New Highs
  9. Chart Your Trade Weekly Report
  10. All-Time Highs Possible In Bear Markets

My Simple and Effective $TQQQ Trade

04 Nov
November 4, 2014

 

  1. I entered $TQQQ at $83.13 based on the $QQQ chart as it broke above the 50 day sma. This has been a profitable buy signal over the past 4 years. My stop was a close below the 50 day sma.
  2. With the first gap and go I moved my stop to a close below the gap up day  trading range’s low of day.
  3. Since I was not stopped out I let my winner run.
  4. On the second gap up day I once again moved my stop to a close below that gap up day. I was keeping a close stop due to the RSI being so close to 70 signaling the potential for being overbought after the quick ‘V’ shaped run up from the bounce off the lows.
  5. Today with the gap down I moved my stop to a close below yesterday’s close. I locked in profits as it never rallied back to yesterday’s close and weakness emerged throughout the day as the trading range from the gap up expanded and most the day was spent in the red.
  6. I locked in a 10.9% return on $TQQQ in just nine trading days.
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