stopped out HAR

bot EQIX

bot HAR

cover TNA

A super dead and choppy market thus far today. After lunch time I've gone short TNA, COF, long FAZ

TNA

COF

FAZ

Reader Q & A 3

Dear FnG,

I know I have had trouble remaining positive and unemotional the past few weeks as well as being disciplined.

On top of your ideas for the webinar, my question would be, how can a new trader have confidence when they have never made money? How do I know this can really work? I know other people can make money, but how can I build confidence in myself when I have never made decent money. And I definetly have a problem trading not to lose, instead of trading to win. How can I stop that? Most days, I am just happy to get back to even. I never have the confidence to get over the hurdle called "fear of losing". Today, I was up $133 by lunch, and I was done. I was too afraid of giving it back to the market.

Also, my brain tells me to do the opposite of what i should be doing. My intuition tells me to buy into the strength instead of selling into it, when I should have been buying the weakness that was before the strength. Then I am long at the top and the strength (pop) just disappears and the stock drops. Does that make sense? Because it is really hard for me to flip such strong beliefs and feelings.

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------

First of all, you are not in a unique position. Most of us have been there. The odds are stacked against the new trader. You have to go against seasoned pros that have lived through the ups and downs and emotional turmoil right from the start. It's a tough business.

" How do I know this can really work? The markets can actually pay you nicely once you can get you mind around how it works. How many times have you only been looking at a play but not actually trading and have seen a great opportunity that did go the way that you thought it would? Many times I would guess. And if you look back at the days you can see the telltale signs of dojis, candles and volume that indicated an opportunity was coming. So if the markets provide the information and you don't take advantage of it, then what you need to happen is to have a fundamental shift in your thinking.

1. Start by looking back at when you saw your very first chart. If you were like me, you were absolutely clueless as to what all those lines and numbers meant. Now think to the present day and how much more you know. Congratulate yourself on applying yourself and learning. See the tiniest step of progress as another step in the right direction to the destination of becoming a successful trader.

2.Confidence in yourself can come in several forms. If you can follow your trading plan without deviation, it will give you confidence. If you can focus your mind on only the task at hand without being distracted, it will give you confidence. If you can cut your losers quickly, it will give you confidence. If you can build a couple of winning trades today, it will give you confidence for tomorrow.

3. Trading to win and not to lose is a change you must make. A winners mindset allows them to focus on the probabilities of the future instead of the problems of the past. The only time you should think about the past is when you take a cold blooded look at the trades you did, critique them and learn from the mistakes. How can you stop doing it? Well this issue goes to your core as a trader. You must believe in yourself, your plan, your ability. This comes about by acknowledging the small victories. You can build on this base one trade at a time. Maybe you are trading with money that you can't afford to lose. If that's the case I would recommend that you stop trading while you build up your account and work on your edge and your emotional components that will in the future led you to be a winner. The market will wait for you.

4. Ask yourself the following questions and answer as truthfully as you can: Am I afraid of losing money? Why? Am I afraid of being wrong? Why? Do I stick to my plan? If not, why not? Do I have a edge? If not ,why not?

These will all work together to either make or break you. When you do develop an edge that works for you and you have a trading plan in place to take advantage of the opportunities that come your way, then trading will become as easy as it looked before your mind got sidetracked.

Making the mental shift from negative to positive requires first your goal to change into a successful trader, then the will to carry it through, then the plan to make it happen, then your skill to put it into practice. You need all these steps.

Nobody is different from anybody else in that we are all born with the same body and mind. Life experiences colour your ideas but in the end we all have free will to decide what we want to do. If we are not happy where we are then we must decide to change our situation for our betterment. You can decide to change. You can carry through with those ideas. It takes hard work. If you stumble and fall, you must want to dust yourself off and try again. Focus on the areas that you want to change. Think about how best to go about it. Put your new plan into action.

Reader Q & A 2

Had a few comments about losses and stops so I thought I’d roll them into a new post and maybe shed some light on the subject.

It is a very complex issue. Being comprised of many factors which have to be given due consideration and then decisions made on a timely basis. What time is it? When are new candles due to start/finish? What are the markets doing and have previously done today? To what level did a stock reach? Is it pulling back or bouncing? How much volume? What is my gut feeling say to do? to name a few.

First, last and always it comes down to reading the momentum correctly. When you are in the flow and are tuned into the momo your entries become the key to easy trading. Easy trading is when the stock moves rapidly away from entry point in the direction that probability suggested it would. It moves away from your stop. It moves into the zone of profitability. Then you have to switch gears from seeking a good entry and into managing the trade and capturing what the opportunity has presented you. Both are learned skills which are vital to you as a trader.

Needless to say if you trade with emotions instead of a well practiced and thought out plan, you won’t be around for long. Decisions on where to enter, where to exit and take profits or losses, what events will cause you to take profits or losses must be clearly set out in your mind before the trade is made. Grappling with fear and greed during this process will undermind your efforts to be successful. All those related issues must be dealt with during your preparation for the trading day. You must be of one mind only during the day-executing your plan.

So when the time comes to enter a trade, how do I decide where to set a stop? I don’t go by percentages, only where the near time price level has demonstrated its limit. The near time price level goes back no more than ½ hour usually and most of the time only 5 or 10 minutes. If I’m shorting a stock I’m looking for new lows or a pop to get in. If it pops then stalls, I’ll set my stop just above the previous high. My stops are usually in the .10 - .15 range. Sometimes a little less or more depending on the volatility of the stock. The line is blurry and not clear cut, it depends entirely on the action of a particular stock. That's the amount I'm willing to lose to find out if the trade is going to work. NO more.

Currently the market is in more of a sell off mode. But it is not panic in the streets yet so I am not loading up the multiple 1000’s of shares. So I would rather trade normal size – 1000 shares of stocks say $40 and up and 2000 shares of stocks $20 and less. Now here is an important point about greed as it relates to stops – I would rather increase the # of trades per day I do than increase the size of my position. Doing this protects my account from suffering blow out losses yet still provides adequate returns. Doing this protects my decision making process so as not to let dramatic swings due to probabilities not working out affect me psychologically. I have total confidence in my ability to pick good trades and entries but I know that I will not be 100% correct in every decision due to the inherently unpredictable nature of the markets. It may seem a contradiction when you look at my style but I am not in a hurry to make money. I am not greedy. Certainly you have to be quick and know when to GTFO and take profits but that is more of just working at market speed and taking what the markets offer you to take. The big money comes from being right 30 or 40 times a day, or 70 times if the markets are on fire as you churn through the pops, drops and intraday trends. What I am saying is that I don’t need to put myself in a live or die moment by taking on excessive risk on an individual trade. Too much risk chips away at you and soon enough the probabilities will manifest themselves in a most unpleasant way. There are so many opportunities every day so I am not worried that I’ll miss out.

I know I’ve only touched on this whole stops subject but it really comes down to timing your entries in sync with the momentum. Getting in or out of a trade before the masses is the least risky play there is.

Losers

Interesting that both yesterday and today I started out with 6 consecutive trades that did not work out before probabilities reasserted themselves and a winning trade resulted.

Loses were small since protective stops were in place so the first couple of winners brought me back positive.

Just a reminder that it's a funny game where anything can happen, no one can control or predict the events. As traders we can only control our reaction to the events and always be prepared to manage the downside potential so as not to get psychologically or fiscally damaged. Using stops and deciding before you get into the trade the point at which the reason for the trade will be proven wrong will protect you.

Confidence and total belief in your yourself and following your trading plan will make you a winner in the end.