2010 was a good year of trading. In trading however, it is your next trade that counts not your last one. As traders we look at our trade data, and consciously or subconsciously analyze it. Depending upon how objectively you analyze your data can have a major positive effect on your trading.
Humans, especially traders are driven by their current P/L. If we’re green we become happy, sometimes cocky. When we’re red, depression lurks in the background. Did you know that we take losses 2.5 times harder than gains? If we lose $1,000 our brain reacts as if we lost $2,500. Yet, when we gain it’s not the same.
We have analyzed our 2010 data, and then outlined some ideas to improve your P/L
To read more sign up for our free white paper. http://www.valuezonetrading.com/traderesults.html
Sunday, February 6, 2011
Wednesday, February 2, 2011
Look Left Before You Enter
Matt Damon the poker playing hero in the move The Rounder said it best, “Here’s the thing, if you can’t spot the sucker in your first half hour at the table then you’re the sucker.”
Most of the time, I hate the comparison of trading to gambling. But this case is the exception. Every time you enter a trade you must look left. Think like the other guys in the trade. If you were short from the highs would you be getting out? Or would you be licking your chops waiting for the next leg down and a really great move?
If the other guy is in a great trade, you better be more certain you’re not the sucker taking the other side of his partial profits.
The Value Zone Trading Course will teach you trade setups that include 8 different solid criteria that you can use day in and day out to make certain you are not the sucker. Take a class this month.
Most of the time, I hate the comparison of trading to gambling. But this case is the exception. Every time you enter a trade you must look left. Think like the other guys in the trade. If you were short from the highs would you be getting out? Or would you be licking your chops waiting for the next leg down and a really great move?
If the other guy is in a great trade, you better be more certain you’re not the sucker taking the other side of his partial profits.
The Value Zone Trading Course will teach you trade setups that include 8 different solid criteria that you can use day in and day out to make certain you are not the sucker. Take a class this month.
Tuesday, January 25, 2011
Change Is In The Wind
- Expanding our blog to include more weekly and monthly profile charts.
- Expanding classes, to include advanced trade management, and specialty lectures for our past and current clients.
- Expanding our markets to include the Euro, Dax and Russell.
- Expanding our trade time frame horizons to overnight and globex markets.
- Introducing new auto strategies and new managed futures products.
- Expanding into signal generation for discretionary traders.
Thursday, June 24, 2010
A Traders LIfe
What happens in Vegas…can’t happen if you don’t have internet service.
One of the beautiful benefits of the trading profession is that you can perform your work anywhere in the world. I’ve traded as far as Shanghai with complete transparency except for the size of my platform screens. Of course, all you need is a solid internet connection but in a country whose residents include Microsoft and other leading tech companies, you would think this would be a mere afterthought, right? Welcome to the Las Vegas’ hotel internet network known as Lodgenet.
I was on the U.S. west coast for a speaking engagement at the Trader’s Expo in LA. My wife and I decided to stop in Las Vegas a few days earlier to relax before the big event. I still had to do some work in my futures trading room where I am co-moderator, so I set the alarm at 4:00am and started to subscribe to the dreaded hotel internet service. In a town where luck is a standard, nothing is a riskier bet than assuming this service will work to a reasonable satisfaction. Needless to say, after 45 minutes on the phone with the hotel’s internet service provider, it was concluded that my room was not going to have internet service anytime soon. After the hotel agreed to waive any charges, they suggested I come down to the lobby or convention area where I should have better success. Unfortunately, the lobby floor of the major hotel-casino at 4:00am is not a place to conduct trading mentorships. And the convention area – all packed with World Series of Poker tournament players -the ultimate display of risk management I must say.
I found a Starbucks and had intermittent service for about 45 minutes before a complete cutoff so I just called it a day to the disappointment of my business partner and me. I guess I can only worry about what I can control. Later that day, after arriving at the conference, the corporate hotel internet services were fabulous. A great lesson learned when traveling for work in the future. Of course, getting a wireless card is given as well. The presentation and the promotional work was a great success and we headed back to Vegas for a few more days of work/play before heading back home.
Staying at the same hotel, I feared going thru the internet fiasco and with the expected result as was 6 days prior, I trekked out at 4am to find a strong signal to start my work in the trading room. First destination: Starbucks – nada. Next, McDonalds, where two of the three patrons were asking me for money, and with a super laptop case in hand, I made the conclusion that my problems weren’t so bad after all. Next, Denny’s. The ‘wi-fi service inside’ sign read as if it said, ‘we pay you blackjack on any busted hand!’ I asked for a table in the corner near an outlet and they told me there should be one opening up soon. It was strange since the place was 90% empty, and the hostess practically called security when I walked over into the open area. I remind you, all I wanted was an internet connection.
Frustrated and embarrassed that our country can’t provide something as simple as an internet connection, let along clog an oil hole in the gulf, I walked out, leaned against the beer-sticky Denny’s entrance door and pondered my next move. At that moment, I was encountered by one of Las Vegas’ finest. No…not a man in blue.
Her name was (allegedly) Sheri. She asked me what happened and I said, “well, all I’m looking for tonight is a wi-fi connection, that’s it. Would you know where I can get a hot zone around here?”
“I think I know a few places.”
Exactly what I wanted to hear. So I said, ‘We’ll, this may sound crazy but coffee is on me if you need a break and you can find me one”. Realizing I just made the most ridiculous offer to a working girl in Las Vegas, she replied, “Sure, come with me. I could check my facebook too if that’s ok?”
Of course I obliged and we headed to our first stop – Starbucks at The Mirage Hotel & Casino. Status: closed, but that didn’t stop Sheri. “Mike, come here”. She grabbed my arm and we hopped over the rope into a dark and closed Starbucks.
I started to calculate the odds of the following scenarios in typical risk manager fashion. “No officer, seriously, I was just looking for a wi-fi signal”. Or even worse, “No honey, sweetheart, wife of mine, seriously, I was just looking for a wi-fi signal. Oh, by the way, Sheri….Nancy….Nancy….Sheri”.
In the end, there was no signal, and thankfully no security, so we headed to her 100% guarantee, - Oshea’s Casino food court. Coffee and internet – not a problem. She told me she’s goes there often after work and noticed people online all the time. So, without hesitation, destination: O’Shea’s.
We had the opportunity to talk a little trading en route to the wi-fi promised land know for their $3 craps and apparently strong wi-fi. Sheri mentioned her dabbling in the market and we actually had an interesting conversation about trading and the keys to success. Ya know, typical banter heard every night at 4:30am on the Vegas strip. As we crossed the strip into O’Sheas we noticed a packed house with a lot of screaming; assuming someone hit their point or nailed a backdoor twenty-one. Continuing towards the food court area, the screams got louder and louder. It didn’t look good.
We turned the corner and I could not believe what I was witnessing. It’s nearly 5:00am on a Wednesday morning and somebody decided that this is a great place to have a beer-pong tournament. Not just two drunk guys who were bored and broke, but over 30 tables all laid out like a billiards hall. It looked like the World Series of Beer-Pong, if there is such a thing, with loud music ringing throughout the place that was earlier in the night home of Subway, Panda Express and a few others eateries. While obviously frustrated, I couldn’t help but notice the excitement and the intensity of each attempt to get this little ping pong ball into one of four tightly connected cups filled with beer.
‘Oooh’, when a rim shot occurred. ‘YES…whoo-hoo’, when one sank. Multiply that by 30 times the volume or so when all the games were on. Sheri was laughing at the failed attempt to get online so we just watched the event for a bit. My second most memorable moment was when the entire tournament stopped on a heartbeat, to the music started by that famous keyboard intro to Journey’s ‘Don’t Stop Believin’. The place went nuts with many of the female participants jumping on the pong tables in Glee-esque fashion. I only imagined that beer was spilling out onto the very same tables where I had eaten Subway cold cut combo’s some time in my past visits to Sin City.
When the music break stopped and the competition started to resume, we watched the transition focus on a ball and beer cup. After a miss, the ball would sometimes bounce to me standing behind one of the tables. I would use my computer bag to keep it in play. One time I avoided the requested two hands out across the table signaling to toss it to the next competitor and gave the arm gesture that I wanted to give it a shot. With computer bag in one hand and a ball in the other, I flexed my knees and got into position to make history, just like Jordan did for years. My toss had incredible arch and felt good after my release. Twelve feet doesn’t sound like long distance but for me it felt like a half-court shot that wins the Mercedes. As it headed back down, I could feel the crowd intensity including my number one fan to my right with her hands clutched together.
I rimmed it right off the middle beer cup, then off the right one and into the muck. A big ‘OOHHHHH’ from the crowd was nothing compared to my own frustration and desire to sink it. I would have given up the best $ES runner of the week to get another shot at beer-pong fame. Sheri leaned over and said “Do you know how hard that is to do?” I replied, “Try doing it holding a laptop!”
As we headed out of the failed wi-fi promised land’, we made our way to our last stop. Harrah’s Starbucks. I knew it wouldn’t fly since I tried it alone earlier but just went along with my new tour guide’s recommendation. I knew then that my journey was over and at that point I really didn’t care. That rim shot was more important at that point than any trading I could tap into; not to mention a facebook note from Sheri’s ‘boss’.
I said my goodbyes, telling my friend that I think that’s enough excitement for one night. I offered her a cab and she kindly refused, telling me laughingly that it was the best hour she spent all night. I walked into the casino towards my elevator but couldn’t help notice a blackjack table calling my name, or at least calling the bills in my pocket. I placed the laptop bag down, bought in, and performed my risk management program as if I would be doing the very same thing in my trading room. I ended up winning the equivalent of four $ES points, similar to my first trade target on most days. I even managed to coach my fellow ‘trader’ next to me who, according to his chip stack, seemed to never use blackjack stops, if there is such a thing.
I took the chips, cashed out, and headed towards the elevator. I kept thinking how all I wanted from this town was a wi-fi connection. That’s it. It’s sad that some of the simplest technological things cannot be solved but if I wanted to compete in a beer-pong contest with a call girl as my fan club…. we’ll get you set up in no time!
I laid my bag down and hopped into bed. Gave my sleeping wife a small kiss and closed my eyes. The last thing I heard was, ‘Honey, you’re done already?’
I love Vegas.
Michael Toma, CRM is a professional risk manager and co-moderator and futures trading education consultant for Value Zone Trading, LLC.
One of the beautiful benefits of the trading profession is that you can perform your work anywhere in the world. I’ve traded as far as Shanghai with complete transparency except for the size of my platform screens. Of course, all you need is a solid internet connection but in a country whose residents include Microsoft and other leading tech companies, you would think this would be a mere afterthought, right? Welcome to the Las Vegas’ hotel internet network known as Lodgenet.
I was on the U.S. west coast for a speaking engagement at the Trader’s Expo in LA. My wife and I decided to stop in Las Vegas a few days earlier to relax before the big event. I still had to do some work in my futures trading room where I am co-moderator, so I set the alarm at 4:00am and started to subscribe to the dreaded hotel internet service. In a town where luck is a standard, nothing is a riskier bet than assuming this service will work to a reasonable satisfaction. Needless to say, after 45 minutes on the phone with the hotel’s internet service provider, it was concluded that my room was not going to have internet service anytime soon. After the hotel agreed to waive any charges, they suggested I come down to the lobby or convention area where I should have better success. Unfortunately, the lobby floor of the major hotel-casino at 4:00am is not a place to conduct trading mentorships. And the convention area – all packed with World Series of Poker tournament players -the ultimate display of risk management I must say.
I found a Starbucks and had intermittent service for about 45 minutes before a complete cutoff so I just called it a day to the disappointment of my business partner and me. I guess I can only worry about what I can control. Later that day, after arriving at the conference, the corporate hotel internet services were fabulous. A great lesson learned when traveling for work in the future. Of course, getting a wireless card is given as well. The presentation and the promotional work was a great success and we headed back to Vegas for a few more days of work/play before heading back home.
Staying at the same hotel, I feared going thru the internet fiasco and with the expected result as was 6 days prior, I trekked out at 4am to find a strong signal to start my work in the trading room. First destination: Starbucks – nada. Next, McDonalds, where two of the three patrons were asking me for money, and with a super laptop case in hand, I made the conclusion that my problems weren’t so bad after all. Next, Denny’s. The ‘wi-fi service inside’ sign read as if it said, ‘we pay you blackjack on any busted hand!’ I asked for a table in the corner near an outlet and they told me there should be one opening up soon. It was strange since the place was 90% empty, and the hostess practically called security when I walked over into the open area. I remind you, all I wanted was an internet connection.
Frustrated and embarrassed that our country can’t provide something as simple as an internet connection, let along clog an oil hole in the gulf, I walked out, leaned against the beer-sticky Denny’s entrance door and pondered my next move. At that moment, I was encountered by one of Las Vegas’ finest. No…not a man in blue.
Her name was (allegedly) Sheri. She asked me what happened and I said, “well, all I’m looking for tonight is a wi-fi connection, that’s it. Would you know where I can get a hot zone around here?”
“I think I know a few places.”
Exactly what I wanted to hear. So I said, ‘We’ll, this may sound crazy but coffee is on me if you need a break and you can find me one”. Realizing I just made the most ridiculous offer to a working girl in Las Vegas, she replied, “Sure, come with me. I could check my facebook too if that’s ok?”
Of course I obliged and we headed to our first stop – Starbucks at The Mirage Hotel & Casino. Status: closed, but that didn’t stop Sheri. “Mike, come here”. She grabbed my arm and we hopped over the rope into a dark and closed Starbucks.
I started to calculate the odds of the following scenarios in typical risk manager fashion. “No officer, seriously, I was just looking for a wi-fi signal”. Or even worse, “No honey, sweetheart, wife of mine, seriously, I was just looking for a wi-fi signal. Oh, by the way, Sheri….Nancy….Nancy….Sheri”.
In the end, there was no signal, and thankfully no security, so we headed to her 100% guarantee, - Oshea’s Casino food court. Coffee and internet – not a problem. She told me she’s goes there often after work and noticed people online all the time. So, without hesitation, destination: O’Shea’s.
We had the opportunity to talk a little trading en route to the wi-fi promised land know for their $3 craps and apparently strong wi-fi. Sheri mentioned her dabbling in the market and we actually had an interesting conversation about trading and the keys to success. Ya know, typical banter heard every night at 4:30am on the Vegas strip. As we crossed the strip into O’Sheas we noticed a packed house with a lot of screaming; assuming someone hit their point or nailed a backdoor twenty-one. Continuing towards the food court area, the screams got louder and louder. It didn’t look good.
We turned the corner and I could not believe what I was witnessing. It’s nearly 5:00am on a Wednesday morning and somebody decided that this is a great place to have a beer-pong tournament. Not just two drunk guys who were bored and broke, but over 30 tables all laid out like a billiards hall. It looked like the World Series of Beer-Pong, if there is such a thing, with loud music ringing throughout the place that was earlier in the night home of Subway, Panda Express and a few others eateries. While obviously frustrated, I couldn’t help but notice the excitement and the intensity of each attempt to get this little ping pong ball into one of four tightly connected cups filled with beer.
‘Oooh’, when a rim shot occurred. ‘YES…whoo-hoo’, when one sank. Multiply that by 30 times the volume or so when all the games were on. Sheri was laughing at the failed attempt to get online so we just watched the event for a bit. My second most memorable moment was when the entire tournament stopped on a heartbeat, to the music started by that famous keyboard intro to Journey’s ‘Don’t Stop Believin’. The place went nuts with many of the female participants jumping on the pong tables in Glee-esque fashion. I only imagined that beer was spilling out onto the very same tables where I had eaten Subway cold cut combo’s some time in my past visits to Sin City.
When the music break stopped and the competition started to resume, we watched the transition focus on a ball and beer cup. After a miss, the ball would sometimes bounce to me standing behind one of the tables. I would use my computer bag to keep it in play. One time I avoided the requested two hands out across the table signaling to toss it to the next competitor and gave the arm gesture that I wanted to give it a shot. With computer bag in one hand and a ball in the other, I flexed my knees and got into position to make history, just like Jordan did for years. My toss had incredible arch and felt good after my release. Twelve feet doesn’t sound like long distance but for me it felt like a half-court shot that wins the Mercedes. As it headed back down, I could feel the crowd intensity including my number one fan to my right with her hands clutched together.
I rimmed it right off the middle beer cup, then off the right one and into the muck. A big ‘OOHHHHH’ from the crowd was nothing compared to my own frustration and desire to sink it. I would have given up the best $ES runner of the week to get another shot at beer-pong fame. Sheri leaned over and said “Do you know how hard that is to do?” I replied, “Try doing it holding a laptop!”
As we headed out of the failed wi-fi promised land’, we made our way to our last stop. Harrah’s Starbucks. I knew it wouldn’t fly since I tried it alone earlier but just went along with my new tour guide’s recommendation. I knew then that my journey was over and at that point I really didn’t care. That rim shot was more important at that point than any trading I could tap into; not to mention a facebook note from Sheri’s ‘boss’.
I said my goodbyes, telling my friend that I think that’s enough excitement for one night. I offered her a cab and she kindly refused, telling me laughingly that it was the best hour she spent all night. I walked into the casino towards my elevator but couldn’t help notice a blackjack table calling my name, or at least calling the bills in my pocket. I placed the laptop bag down, bought in, and performed my risk management program as if I would be doing the very same thing in my trading room. I ended up winning the equivalent of four $ES points, similar to my first trade target on most days. I even managed to coach my fellow ‘trader’ next to me who, according to his chip stack, seemed to never use blackjack stops, if there is such a thing.
I took the chips, cashed out, and headed towards the elevator. I kept thinking how all I wanted from this town was a wi-fi connection. That’s it. It’s sad that some of the simplest technological things cannot be solved but if I wanted to compete in a beer-pong contest with a call girl as my fan club…. we’ll get you set up in no time!
I laid my bag down and hopped into bed. Gave my sleeping wife a small kiss and closed my eyes. The last thing I heard was, ‘Honey, you’re done already?’
I love Vegas.
Michael Toma, CRM is a professional risk manager and co-moderator and futures trading education consultant for Value Zone Trading, LLC.
Tuesday, May 25, 2010
To Be or Not To Be……Responsive
The recent market volatility has allowed many traders to re-evaluate their risk parameters and trade entry processes in their trading plan. Should I adjust my default-two point risk on an ES futures contract? What about my targets or scaling out process? Should I reduce size? These are all good questions and one should consider these variables in a high volatility market arena.
An often-overlooked trading component is regarding the trade entry process. Many new traders follow a confirmation/pullback entry process. That is, they wait for a reversal in trend to be confirmed and then attempt to buy a pullback in price. This style can be very effective should one have the required patience and discipline.
There are challenges, benefits and risks with any entry strategy. The most conservative of strategies such as the confirmation/pullback method usually have an opportunity cost component to them. The inability to participate in price movement due to price not pulling back to meet your entry order is common with this strategy.
We have encountered many ‘V’ pivot price occurrences in these highly volatile markets. Many of these setups that do not pullback are formed at the eventual high or low price of the day. One can be right on market direction, price level, and yet still miss a major move. The markets can be cruel in this regard. As traders, we cannot control market dynamics but we can control execution and risk – two critical components to consistently successful trading. Responsively entering a position rather than confirmation has proven extremely beneficial and should be considered in your trading arsenal.
So why are so many traders non-responsive? One reason is simple: fear. Most traders were initially taught using typical candlestick charts. Green bars signifying strength and red showing a weakening and declining price. All the books we read told us to follow the trend, buy pullbacks, wait for confirmation and ‘never try to catch a falling knife’.
Simply put, many traders find it more comfortable to enter after a confirmation signal. Of course, defining ‘confirmation’ may be the first consideration. A responsive trader who enters at a key inflection or pivot point because price has reached that level is confirmation in their eyes. There is no need to wait for a traditionally defined confirmation because their confirmation parameters have already been met at the inflection point.
The most difficult thing to teach traders is to trade without fear. The human condition is designed to avoid perceptually dangerous situations. Fear is merely our human protective reaction to avoid danger. A responsive entry approach at times can be much more advantageous than confirmation trading and those results in itself can sometimes reduce the fear in using this approach. Being selectively responsive will help increase your success probability and profitability.
So how can we be more selective? I become a responsive trader when three conditions are met.
1. Indicator confluence to support the responsive entry.
2. Price is approaching a key pivot or reference area for the first time.
3. Evidence of divergence especially in the market internals.
It is common for prices to pivot, sometimes sharply, at the initial test of a key reference area. Perhaps a self-fulfilling prophecy, responsive traders will enter with the notion that others slightly late to the party will join as price confirms. Did you ever enter late on a confirming price bar only to have the trade pull back and hit your stop price? It’s happened to all traders. Most responsive traders become responsive after learning that confirmation candles can be comforting but costly.
In addition to being responsively selective initially at key price levels, once should also add an internal filter to help improve the risk and success potential of the trade. Two effective supporting filters I have in my plan are volume exhaustion and tick extremes.
High volume spikes are commonly used to show exhaustion of the current movement and potential reversal in price. Using a volume spike filter at key pivot areas is a solid premise to consider using a responsive entry strategy, particularly in a downward move. Using an extreme tick-reading filter is also a powerful tool in my responsive trading arsenal. Tick extremes can be effective, specifically when the extreme readings are not continuous. Price divergences are also effective but like any indicator, can stay divergent for long periods. Combining the use of exhaustion volume, tick extremes, and divergences at key reference areas is my confluence-filled recipe to play the responsive entry. Nothing ever works perfectly and solid exit strategies will protect you when it doesn’t.
Still have some fears about trying to catch the bounce? Try entering the world of responsive trading in simulation. Add a column in your trade journal to show the result if it met the above criteria and you had entered responsively. Another option is to take half of your intended position using a responsive entry and then add one confirmation style. As with any data-driven plan, let the results dictate your decision to modify your strategy. After entering a responsive trade and then start to see price action reverse in my favor, I know I’m in a favorable position. In fact, sometimes I’ll take a break on my soft-cushioned wicker chair in my office while giving my trade a chance to work. Ah…now that’s comfortable.
An often-overlooked trading component is regarding the trade entry process. Many new traders follow a confirmation/pullback entry process. That is, they wait for a reversal in trend to be confirmed and then attempt to buy a pullback in price. This style can be very effective should one have the required patience and discipline.
There are challenges, benefits and risks with any entry strategy. The most conservative of strategies such as the confirmation/pullback method usually have an opportunity cost component to them. The inability to participate in price movement due to price not pulling back to meet your entry order is common with this strategy.
We have encountered many ‘V’ pivot price occurrences in these highly volatile markets. Many of these setups that do not pullback are formed at the eventual high or low price of the day. One can be right on market direction, price level, and yet still miss a major move. The markets can be cruel in this regard. As traders, we cannot control market dynamics but we can control execution and risk – two critical components to consistently successful trading. Responsively entering a position rather than confirmation has proven extremely beneficial and should be considered in your trading arsenal.
So why are so many traders non-responsive? One reason is simple: fear. Most traders were initially taught using typical candlestick charts. Green bars signifying strength and red showing a weakening and declining price. All the books we read told us to follow the trend, buy pullbacks, wait for confirmation and ‘never try to catch a falling knife’.
Simply put, many traders find it more comfortable to enter after a confirmation signal. Of course, defining ‘confirmation’ may be the first consideration. A responsive trader who enters at a key inflection or pivot point because price has reached that level is confirmation in their eyes. There is no need to wait for a traditionally defined confirmation because their confirmation parameters have already been met at the inflection point.
The most difficult thing to teach traders is to trade without fear. The human condition is designed to avoid perceptually dangerous situations. Fear is merely our human protective reaction to avoid danger. A responsive entry approach at times can be much more advantageous than confirmation trading and those results in itself can sometimes reduce the fear in using this approach. Being selectively responsive will help increase your success probability and profitability.
So how can we be more selective? I become a responsive trader when three conditions are met.
1. Indicator confluence to support the responsive entry.
2. Price is approaching a key pivot or reference area for the first time.
3. Evidence of divergence especially in the market internals.
It is common for prices to pivot, sometimes sharply, at the initial test of a key reference area. Perhaps a self-fulfilling prophecy, responsive traders will enter with the notion that others slightly late to the party will join as price confirms. Did you ever enter late on a confirming price bar only to have the trade pull back and hit your stop price? It’s happened to all traders. Most responsive traders become responsive after learning that confirmation candles can be comforting but costly.
In addition to being responsively selective initially at key price levels, once should also add an internal filter to help improve the risk and success potential of the trade. Two effective supporting filters I have in my plan are volume exhaustion and tick extremes.
High volume spikes are commonly used to show exhaustion of the current movement and potential reversal in price. Using a volume spike filter at key pivot areas is a solid premise to consider using a responsive entry strategy, particularly in a downward move. Using an extreme tick-reading filter is also a powerful tool in my responsive trading arsenal. Tick extremes can be effective, specifically when the extreme readings are not continuous. Price divergences are also effective but like any indicator, can stay divergent for long periods. Combining the use of exhaustion volume, tick extremes, and divergences at key reference areas is my confluence-filled recipe to play the responsive entry. Nothing ever works perfectly and solid exit strategies will protect you when it doesn’t.
Still have some fears about trying to catch the bounce? Try entering the world of responsive trading in simulation. Add a column in your trade journal to show the result if it met the above criteria and you had entered responsively. Another option is to take half of your intended position using a responsive entry and then add one confirmation style. As with any data-driven plan, let the results dictate your decision to modify your strategy. After entering a responsive trade and then start to see price action reverse in my favor, I know I’m in a favorable position. In fact, sometimes I’ll take a break on my soft-cushioned wicker chair in my office while giving my trade a chance to work. Ah…now that’s comfortable.
Friday, May 21, 2010
Hedgers and Speculators
The German Deputy finance minister was interviewed on CNBC today. In that interview he stated that the two reason that Germany had enacted the ban on some naked short selling was 1- calm down volitility caused in part by speculators his mesage was that Germany wanted to " fight against speculaton" and 2- show Germany’s willingness to act now on financial reform. When asked if he cared if stopping speculation might lead to decreased hedging and therefore a lack of liquidity he essentially said he did not care.
From a financial perspective Germany is missing the boat here, making number two the real reason totally political. The Financial Reform bill that passed the Senate last night now goes to a committee with the House of Representatives which will end up getting the United States to get an even more draconian bill is not good for speculators or hedgers.
Yet, hedging and speculation are two of the most important financial mechanisms we have. And as day traders speculation is how we make our living. The CME was founded to hedge agricultural products. The essence of how the system works is that there are two parties, hedgers (those who want to protect them selves from price movement) and speculators (those who want to gain from price movement and provide liquidity). They buy and sell derivatives to provide the liquidity and the insurance market participants needed for a vast variety of reasons. Hedgers need speculators to make the system work. Yes, some times speculators lose money when they are on the wrong side of the trade.This is the risk embedded in trading. In fact, the reason you get paid well for winning is that you take bigger risks just for participation.
As intraday traders we are speculators. One way to judge our risk of participating in the markets is the Vix.
The Vix is both a measure of fear and a method for speculators to hedge. The Vix at 45 says that all speculators are nervous and afraid of the outcomes of current market unrest. They are willing to pay a very high premium for their insurance.
Given these facts what are we, the small intraday screen trader going to do today. In this economic and political climate, we need to understand the politically speaking we speculators are akin to piranhas. We need to understand that as screen traders we operate with a handicap. The large speculators can and do hedge their intrday risk and exposure. We can’t do that easily so we, we just take risk.
Today you have to ask yourself. Do you want to be a naked speculator? Without any risk protection. If so then trade today. If not then sit on the sidelines. Make no mistake there is money to be made today. But it is high risk money. With the Vix at 45 many small account traders are better off sitting on the side lines.
From a financial perspective Germany is missing the boat here, making number two the real reason totally political. The Financial Reform bill that passed the Senate last night now goes to a committee with the House of Representatives which will end up getting the United States to get an even more draconian bill is not good for speculators or hedgers.
Yet, hedging and speculation are two of the most important financial mechanisms we have. And as day traders speculation is how we make our living. The CME was founded to hedge agricultural products. The essence of how the system works is that there are two parties, hedgers (those who want to protect them selves from price movement) and speculators (those who want to gain from price movement and provide liquidity). They buy and sell derivatives to provide the liquidity and the insurance market participants needed for a vast variety of reasons. Hedgers need speculators to make the system work. Yes, some times speculators lose money when they are on the wrong side of the trade.This is the risk embedded in trading. In fact, the reason you get paid well for winning is that you take bigger risks just for participation.
As intraday traders we are speculators. One way to judge our risk of participating in the markets is the Vix.
The Vix is both a measure of fear and a method for speculators to hedge. The Vix at 45 says that all speculators are nervous and afraid of the outcomes of current market unrest. They are willing to pay a very high premium for their insurance.
Given these facts what are we, the small intraday screen trader going to do today. In this economic and political climate, we need to understand the politically speaking we speculators are akin to piranhas. We need to understand that as screen traders we operate with a handicap. The large speculators can and do hedge their intrday risk and exposure. We can’t do that easily so we, we just take risk.
Today you have to ask yourself. Do you want to be a naked speculator? Without any risk protection. If so then trade today. If not then sit on the sidelines. Make no mistake there is money to be made today. But it is high risk money. With the Vix at 45 many small account traders are better off sitting on the side lines.
Monday, May 17, 2010
Welcome Michael Toma the new co-moderator of the Value Zone Trading Room
Value Zone Trading is stepping out of the educational pack, into new area with the addition of a certified risk manager to our staff. To achieve this mix Value Zone Trading is excited to announce our new partnership with Michael Toma of TWC Futures.
Among his many new duties starting today Michael will become the new co-moderator of the Value Zone Trading and Training Room. Michael will also provide coaching services and new risk management courses to new and existing clients. The style of trading that Value Zone teaches is based on market profile. The addition of even more stringent risk management will make this one of the most powerful trading strategies available today.
Before beginning his trading career he spent five years as a certified risk manager in the insurance industry. The combination of trading and genuine risk management is an area that has been overlooked in the individual trading and trader education arena, said Lydia Langston, co –founder of Value Zone. We all understand the need for risk management, with Michael joining Value Zone, we did now have a risk management programs and expertise that are miles above any other trader education company.
For more information go to http://www.valuezonetrading.com/
Among his many new duties starting today Michael will become the new co-moderator of the Value Zone Trading and Training Room. Michael will also provide coaching services and new risk management courses to new and existing clients. The style of trading that Value Zone teaches is based on market profile. The addition of even more stringent risk management will make this one of the most powerful trading strategies available today.
Before beginning his trading career he spent five years as a certified risk manager in the insurance industry. The combination of trading and genuine risk management is an area that has been overlooked in the individual trading and trader education arena, said Lydia Langston, co –founder of Value Zone. We all understand the need for risk management, with Michael joining Value Zone, we did now have a risk management programs and expertise that are miles above any other trader education company.
For more information go to http://www.valuezonetrading.com/
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