With Crude taking a dive this week (our MarketClub Trade Triangles getting short at the PERFECT price) I wanted to bring in Jeremy Ascher from ChartWhiz.com to bring a little insight into what he's seeing in the energy markets as we've gotten a ton of emails regarding pulling profits and controlling losses. Please enjoy the post...and take a look at our most recent signals for Crude Oil (CL.V08) if you're a MarketClub member.
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I’ve been analyzing and trading the energy markets for more than 10 years and I continue to see beginner traders make the mistakes over and over again. I know this because I made the same mistakes when I was a rookie trader. It goes something like this…you start the day with a good trade and lock in some nice profits. Then you make another and your having a pretty decent day, one in which you could easily call it a day. Let’s say for example you’re up $800 on the day. But then the greed kicks in and you want more. Ok, one more trade, let me hit that $1000 mark. Now you place a losing trade and you’re up only $600. Now you think to yourself “I should have just closed the books. Ok, let me try to make that $200 back and call it a day”. You lose again, up only $350 now. Now you’ve turned a triple into a single. Now you’re angry. That’s it, it’s all or nothing. I have $350 to risk and I’m done. This is where it gets ugly, usually turning an $800 winning day into an $800 loser, a $1600 swing.
Sound familiar? You bet it does.
Why does this happen? The answer is simple-you are not master of your domain. In other words it’s a lack of discipline. Without discipline it will be very difficult to become a successful trader. So I’ve come up with a few simple “post it” notes that should help you overcome this hurdle. I have these notes posted to my monitor in big letters to keep a constant reminder. Here they are:
1. Trade the numbers, not opinion. Before you trade you should always do your homework. I analyze the charts to derive support and resistance numbers. These are the only areas that I am willing to place trades. Anything else to me is gambling. If you have support you are buying against, you trade that number until the market tells you otherwise.
2. Patience. It is extremely important to have patience when trading. Use your support and resistance as guide lines. Do not chase the market and force trades; let the market come to you.
3. No Emotion. It is virtually impossible to not have any emotion when trading, but it can be reduced drastically. To do this, trade with a systematic approach. Determine a comfortable risk threshold to use on every trade. If you’re wrong and get stopped out, wait for the next trade with the same risk parameters. Trading a system day in and day out will help keep you off the emotional rollercoaster that so many of us experience.
These may sound too simple and basic to work, but sometimes it’s the simple things that work best. And believe me, these do. After all, not trading your numbers will lead to impatience which will lead to emotional trading. And that my friends, is a recipe for disaster. So get out your sticky notes, write these down, and stick them on your monitor and become master of your domain today.
Jeremy Ascher
www.chartwhiz.com
I'd like to see more of your blog posts!
Hi Terrence,
I'm not a successful trader so I know exactly how to lose money. Here are some of my advices.
1. If you have not traded yet, then just stay out completely. Find another way to generate income. I'm serious; some people might say I'm pessimistic but that's my take on it.
2. If you really want to trade then
- use the money you have to get educated first. It's hard to find a good one out there. Most of them just want your money. If there are some decent ones, it's pricy. Now you think that you don't have money for education; by the time you know it, you lose much more money than the fee for education.
- Do not try to discuss about trading with other traders: I have good reason for this. As rookie trader, we are not able to be firm on our decision yet; so by talking with other traders, our decision or plan will be affected greatly. Sometime it affects in a good way but most of the times it affects in a bad way. Once you're into trading, you'll know what I mean. What I try to say is that try not to discuss with other traders after you put on your trade. You can discuss about a trade before hand. Also try not to talk about good trade or making money in some good trades. If your friend makes money and you don't, you'll find a trade to put on so that you can make some money. This often time results in a bad trade.
- paper trade first. I lost so much and I still don't want to paper trade. But if you listen to me, it saves you a lot of money.
- Do not follow hot stocks. It'll be great if you're on the right side of it, or if you're on the wrong, and cut loss early. If you're on the wrong side and hold on to it, you're toasted.
There are more to say but you hope you get the point.
I hope I scare you enough for you to stay out or at least to prepare well before trade your own money.
Kevin.
THANK YOU FOR YOUR ARTICAL ON "DOMAIN"
I HAVE NOT TRADED YET , HAVE A LITTLE MONEY, AND WOULD LIKE TO LEARN TO MAKE A MODEST INCOME TO HELP ME BY AS I AM 64 YEARS AND ALMOST RETIRED.\AND WOULD TAKE ANY ADVICE I COULD GET FOR A FIRST TIMER ( I GUESS , I'M A BIT SCARED TO PUT MY TOE IN THE WATER . YOURS
TERRENCE LANE
Perhaps the biggest source of stress is the expectations you place on yourself to do well. If you want to master the markets, you have to be ambitious. But, on the other hand, too much ambition can put unnecessary pressure on you. It's better to take it easy. Don't try to be perfect. Try to work hard, but at the same time, just do your best. When the heat is on, it's hard to perform at your best. So why push yourself too hard? Why not take some of the pressure off? The less pressure you feel, the more free you will trade and the more profits you will make.
Yes, the old KISS still works best. So work within the trading range between support and resistance!
Keep up to common sense work.
WD