The #1 Account Killer: Emotion

Posted on by The INO.com Team

The #1 Account Killer: Emotion

Well, I have to say that emotions always lose out to a solid game plan when it comes to the markets. Here's a recent example; we received a buy signal for gold (XAUUSDO) at $905 basis spot on May 19th. The gold market ran up and reached an intra-day high of $935.30 before it subsequently collapsed. I'm sure many traders held on thinking that the sharp pullback was just a pullback and that gold would soon regain its footing and once again go higher. Why subject yourself to that kind guessing and emotional type trading when there's a better way? Using the MarketClub's non-emotional "Trade Triangle" technology we were able to exit the market with a small profit of $10.25 an ounce and rest on the sidelines as gold collapsed. There's really no room for emotion in the market place. This is one of the greatest downfalls of most traders. You need to go into the market with a solid game plan, this could be in the form of MarketClub's "Trade Triangles" or it could be another form of discipline, but having a solid game plan does give you a reference point to work from. When you are making trading decisions about the market while it is still trading is generally not a good idea. Here's a recent trading recap:

Gold (XAUUSDO): We are out of the gold buy trade from $905 on 5/19 to 5/27 at $915.25 for a profit of $10.25. We are resting on the sidelines based on "Trade Triangle" technology. See video.

Crude Oil (CL.N08): We exited our long July position from $125.63 purchased on 5/15 at 126.90 on 5/28 (original signal $128.69) for a gain of $1.27. We are out of this market and on the sidelines based on our "Trade Triangle" technology. See video.

Whether the "Trade Triangles" turned out to be correct or incorrect, they do provide you with discipline and a reference point that you can hang your hat on. "Trade Triangles" are consistent and not a willy-nilly approach to the market. Using MarketClub's "Trade Triangles" gives you confidence as they represent a defined, measured approach that if followed consistently will make you money in the long run.

Every success in the markets and in life,

Adam Hewison

Co-Creator, MarketClub.com

The Four Main Types of Trades

Posted on by The INO.com Team

Today we welcome Corey Rosenbloom from Afraid To Trade, as our Guest Blogger!

Please welcome him and take advantage of his vast trading knowledge.

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Good Morning Trader's Blog Members!

I'm very happy that Adam and Trader's Blog have given me the chance to teach you today.

Let's get to it...

Although we all employ different trading strategies across different time
frames using different vehicles (stocks, options, futures, etc), there
really are a limited number of pure trades we can take which provide clean
entries and risk-management points, and it is helpful to know the major
types of trades we are employing in our trading plan.

The four major types I propose are the following:

1. Breakout/Breakdown
2. Retracements
3. Reversals
4. Rangebound Fades

This simple chart I created helps illustrate these basic concepts:

4 Types of Trades

1. Breakout Trades

When experiencing extended range consolidation, it is best to begin
considering playing for a Breakout in hopes of a new, sustained breakout
move. Recall that other traders will be attempting to “fade” the breakout
and if price continues, they will be forced out by their stop-losses.
Stops are placed conservatively just below the breakout zone or
aggressively below the area of most recent consolidation.

2. Retracement Trades

Retracements often have the highest probability of success when properly
identified (in a trending environment). Core trading strategies can be
utilized as well as swing trading strategies which seek to capture the
“sweet spots” or a simple 'leg' of price movement (these can be the
distance from a support zone to the most recent swing-high price). Stops
are placed conservatively below the support zone or aggressively below the
most recent swing low.

3. Reversal Trades

Although Reversals have the lowest probability of success, when they truly
occur, they can produce some of the largest profits if you capture near
the true reversal zone. Realize that calling tops or bottoms is a losing
game if you do not press your edge when the trade goes in your favor
because your win ratio will be so low. It is generally not a good idea to
fade a dominant trend even if you suspect a trend change due to a
potential price climax or exhaustion. When fighting a trend, you must keep
tight stops.

4. Rangebound Trading

Finally, Rangebound or Fade-Trades occur when you have identified a
rangebound, consolidating market with clear support and resistance
boundaries to provide profit targets and close stop-loss zones (just
outside the often parallel channel lines). This tends to be profitable
until a breakout occurs, in which you could endure large losses if you
trade without stops. Realize that price expansion often follows
consolidation, as markets do not consolidate (or trend) forever.

Typically, traders find it ideal to identify one set of trades or trade
set-ups and play those whenever they recognize them, rather than trying to
interpret complex signals or varying your personal trading style on
perceptions of possible market behavior. In other words, it might be best
to identify which types of trades you are most comfortable executing given
your psychological and risk tolerance and then adhering to those
strategies instead of being tossed around by market action.

Keep in mind that these trade types are applicable to technical analysis
and short-term trading, but even fundamental analysts can benefit from
learning basic market structure, especially trend structure analysis An
ideal trade has a fundamental reason for buying which is supported by a
low-risk entry provided by basic technical analysis and the trend
structure.

In your own trading, identify which set-ups you take most often and see if
they fit into any of these above patterns. Learning where you fit in the
“Grand Game of Trading” can lift your confidence and give you that
psychological edge needed over the competition who is driven by emotion
and fails to study market structure.

::::::::::::::
Corey

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Please learn more about Corey Rosenbloom, his strategies, and his analysis at his blog:
http://blog.afraidtotrade.com

Are you trading at the right 'pace'?

Posted on by lindsay

Guest Post by Norman Hallett, CEO of Subconscious Training Corporation

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A group of 1000 traders were recently asked, "What is the single most important mental/emotional concern you have that is preventing you from being the most successful trader you can be?"

The second most frequent response was the fear of blowing out their account. (For the record the first was fear of "pulling the trigger".)

Why all this fear?

The answer is multi-fold, but one of the main causes is likely that we are overtrading or trading too much before we are ready... what I call trading at the wrong "pace".

The more you put at risk, the higher level, or "pace" you are trading at.

When you first start out as a trader, you begin by paper-trading. You put no money at risk and you practice executing your trades the way your trading plan commands that you do. / No stress, no emotions/... there's no money or ego at stake. Your (phantom) "equity" seems to rise with ease.

You're chomping at the bit to up the pace. You're ready to trade with "real" money.

You begin to trade the minimum number of contracts to effectively run your trading plan. For the first time you are now dealing with your emotions and notice that they are causing you to stray from your trading plan.

You recognize that emotions play a big part in your ability to trade successfully and you take the steps necessary to get back to trading with ice-in-the-veins confidence.

When you experience the degree of success you are looking for, you feel you are now ready to step up the pace of your trading again... to the level that you always wanted to trade at. Full speed!

Your first trade in the big-time went well. Wow!... this is great! But then it happens... an unexpected move against you. And it's a big one. You never knew your emotions could be so debilitating!

Thoughts are racing through your head and you're tempted... I mean REALLY tempted... to pull your protective stops because you want the market to rebound and get you out of trouble.

And right before you click the mouse to lift your stop, you screech to a halt. "You MUST follow your trading plan", the voice in your head insists. You comply. You're stopped out and market continues to a free-fall.

You've lost money today... a bit more than you would have liked to, but you're proud of yourself and you actually feel pretty good.

Over the next few weeks and months you think back to that day... the day you could have blown out your account... and know that the profit you see now in your account would not be there if you were not ready, MENTALLY and EMOTIONALLY to trade at a full-out pace.

Now this little story is an ideal scenario. It happens to about 2% of real-world traders.

The fact is that most traders up the pace too quickly. They make 30% in their papertrading account in a month and kick themselves for not having the guts to use real money.

"Look at all the money I've left on the table," they cry.

So they move to level 2 (not the minimum number of contract to run their trading plan). The result:

Too much emotion, too soon. Losses result.

I could go on with examples of moving up your pace too quickly and not being emotionally prepared to handle it... but I won't.

I'll just let YOU think back to what got you where you are today and let THAT be your best example.

But don't beat yourself up... just scale back... now.

Then "train your emotions" to fit your trading pace and you too... YES, YOU TOO... can be in the trading elite.

It's not rocket science. It's including the development of your mind in development of your trading plan.

My best,

Norman Hallett, CEO
Subconscious Training Corporation

Makers of TradingMind Software

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Normal Hallett will be speaking at the Orlando 2008 Investors' Super Conference. Read more about the event here.

"Saturday Seminars" - Channel Analysis—The Key to Improved Timing of Trades

Posted on by lindsay

Currencies, fixed income, equities and futures are all characterized by price movement that is simultaneously both random and cyclical. The random movement is, of course, unpredictable. Cyclical movement is somewhat predictable, although not completely because the various cycles undergo gradual changes in amplitude and frequency. Channel analysis provides a simple way of focusing on the predictable. This knowledge will enable the trader to enter and leave the market at the optimum time for maximum profits. Using examples from the currency and stock markets, Brian shows you how the channel analysis method can be applied to both short-term and medium-term trading. You will learn fundamental relationships between short-term and medium-term trends, and how to decide when either type of trend is likely to change direction. You are given guidelines and rules for estimating the future target area in which the trends will again reverse direction. This will enable you to choose the trades with the highest gain potential and lower risk at the time trade is contemplated.

Listen to Brian explain his 6 rules of successful trading...

  • Hold a maximum of 8 stocks in your portfolio
  • Invest approximately equal amounts in each
  • Diversify between sectors
  • There should be a logical reason for every action
  • Should avoid the "manana" attitude
  • Analyze and learn from every mistake

Brian J. Millard earned a Ph.D. in chemistry and was a senior lecturer at London University for fifteen years before beginning to use his scientific training to analyze the stock market. He left the university setting in 1981 to establish his own investment publishing business, writing books and authoring investment software. He is the author of five books: Stocks and Shares Simplified, Traded Options Simplified, Profitable Charting Techniques, Winning on the Stock Market, and Channel Analysis. The latest editions of the latter two books have been widely acclaimed for breaking new ground in the development of prediction tools for the market. John Wiley and Sons has taken over the publishing and distribution of his books, leaving Brian free to concentrate on investment research and software development. Brian is one of the few independent investment researchers in the United Kingdom. His work has advanced the concept of channel analysis, first developed by J.M. Hurst, into the realms of probability and chaos theory. Probability and chaos theory have recently appeared in software as the program Sigma-pTM. This software predicts turning points in long term trends up to six months into the future. Interest in Brian’s work has increased dramatically over the past several years. Traders throughout the United Kingdom and Europe are discovering his low risk, high profit methods through the use of popular channel formulating and drawing software now available. Professional traders throughout the European Common Market have requested that he share his insights and expertise via seminars and personal appearances. --- To access more audios and videos please click INO TV