Categories
Day Trading

Should Octobers’ Reputation As Disastrous Territory Affect Your E-Mini Trading Strategy?

The press has begun their annual warnings and speculating that October is a perilous month for e-mini trading. They tend to dredge up the October 1987 market crash as proof positive of impending doom. Yes, the drumbeats of financial ruin and economic disaster are pounding with impressive regularity based upon that devastating week in October 1987.. But, are these warnings based in fact or an example of “news creation” of dubious accuracy? Let’s look at history to assess October’s performance in the years after the 1987 and relate it to potential issues in e-mini trading, specifically day trading and e-mini scalping.

From the onset I must state my belief that catastrophic events in the past are not a heavily weighted variable in e-mini trading strategy. On the other hand, to summarily dismiss any risk in October would be reckless and counterproductive in my e-mini trading strategy. Benoit Mandelbrot’s “The Misbehavior of Markets’ seminal book, and his discussion of “long tail” events are proof positive that any constellation of variables can produce unexpected trading movement; the hundreds of variables in discovery of market price are difficult to analyze and usually go undetected (or properly interpreted) as market crashes have routinely surprised and confounded both economists and traders with their randomness and scope. Since the commodities and futures exchange tends to produce higher levels of volatility than the NYSE, which I attribute to exponentially higher levels of leverage, you would anticipate the price volatility expressed more profoundly in the price movement on the CME and other futures exchanges.

With my personal bias on the table, let’s have a look at yearly results in the Dow Index to determine if October has been a risky month to trade. In results that can be found on the insightful “Seeking Alpha” blog and data from Dow Jones, here are the facts:

· In the last five years, the Dow has advanced four of the years, not declined

· In the last ten years, the Dow has advanced six of the years, not declined

· In the last fifteen years, the Dow has advanced eleven of the years, not declined

· In the past 15 years, the Dow has advanced at an average of 1.76% in October.

Source: Dow Jones and Seeking Alpha blog

There was only one year (2008) in the past that saw a significant a drop in price levels. In that year the Dow experienced a drop of 14.06%; I would characterize that number as the result of the banking/credit crisis and not attribute it specifically to October in particular, as the previous data has shown that October has not been an overly dangerous month for e-mini trading. The data confirms that in the past fifteen years October has not been a perilous month, or even statistically relevant month for dangerous trading conditions.

In summary, I don’t consider October as a challenging month to trade in relation to other months of the year; in fact, the data would suggest that October may be a good month for e-mini trading. Still, that October 1987 event remains a psychological barrier for traders and apparently is far from forgotten. As always, best of luck in your trading…

Categories
Day Trading

Option Trading Strategy is One of Other Ways to Diversify Our Portfolio

As we hear either from financial management book or seminar from financial gurus, it often mentions that we should not put all the eggs into one basket. The point is if the basket is leaking down and the hole is getting bigger and bigger, it end up the egg will fall down.

This is what happens if we put our money in US stock market and expect the market goes bullish in order to make profit, we might have to hold our breath for a moment because market might go sideways or even bearish for few months or a year. However, if we know how to make profit by using Option Trading Strategy, we can get advantage in bi-directional market meaning to say we can still make profit when market goes either bullish or bearish.

For some people may get confuse what Option Trading Strategy is, especially for those who have just heard this terminology at the first time; Basically option is contract that conveys buying and selling shares of underlying securities at specified prices on before any given date and Option Trading Strategy is the method we apply in US market with different varieties and every Option trader may be suitable with his/her own strategies that may not be suitable for others. Also, Option Trading strategy we use when market bullish can be different from when market bearish and it can be different also when market goes sideway.

However, all the Option Trading Strategies we talked about at above, come with the risk and I strongly recommend that before we jump into, we have to understand well how it works in order that we can avoid losing our capital and one thing to remember is that Don’t let our emotion, fear and greed, control us for making decision on diversifying our portfolio.

Categories
Day Trading

Forex-ology Simplified – 5 Unorthodox Steps of a Winning Forex Strategy

First of all, I want to stress that this trading system of mine is no holy grail and anyone can use it successfully if they follow the rules of the trading system. I have been trading for years and this is one of my forex trading strategies that have helped me made profits consistently.

I have always kept my trading systems simple because it’s the simple system that works in this ever-changing brutal currency market. Surprised by that? Did you think that a successful trading system has to be sophisticated and difficult to use? Doing well from the forex market depends on how effectively the trader himself uses the trading system and not how good the trading system is.

So now I will reveal a forex strategy that I use very often to profit consistently from the market. After you read it, you may think that actually it’s such a simple system. But like I said earlier, trading should be simple, don’t complicate it. Below are the steps of my forex day trading strategy:

Step 1: Look at the main trend using daily chart. The first look from left to right of the chart should tell you it’s a down trend or up trend.

Step 2: After knowing what the main forex trend is, I will go to Forex Factory website to check for for any news releases. If there are upcoming news in 2 hours, I won’t even go to step 3 to look for trading signals because there is a high likelihood of whipsaws.

Step 3: If there is no news, I will put my forex trading plan into action. For example, if the main trend is up, I will only be looking for buy signals generated from my forex indicators, Vice versa if the main trend is down.

Step 4: Now this is the most crucial stage and my trading decision lies here. I use the crossing of 4 EMA (Exponential Moving Average) and 23 EMA to define buy and sell signals on the 30 minute chart. There are other indicators involved, the weekly pivot, Stochastic and MACD (Moving Average Convergence Divergence) must also follow the trend and cannot look flat. I filter whipsaws by trading only during high liquidity sessions and checking whether the trend is the same using 4 hourly chart. That’s all!

Step 5: The trade is set at a tight stop loss of around 35 pips while I have 2 methods of targeting profit. One is using healthy risk to reward ratio of at least 1:2. The second is using daily support and resistance.

That’s my successful forex trading system. It’s simple isn’t it? Of course risk management, money management and psychology should be combined in this trading system for it to work properly.

Categories
Day Trading

Forex 10 Pips – A Very Simple Strategy For Gaining 10 Pips a Day Trading Forex

This article will explain how even a relatively new and inexperienced trader can easily gain 10 or more pips a day on average — by observing and taking advantage of a common market behavioral pattern during the daily New York Close, or from 2 p.m to 4 p.m. Eastern time (New York time).

Once a trader has observed the forex market for a length of time, he or she will recognize that the market does have certain habits and does frequently repeat daily patterns of activity. Learning these patterns and recognizing these habits does not require any special knowledge, training or education. All it takes is careful observation and looking for patterns as to how the market tends to behave during certain times of the trading day. As a new trader, if you spend enough time observing the market movements with respect to time of day, you will begin to see some regular predictable patterns.

One of the market’s predictable habits occurs in the New York afternoon, after 2 pm EST and into the final New York daily closing. Most notably, this pattern is most frequently observed in the EUR/USD. During this time of the trading day, trading flows are usually light and volatility is low. One pattern that has been very consistent over time, for whatever reason, is that there tends to be a pivot that becomes apparent sometime just after 2 pm EST. By “pivot,” I am referring to a “pullback” or “retracement” from the overall day’s predominant trend.

In other words, if the trend of the day for the EUR/USD has been rising, then between 2 pm and 3:30 pm EST, the market will typically see a pullback lower, usually around 20 to 30 pips. On the other hand, if the daily trend for the EUR/USD has been downward, then after 2 pm a retracement of 20-30 pips higher is often observed.

By checking the market or checking the charts in the New York afternoon around 2 pm Eastern time, a new and even an inexperienced trader may recognize this pattern and then safely execute a high probability trade. If a person is available to trade at this time of day on a consistent basis, they could expect to gain an average of 10 pips a day with a fair amount of ease.

In closing, I must state the obvious disclaimer – that trading forex is a risky endeavor with no guarantees. Trade with caution and never trade more than you can afford to lose. Spend time observing the market to recognize its patterns so you may make smart, high probability trades and minimize risks.

Categories
Day Trading

What Kind of Trading Strategy Is Best For YOU?

The biggest mistake that most beginning forex traders make is made before they even place their first trade. In fact, they usually make this mistake before they even open their trading account!

Most traders begin by learning the mechanics and terminology of trading.

They study charts and look for trends. They try to find predictable patterns and how to profit from them.

They learn the meanings of the words “pip”, “cable”, “swissie”, “shoulder”, “flag”, etc.

They study how the “Aussie” behaves when the Royal Bank of Australia lowers rates or what the impact on the EUR/USD will be after Jean Claude Trechet says the word “vigilant” three times during the ECB rate announcement or what the rising price of oil will do for the Canadian dollar.

But the one thing most traders don’t do before they begin their careers in this “sport” is to properly assess their own temperament and how that will effect their trading.

The cute E*Trade commercial which shows a talking baby placing a trade is accurate. It’s easy to place a trade. The mechanics are easy enough to learn. And many traders, even adults, feel like barfing right after they pull the trigger!

Are you going to barf every time you place a trade? Will you be afraid of losing? Will you become angry when you do lose on a trade – even if it’s a small amount? When you close out a trade, will you feel elated (on a win) or humiliated (with a loss)?

These are all questions that you need answered before you place that first trade.

When you have answered the tough questions about yourself, you will be well on your way to determining what kind of trader you will be.

Many of those who hold educational seminars and write books on forex traders talk about 3 types of traders: the day-trader, the swing-trader, and the investor. However, I believe there is a viable fourth category: the non-trader.

The day-trader goes for the quick gain. Successful day-traders have nerves of steel and don’t mind sitting in front of their computers watching the up-ticks and down-ticks of their favorite pair(s). They can easily stomach many small losses knowing that they only need a successful trade or two to put them ahead. The day-trader depends heavily on the charts and technical analysis. But they really only care about what’s going on with the 5-minute, 10-minute, or 15 minute charts. A daily chart represents an eternity for a day-trader.

The next type of trader is the swing-trader. This type of trader is a bit more patient then the day trader. The swing-trader will read the weekend papers and websites and study the fundamentals of their favorite pair. They’ll then take a look at the yearly and daily charts, looking for good entries and then decide on their target. Then they’ll set up their trade on Monday morning, which may or may not be triggered. When the entry for the trade is triggered, the swing-trader is patient to then wait until either their stop or target takes them out. The swing-trader’s trades will run for days, weeks, or months, typically – and that’s plenty fast for them.

The third type of trader is the investor. And the investor is the most patient of them all. The investor trades off of very long term trends. He places his trade and forgets about it. It may be months or years before he exits his trade. The investor relies mostly on fundamentals and long-term economic trends.

The last type of trader is the non-trader. Although, the dealers wouldn’t agree, it’s actually OK to not trade. For some people, trading is just going to be too stressful for them. Even though education can relieve a lot of this stress it won’t eliminate for everyone.

What category am I in? Right now, I’m in category four. But, soon, look for me in category 3.

What is the best category to be in? Again, it all depends on who you are.

Categories
Day Trading

Day Trade Strategies – Five Year Old Strategy For Futures and Stocks

How long did it take you to develop your first profitable trading system where you had complete confidence in your trading approach?

When I first started, I was desperate for a day trading solution!

If you are like me it was a lengthy process that took me about five years before I finally developed a trading system that gave me the confidence I needed to profitably trade the markets.

One of the secrets to being a profitable trader is having historical research and information developed over time. Currently, I am fortunate enough to have developed day trading systems for the last 15 years and can use that experience to see what is working in the markets.

Not many have the patience to spend the next 4 or 5 years researching strategies and then tracking them into the future to see what works.

Where can we find a five year old day trade system that hasn’t been modified and see how it has done? In February 2006, I submitted an article to Active Trader magazine for the May 2006 edition titled, “Using the TICK To Indentify the Intraday Trend”.

The strategy was designed for the E-mini S&P futures (but works on other stock indexes, stocks and ETFs) has five short entry rules and three long entry rules. A secret to trading the stock market and stock index futures is looking at the market internals such as TICK, ADVANCING ISSUES (ADV), DECLINING ISSUES (DECL).

This article reveals how strength in price action and the TICK in the first fifteen minutes of the trading day can be used to day trade on the long side and how weakness in the price and TICK in the first fifteen minutes of the trading day can be used to day trade on the short side for the day.

This strategy was developed in the Tradestation platform. I made the mistake of not trading this strategy over the last few years (studying other strategies). The other day, I re-visited this strategy and discovered how profitable it had been. I missed out on some new equity peaks but now have a walk forward test that is working on its fifth year.

The best long entry rule from that strategy is:

  • If after the first 15 minutes of trading the TICK is above 500 and it hasn’t traded below -350 then get long

The best short entry rule from that strategy is:

  • If after the first 15 minutes of trading the price is less than the day’s Open minus the average range of the last day’s worth of 15 minute bars and the TICK has not traded above 750, then go short.

The best exit is:

  • Exit on the close or use a range based stop loss.

Be sure to test this strategy out and enjoy the process of studying the markets. Finding experienced traders that provide good information can also short cut the process.

Categories
Day Trading

Ultimate Swing Trading Strategy That Works For All Types of Markets!

Swing trading can be a much better option as compared to day trading. You can swing trade stock, forex, futures, options or ETFs in just 30-60 minutes each day as compared to day trading. Day trading is in fact a full time job.

Recently the CFTC (Commodity Futures Trading Commission) the regulatory body that oversees the futures market as well as the forex market has given a ruling that outlaws 100: 1 leverage. Now, you can not use more than 10: 1 leverage level in forex trading. What this means is that you will need a large balance in your trading account to trade the standard lot.

Whatever, leverage was always a double edged sword. If it amplified your profits, it also could destroy your account in a matter of seconds. What you need to do is to master trading different markets. Sometimes, you will find a good opportunity in the stock market, sometimes in the gold market, sometimes in the crude oil market and sometimes in the options market.

As a new trader, you can start off from one market. Master it and then master another and then another. The basics of trading are almost the same for these different markets. So once you master trading one market, you can easily master other markets. This is a much better option as compared to sticking with just one market and day trading it all the time.

Trading different markets is what will work in the 21st century. Some people call it market timing, Whatever name you give it, swing trading is what you need to learn if you want to enjoy your life as well as make money with trading.

Categories
Stocks

A Day Trading Strategy to Give You a Definitive Edge

A strategy that can used on its own, or in conjunction with other strategies, this is one of my favorites. Why do I like it? It gets a trader into a move early, using a couple of confirmation tools. While no system is perfect, this strategy does often provide very high rewards for the risk, and we often know quite quickly if the market gave us the correct signal.

I will call this strategy the Truncated Price Swing.

A truncated move I will describe simply as a move that falls short of the previous move. I especially like this near the open. This is often when the most profit potential is available, but it can be used at any point in the trading day. Let’s say a $50 stock drops $0.50 off the open, pulls up and then start heading back to test the lows. But this current price swing fails to reach it. This can provide a low risk opportunity to enter the market long (in this example), and the entry could be based off another signal, such as a doji, engulfing pattern or trend line bounce.

Using profit targets and estimated daily ranges a high reward to risk trade can be set up. The down side is that we don’t know if (in this example) the stock is actually going to reverse, although based on the evidence we are making a educated estimate that it will. We are buying on the truncation using a simple signal, but in a few minutes the market could head back lower and break the lows (or highs if shorting an up move).

As I am writing this, this strategy could have been used on July 10, 2009 (check out your intra-day charts). It sets a low, then sets high, then lower low, but when it tries to test the highs again it fails. In this example a small range was created below the old high (rectangle). A break below the little range singled the truncation and short could have been place around the bottom of the rectangle. The market for much of the rest of the day.

To summarize we are watching for any move that is heading to test a daily high or low, but does make it there. Once the price stalls and starts to reverse away from the daily high or low, we are watching for a confirmation signal – this could be a candle stick pattern, bounce off a trend line, or as in the example above, a collection of bars and then a breakout from those bars away from the daily high or low.

Stops can be placed outside the daily high or low, or alternatively just above the truncated high or low which will likely not be too far from where we entered our position.

Profit targets for this trade vary on the daily market dynamics.

Categories
Day Trading

Day Trading Strategy

It is necessary to plan business and prepare a proper strategy for achieving success at day trading. If you want to take advantage of every available market opportunity and want to maximize the potential profit – striving for quality and gaining precise information at the right moment is absolutely necessary. Remember to increase the returns and learn the art of limiting the risk by trading the right number of shares or contracts in regards to your account size and risk tolerance capacity. Furthermore, it is necessary to find the optimal settings to reach your trading goals. Be cautious about over-optimized trading systems and try to prevent curve fitting at all costs.

Another strategy may be to exploit winning and losing streaks, in addition to evaluating trading using detailed performance statistics that properly account for equity. Trade equity curves crossover four different ways to increase returns and reduce risk. You must assess the sensitivity of your trading results to trade order.

‘Market System Analyzer’ analyzes (in short MSA) “”market systems”” (e.g. the Euro market trade with a moving average crossover system) in terms of their profit and loss records. This program is designed without any complicated programming or lengthy data input requirements. The program allows extracting the maximum amount of information using the minimum amount of input data. Moreover, all analysis features in MSA are easily accessible to both individual and professional traders. The familiar Windows Operating System interface makes the program user friendly. The help feature is detailed and available if needed, to explain how to use each analysis feature of the software.

To get started with this software, all you need is a list of trade results for the trading system or the method you want to improve.

Categories
Taxes

Investments for Income – A Proprietary Property Trading Strategy

So, the best rate of interest you’ll get on a deposit account in the UK is about 4 per cent, and for that you have to sacrifice the liquidity that is ostensibly the biggest advantage to holding cash as you have to commit to at least 3 to 5 years for the full rate. Then let’s also take into account the fact that you’ll probably pay 40 per cent tax (if you’re a higher rate tax-payer), and furthermore factor in inflation eating away at your capital and diminishing your purchasing power by at least 3 per cent for each year, and an investment of £10,000 actually loses you sixty pounds (GBP) in real terms:

10,000 + ((10,000 x (0.04 x 0.6))-(10,000 x0.03)) = 9,940

Let’s look at this in terms of risk and reward. In the UK, a cash deposit of up to £85,000 GBP is effectively insured by the government – so one might consider it as risk free. But that risk-free investment will lose you £510 GBP. Let’s then move right to the other end of the risk scale and look at equities, where it has been proven time and time again that the value of shares can fall to virtually nothing overnight, and an investor can lose literally all of his or her invested capital. What kind of reward do we get for taking this huge risk? Well, not a lot. A recent report showed that a portfolio of UK equities generated a compound annual growth rate of just 0.96 per cent for the past 10 years.

Well that’s confusing! Those ‘in the know’ have always told us that a bigger risk equals a bigger return – or something like that, but it would appear that this is imply just not the case. For example, I can buy a property from a distressed seller with a 30 per cent or greater discount to market value, I can then spend a little money cleaning it up, and I can then sell it closer to market value and take the discount as a capital profit. And if I do my research and buy the right property in the right area, I can do this 5 or six time a year using the same seed capital. So in this case my £85,000 earns me a net return (after capital gains tax) of 14.4 per cent every time I buy and sell, which means I earn a whopping 72 per cent per year if I manage to trade five properties over 12 months.

So for this I must be taking huge risk, right? Well, let’s look at that for second. Firstly, property value might fall, but I have bought at least 30 per cent below market value, so property would have to fall by ANOTHER 30 per cent before I lost any money. Secondly, I might have problems selling each property. This is quite true, I might, but if I set my business up properly then I’ll secure buyers before I even acquire the property – and there are ways to do this.

Look, this isn’t a cure all solution to investing, there are risks, but the likelihood of losing money in the long-term is slim, and the opportunity to generate a profit that you will NOT find at any other time than in the unique circumstances of a distressed property market is obvious.