Wednesday, August 30, 2006

Summer is over

Prepare yourself mentally for a change.
The last 4 weeks saw low volume trading with this week showing usually the lowest volume of the whole summer.
Next week everything will change.
After Labour Day the summer vacations are over and everyone will be back in full force, eager to show the market, that he or she is still in command.
So prepare yourself for a different type of trading, maybe start it lighter early next week, so you can adapt to the changed environment.

Tuesday, August 29, 2006


Trust in yourself, in your ability to ALWAYS act in your best interest
Only when you trust your subconscious mind to always act in your best interest, you can start following your trading impulses, giving the conscious mind the task of executioner of decisions already made.
As long as you have to tell yourself at the end of the day, that your trading impulses were often wrong, that you were not able to execute your plan or that you were not able to execute your stop, you will not achive this higher state of trading, where you fly in the market or are in the Zone as Marc Douglas calls it.
But when you start trusting your impulses, you start giving them control, you execute the trade and now remain in control, acting in your best interest, meaning cutting a loser and letting a winner run, then you will notice how over time you allow more and more impulses to be executed.
It helps, if you have the ability to instantly dissect a trading impuls you receive. You don't execute it, but you look on your chart or what ever you use for trading for rational reasons within your trading plan WHY this trading impuls should be a valid one. If it helps you make a picture and write down what you saw, then follow this trade, you have not taken in real time. See, if the impuls was a good one. Never expect 100% winners. We trade probabilities and you have to think in probabilities, you have to see the big picture, the forest not the single tree.
I have come a long way trusting my impulses, trusting my subconscious mind to act in my best interest.
And it's starting to pay off finally, but I can tell you it was a very long way to trust myself, when I had done so much damage to myself earlier, when I actually had no reason to trust my impulses at all just 1, 2 years ago.

Friday, August 25, 2006


Rollover is not too far from us.
And again the questions start appearing in the chatrooms I follow:
- When do we roll
- Shall I switch to December yet
and so on.

I have a simple answer:
Watch the volume in the current frontmonth
and the volume in the new contract.
The moment the volume in the new contract surpasses the volume in the expiring contract, it is time to roll and start trading the new contract instead of the old one.
Always good to let the market tell you what to do.
Have a great weekend.

Thursday, August 24, 2006

Keep your eyes open

Does it matter, if you earn your money with currencies, with the Russel, the ES, with the australian SPI or with Gold?
I don't think so. They all pay a fixed amount of money / tick.
So why do you stick to one instrument, trying to conquer it?
If you can't get a handle on Gold, well so be it. Nothing wrong with that. You don't need to trade it with such a big universe of contracts out there to select from.
Also you need to be aware, that over time some contracts start to be disregarded, are no longer en vogue with the trading community, while others become new interesting trading vehicles.
Look at the australian SPI. A really dull index just one year ago. Sure it pays 25 AUD/ point (about 20USD) but it was moving 25 to 35 points a day. Nothing to excite a daytrader.
Today it moves about 80 to 120 points on average / day. And that is something you can sure use as daytrading vehicle. Of course due to the timezone it trades in, it might be more interesting for you, if you live on the Westcoast or Hawaii, but even for me, living in Germany it is nice to trade just the close, which often sees movements of 20 to 30 points in 15 minutes.

Make it your monthly homework to look at the average daily ranges of a select group of contracts to see, whether some start showing increased volatility while other fall out of favor.

Monday, August 21, 2006

Unfinished business

Sitting in front of your trading desk, you do one or two trades, they are profitable and you start hesitating. You have a nagging feeling in your stomach, you hesitate taking another trade. It might be fear to lose the profits you made, but you think, hey I left that behind, I already decided that I will take a trade, regardless of my earlier profits or losses.

Maybe it’s something else. Do you have another source of income? Most of us fortunatly have, as it makes living a lot easier not to depend on your trading ioncome. But that means also, that you can’t focus 100% on your trading. You might have some unfinished business, which you need to attend to, but decided to put it on the backseat in favor of your trading today. It stays there, giving you a squirmish feeling, as if someone is telling you again and again: go faster, come on, move on, let’s get that behind you,  aren’t you finished yet.

Listen to that voice. Do what has to be done and leave it behind. Come back to trading and you will see, you have no problem taking the next trade.

Thursday, August 03, 2006


Why does it take so long to become consistently profitable in trading?
For most of us, it's thinking in probabilities which is so difficult to learn. Do you expect to have an accident when driving a car, when riding your bicycle, when going to swim. Sure not.
Of course you know, you might have an accident, but deep within, you don't expect it. Even if you drive dangerously or swimm, where you should not. You don't expect to have an accident. You expect to get away, to be a winner.
In trading it's different. Every single trade can become a loser. And your chances often are not better than 50% that this one single trade will be a winner.
Sure in the long run that doesn't matter, as you might have a system, which gives you more winners than losers, which gives you more USD for winning trades than you have to pay for losing trades.

But your subcontious mind is not easily convinced that that will be the case. That this one single trade doesn't matter in the long run. And it has powerful emotions to play with to convince you not to take a loser. There is hope, despair, inability to take a decision, inability to click the mouse button or fear to name a few. But also stubborness, an (unwarrented)knowledge to be right, to know it better than the market. 
And it uses them as it sees fit and all in your best interest or so it thinks.

You don’t have an accident, if your subcontious mind is right.
You won’t get hurt, if your subcontious mind is right.

Only when you can no longer ignore the reality, your subcontious mind accepts defeat. But that might take time. Time you don’t have in trading. Time which will cost you dearly at times.

Take care of your losers, the winning trades take care of themself is a saying in market lore.

And as many of these sayings there is some truth in it. You know about this feeling in your stomach, when you can no longer bear to see this losing trade, when it hurts so much, that you just want out. (A great reversal indicator btw) If you manage to move that point up, if you achive to have that feeling, when your trade is down say 10–15 ticks, then you have done very well, then you have taken a big step towards profitability.

You need to rewire your subcontious mind. It has to think in probabilities, it has to see the big picture and should not see the individual trade as important.