Seven Rules For Success vs. The BluePrints Of A Master Trader

In this short video Brian Tracy reviews what he believes are the 7steps to success for anyone, no matter where you are currently in life.

Introduction
I heard some sayings some time ago and the more I think about them, the more I see them fitting a trader who has failed. One saying says: 'If you fail to plan you are planning to fail'. Next: 'Proper planning prevents poor performance' (5 P's). And then: 'Plan your work and work your plan'. Wow!

Therefore in my journey - From Virtual Trading to Reality, the more I implement what I now call the 'The BluePrints of a Successful Day Trader', I realized that it is impossible to succeed if a trader does not take the following actions...

Plan!
A trading plan could be very simple and short or very long and complicated. I prefer a simple plan with details. In developing a plan it is a good idea to state your trading goal and then write down what you need to do to accomplish that goal. Incidentally, those writings are sufficient to be your plan. Your plan to become a successful trader includes: become educated about the field of trading, practice trading, and master it. You should be able to simplify your plan so that you have a daily plan as you set out to accomplish your goal.

Work!
Once your plan is in place you must work it otherwise it is useless. To become a successful trader you must master your craft. This implies educating yourself; a lot of practice, more practice and then some more practice. Use the luxury of free virtual trading, and paper trade as if you are trading in a real account. Review your work and find out why some trades go bad as some will always do. Then improve and learn from your errors/mistakes.

Be Patient!
Once you turn on your computer to practice and later to trade in a real account you must avoid all distractions no matter how simple it may be. Stay focus as you seek candidates for trading. Wait for your favorite chart patterns and trade them only. Be focused as a laser beam especially when you are in a trade. You do not have to trade if the conditions for trading are not in your favor. Wait for another day!

Execute!
Like driving, many people get into an accident because of their indecision. Once you have determined you are going to make a trade, make the trade, period. When the trade is over then you can do the analysis that's necessary. Enter and exit the trade as per your predetermined plan. Absolutely no modifications during trading. Modifications are done when you review and analyze your work.

Be Disciplined!
Be disciplined can't be over emphasized. It includes focus, but it goes even further. Your emotions must be managed and have no part in a trade. Be very much aware of fear, greed and what you think. What you feel about a stock has nothing to do with your trade. You must only react to what your charts and indicators etc. are showing. Do not act on what you think but on what is.

Be Consistent!
Before you move on from one stage to the next you must first master that previous stage. Think about doing a long division Math problem. In order to do it, it is important that you can multiply and do subtraction. Once you master multiplying and subtracting then you can move on to dividing. The same can be said for trading. Master a strategy before your move to another. Then, after you mastered a strategy just keep on doing it until it becomes an automatic process to you. Do not change until it fails as it may because of the field you are in. It is good practice to quit trading once you have met your daily goals.

In summary many people like to make money and are intrigue by the stock market. They have heard many good stories about the stock market but have forgotten the many horror stories. What I have discerned is that many want-to-be traders fail because of lack of proper preparation to trade.

All the best and good luck in your trading!

Part III - How Small Traders Overcome Inherent Disadvantages in Day Trading

Gary Ender from Candlecharts.com shows you how to use candlesticks with pivot points for better trading results.

Continued from Part II...

Introduction
I received the following from Yogesh, a very good virtual trader on howthemarketworks.com. He was unable to post it as a response to my blog so he forwarded it to me. It is an excellent commentary so I am posting it in its entirety and I am responding 'in blue' to it paragraph by paragraph with resolutions to handle the disadvantages to small time traders. Here are his comments and my response: 

Tips
1. Select stocks between $5-$15, with high volume and volatility for quick results. Larger the number of stocks more will be gain/loss. Playing short gives double the profit in this contest (with no relevance to real trading).

In real trading you need to know if the stock is shortable, marginable, and if the stock is available for shorting. Direct access trading software do provide this information.

2. Don’t leave any stock position open overnight. At the end of every day as a day trader only cash shoud be in your account. If the stock gaps up/down overnight you will have big losses. Up is good, but what is the guarantee!

I agree totally! This is not applicable to swing/long term traders.

3. Use 2 different browsers (preferably Fire Fox and Int. Exp.) for short and long to save time (for this contest).

I even try this to trade in two portfolios. In doing so you save a few clicks.

4. Up/down trend lines in MACD, rsi2 and crossover of moving averages is good guides to decide buy/sell (Study this at investopedia and onlinetradingconcepts.com.

This site has 5 chart formations they claim that all traders should know. The information is very good: chartadvisor.com

5. All the websites I mentioned here are free.

I agree.

6. Study Doji, Bullish and Bearish Engulfing, Hammer, Inverted hammer, Hanging man, Morning star and Evening star for reversal in price trend in the charts. (onlinetradingconcepts)

These are candle stick chart formations and you may research YouTube for help on these formation also.

7. Especially for Elena, you experience drop of price as soon as you buy, and price rise as soon as you short, because you are buying at the top of the uptrend line and selling at the bottom of down trend line.

In understanding indicators, chart patterns, and candlestick patters you will be able to avoid such mistakes. Also, if what you are doing you are getting the negative result on a consistent basis, then trade against your original intent. For example: If you were planning on buying long, then sell short instead and vice versa.

H A P P Y T R A D I N G

All the best!

Part II - How Small Traders Overcome Inherent Disadvantages in Day Trading

This is a very important video as it explains how to best use our free videos for inspiration and how to safeguard you against too big losses testing out new ideas. For example the use of Simulator will protect your trading capital.

Continue from Part I...

Introduction
I received the following from Yogesh, a very good virtual trader on howthemarketworks.com. He was unable to post it as a response to my blog so he forwarded it to me. It is an excellent commentary so I am posting it in its entirety and I am responding 'in blue' to it paragraph by paragraph with resolutions to handle the disadvantages to small time traders. Here are his comments and my response: 

There are many other things that are different here. So don’t think that if you do well here you could make money in real trading. Mack’s blog has good things to say, and what to do. But he has not told you how to do that and where to find the information. I will try and give you whatever I know and practice.

The above is true, however, I entered some related websites in the comment section of the contests and I will be entering relative links to the blog. As a facilitator, I wanted the traders to do some searching for themselves. Also, I do not share my trading set up and the proprietary indicators that I use. I believe each trader has to choose or develop his/her own set up.

Charts and Portfolio
It is very important to follows the charts and know the indicators. You can find them at freestockcharts.com. Find different indicators that suit you and study them at investopedia.com and onlinetradingconcepts.com. I use volume, MACD 12/26, rsi2, Exponential Moving Averages 6 and 30 (i.e. 6 days and 30 days), Bollinger Bands and Stochastic Fast. You may make your portfolio with freestockcharts.com.

I did share about freestockcharts.com before. I even mentioned their premium paid service called TC2000.com. It is similar to the free version but there are many more options. To subscribe to TC2000 is about $100 per month. I am a subscriber. You can even go to the Worden Brothers website, worden.com and watch free Webinars to learn how to use the software and to understand the different features such as indicators and what they mean etc. 

Selection of stocks
1. Go to barchart.com and under Signals, you will find Top Signal Stocks and Bottom Signal Stocks. Make 2 separate portfolios for use of Long and Short. Choose stocks with daily volume of 500,000 and more only. Below that, in this contest, it will go to delayed orders. Higher the volume more volatile it will be. Lower volume stock price change slowly and keep you waiting for long time for a price change. Next to Signals is Hot Stock topic. It gives the top 10 positive/negative moving stocks at that time. Playing these stocks is very useful in this contest.

I use the scanner in TC2000 or if you use the free version there is a scanner you can use there too. My scanner is real time, auto updating, and the best stocks according to my criteria always come to the top of the results. I simplify my set up as much as possible.

2. Yahoo Finance, under Market Movers, gives most active, %gainers and %losers, that are very good guide for selection of stocks. (Remember the volume).

Gainers and losers are old and after the fact information. But you may use the info for trading second wave movement or the pullback and the comeback. My scanner provide me with all the stocks I need to trade. I only trade one stock at a time and every time I trade have from at least 6 or more candidates to choose from.

3. Its a good idea to keep track of earnings status of financial results. Its reaction gives sure up and down

This may have some benefits to long term traders. I do not trust the stock market. I do not listen to any news, period! I tune out all noise, and I focus as a laser/robot. All the information I need are shown on my chart set ups. I strive to be very, very simple.

4. CNBC will give you an idea as to how the market is going to open that day at opening. So you can select long/short play.

This may have some benefit to swing traders or even some day traders. I am a scalper. See response to #3 above.

Continue on Part III...

Part I - How Small Traders Overcome Inherent Disadvantages in Day Trading

Expert trader Linda Raschke discusses her pre-market preparations, technical and fundamental analysis, and important steps traders should take to prepare for each trading day.

Introduction
I received the following from Yogesh, a very good virtual trader on howthemarketworks.com. He was unable to post it as a response to my blog so he forwarded it to me. It is an excellent commentary so I am posting it in its entirety and I am responding in 'blue' to it paragraph by paragraph with resolutions to handle the disadvantages to small time traders. Here are his comments and my response: 

 

With Reference to Howthemarketworks.com Contests

I can't add to your blog. If you think it is fitting can you please include this in your blog that it may be beneficial to the participants of the contests on howthemarketworks.com? I love to share what I know with people, if it can be of any use to them. I would be more than happy if they benefit from my experience.

I would recommend that you all to read Mr. Mack’s blog at mainstreetusa1.blogspot.com . It is very informative. I will like to mention here that this competition is not like what actual trading is. This is a good way of learning different trading methods. There are certain glaring differences between actual trading and virtual trading, which I know about and would like to mention them here.

I agree.

The Contests are Very Different Because:
1. Order execution here is at market price, whereas in actual trading it is on ask/bid price, which may be more or less than 1 cent. So here you can cash-in on 1 cent, you can buy a stock at $8.81 and sell right away at $8.82. But you will have to make at least 3 cents to gain 1 cent, in actual trading.

Some readers may have difficulties understanding this point. In summary, when you trade live, commission ($5) is paid first. Then, the price of the stock you buy is at least 1 cent greater than the price you will get if you sell at the same time. So if you sell as soon as you buy you will loose the cost of round trip commission ($10) and 1 cent by the amount of shares traded (3,000 shares x .01 cents = $30). My goal also include to be able to predict that a stock that I am about to trade will increase or decrease in price by 3 cents or more. To date my predictions are nearly good.

2. There are no worries about buying/selling large a number of stocks here, whereas in actual trading, as soon as you put large stocks on sell/buy, the market will react and the price will change with your order. Your order may not be filled at your desired price. It may not be filled fully , for a long time because there may not be enough buyers or sellers at that time.

To resolve this issue, trade no more than 5% to 10% of the shares currently trading. Also, select only stocks that their current volume exceed 500,000 to 1,000,000 shares. If you still have difficulties, then trade stocks with even higher volume, may be 10 million or more.

3. Stop loss orders put up by small traders, like us, are immediately taken up by market makers and then it comes back to previous market price. Say the market price is 5.81 and you put a stop market order at 5.71, your order is immediately filled at 5.71 and then the price returns to 5.81. Then you feel cheated and fooled. I have experienced this more than 75% of times, before I stopped using stop orders in real trading. In this contest it is fairly dealt and gives you the feeling that it works.

In real trading as a day trader do not enter a stop loss into the trading software you are using. Instead, keep your stop loss in your mind, or draw a line on your chart where your stop loss would be. My stop loss is very simple, if I predict a stock to go up and after I make the trade it turns down, -1 cent, -2 cent; then I would exit the trade; and vice versa for shorting. If I am in this trade, as soon as there is any indication of a red bar appearing in conjunction with my other indicators; I would exit the trade.

4. You can put your short sale orders to use full available money here. But if you do so in actual trading, on a slightest loss you are reminded by the broker to put additional money, lest you’re a/c could be restricted.

This is an easy fix. Just do not use your entire balance to short trade in real trading. Some US brokers require $25,000 in order to day trade others even ask for $30,000, however there are offshore brokers such as SureTrader.com and AllianceTrader.com that only require a $2,000 deposit to open a margin account to be able to day trade.

Continue on Part - II...

Ordinary Trader Turned $700k to $41 Million In 3 Years

Mr. Burns inspired me as virtual trader but Karen has blown me way with what she did in actual trading. Karen went from her day-job as a CFO to an option trader and made 50% profit on $100,000 in  2007. Later she turned $700,000 into $41 million by 2011. This is her story, as told by Karen herself with Tom Sosnoff on Tastytrade.

She took about five years to educated her self about trading. She attended several trading seminars and workshops at that time. During those years she paper traded, practiced her strategies and learned from her mistakes. Her confidence level rose to the level where she thought she could make a living trading. She then took her funds from her broker and invested and managed her own money. In the first year she made 50% profit. Later her previous broker called her to manage his money.

In her own words in summary - "It took hard work and being discipline and the controlling of your emotions."

This video of 24:55 minutes is a must watch!

I can hear the doubters. Well she used options. It can't be done trading stocks. And I can also hear the excuses... This documentary is very good because it shows that there are tremendous possibilities in the markets. What anyone who watches this video, who are interested in charting their own future need to do is to choose the vehicle they are comfortable with and do what is necessary to accomplish their goal.

As you may know by now, I have a plan to be financially successful in the market by trading stocks. Without even knowing about Karen, I see many similarities in her story and my experiences. I am currently near to the end of the practicing stage of my plan. As a result, I will be updating this blog to document my progress as a I take this journey from a day job to a successful trader - from virtual to reality!

You can do it!

I can do it!

Part II - Tips on Making Money Trading Like a Pro

This video shows a simple entry and exit method for swing traders. This strategy can be used in day trading. 5 minute candle will be used instead of daily candles.

Continuing from Part I...

Introduction
The greatest thing about virtual trading is that you cannot loose any money. It is a good place to develop and practice your trading skills and master your craft. To do so tips are very useful. Compare the "10 Golden Trading Rules" in the video in Part I with the tips shared in this blog and make your choice based on your style or method of trading.

Tips 6 - 10

Tip 6. Select or develop an entry and exit strategy which must include stop loss. The chart formations in the previous link can be used in any type of trading. Take your profits, you may reenter a trade if need be. You can't go broke taking profits. But, greedy pigs get fat first and are then slaughtered. There are many trading systems, but you have to choose one you are comfortable with according to your risk tolerance. To succeed in a system you must follow it 100%, and be consistent. Document and learn from your mistakes. You do not have to win a virtual competition to be a successful trader, but use it to help you get better at trading.

Tip 7. You need time to trade. The best time are from 9:35 am to 10:35+ am; and from 2:45 pm to 3:45+ pm. The “+” sign means you are in a trade that is working for you. A few stocks at 9:00 am and after 3:45 pm may explode or gap up or gap down. Sometimes, during the middle period of the day a few stocks may also drop like a rock or go up like a rocket. If you can catch any of these at the right time you will make huge profits in a very, very short time.

Tip 8. Every expert trader needs a reliable scanner or some other method to prepare a list of stocks to trade. A good scanner will inform you about stocks that fit your trading criteria. To get a quick list of stocks to trade, visit the profile of the leading traders in this month official competition at howthemarketworks.com. Create a watch list with these stock symbols and monitor them daily.

Tip 9. Another day trader suggestion is to be focused like a laser beam. Trade only one stock at a time. Buy long or sell short the maximum amount of shares as per your capital balance (in reality trade the maximum according to your brokerage commission/volume agreement). Once you understands the movement of a particular stock you may be able to buy long and sell short this stock at the appropriate time. You will be able to make profitable trades better than 70% of the time if you are aggressive and almost 90% if you are conservative.

Tip 10. Some traders say you need to know the the market sentiment, but I say you need to know the psychology of the trade and what the indicators represent. Obviously, as a new trader if you select a stock to buy long and the market is going up at that time you will have a good chance of making a profitable trade; and vice versa if you sell short. However, as a you get good at this, you will be able to buy long even on a day when the market is down. For example, in my $5,000 virtual portfolio, New 1 Percenters-Jan I only did a few short trades on the 31st of the month and I won that contest with huge gains. In that month I made at least one trade every day.

Finally, if you are a new trader and you move from being a long term or swing trader to a day trader and you implement the above tips you will have a good chance to increase your profits. Also, even if you are an experienced trader, you can use the above to help fine tune your trading and be more efficient in your trading, and be good enough to compete with Mr. Burns in the virtual competition. If you have any difficulties with any of the trading terms used; feel free to research the terms at www.investopedia.com or in Google type for example - “define: scalper” without the quotation marks.

All the best in your trading!

Caution
According to the Federal Trade Commission, 'How-To' Products Promise Extravagant Profits, Few Risks, While North American Securities Administrators Association Says 70% of Day Traders Lose Money. Please visit the FTC at the link above. The information provided on this site is for educational purposes only and does not give trading, investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. Because of the nature of financial leverage and the rapid returns that are possible, day trading can be either extremely profitable or extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Anyone who chooses to use the information here in real trading does so at their own risk and will be responsible for their gains as well as their losses.

Part I - Tips on Making Money Trading Like a Pro

10 Golden Rules of Trading explained by former floor trader, retired hedge manager and President of INO.com, Adam Hewison.

Introduction

The greatest thing about virtual trading is that you cannot loose any money. It is a good place to develop and practice your trading skills and master your craft. To do so tips are very useful. Compare the 10 Golden Trading Rules in the video above with the tips shared in this blog and make your choice based on your style or method of trading.

Recently, there are a few people who have influenced me and made a lasting impact. They include: Nick Vujicic – Life without Limbs; Brian Tracy – Personal Development; and Mr. Burns – one of the most skillful virtual day trader on howthemarketworks.com.  In this article, I will share some trading secrets to help new traders. The information will also help the experienced trader to step up his/her trading to another level.

Long Term Investors vs. Day Traders/Scalpers
Long term investors can’t compete with Mr. Burns. Mr. Burns is an exceptionally highly skilled day trader, paper trading on howthemarketworks.com. He can trade the same stock an investor has in his portfolio and Mr. Burns will take out profits and exit while the investor is waiting for the stock to accumulate more profit. With his increased capital (initial capital + profit) Mr. Burns will make even more money shorting the same stock on the down side while the investor is still waiting for the stock to rebound .

A swing trader does not have a chance either. He will get the same treatment if or when he holds his position for a day or more.

Day Traders/Scalpers
A day trader has a chance to compete with Mr. Burns. A day trader holds his positions for less than a day and if skilled, may be able to compete. However, I believe that Mr. Burns has the uncanny ability to detect when a stock is going to gap up or gap down and he enters his trades before the events occur. Therefore, making huge profits in a short period of time.

Then, there is another group of traders that howthemarketworks.com does not account for. These traders are called 'scalpers'. I believe that Mr. Barns is an extremely advance scalper/day trader. On the site, he has two portfolios of which he is in first place in each portfolio. He also trades a few days in each portfolio and then rides off into the sunset, may be playing golf or making real money.

I can be categorized as a scalper. But, I refer to myself as a 'Momentum Minute Trader' tm. I trade from 1 – 25+ minutes per trade. I work full-time, so my time to trade is very limited. However, Mr. Burns by his performance has inspired me to step up my trading and I made huge profits in one day virtually trading one stock. I hope that every trader who reads this article will refer to themselves from now on as a 'money making trader' instead of a long term investor, a value investor, a swing trader or a day trader etc. Meaning, that they will become whatever trader that is necessary that will help them make money.

For new traders to increase their profits; and for experienced traders to step up their trading they need to implement the following tips. These may give them an opportunity to compete with Mr. Burns; but most importantly, make them better traders.

Trading Tips 1 - 5
Tip 1. Every trader must have a trading plan and task/strategies to implement in order to accomplish their goals.

Tip 2. A day trader/scalper has the best opportunity to make serious money in this market environment. However, stock market trading can be highly risky. A trader must be proficient in shorting. In shorting, you could make just as much or more as in buying long.

Tip 3. Trade the lower-priced stocks with large 90-day average volume, 500,000 or more. Buy long or sell short the maximum amount of shares as per your available balance. This will give you the biggest bang for your buck and avoids slippage when you enter and exit a trade. However, in comparing two stocks look at the increment on each chart. Let’s say one chart shows $5.21, 5.22, 5.23 etc.; and the other chart shows $7.71, 7.81, 7.91 etc.; then you are better off trading the $7.71 stock. To simulate real trading stay within the commission/volume range of your brokerage account.

Tip 4. Trade the most volatile stocks with the largest price ranges. This gives you an opportunity to make a lot of money quickly, your potential to loose also increases. Disregard news, stock tips, fundamentals etc. Just focus on the stock charts. Charts reveal all you need to know about a stock in order to make money. Could you imagine traders chatting about AAPl, $457 and GOOG, $754? I traded virtually KERX, $8.49 a few days ago and made huge one day profits when my portfolio balance was about $50,000. I traded virtually RIMM, $13.78 for part of the day and made very large profits also – need I say more?

Tip 5. Become a pro by practicing and know the movement of Exchange-Traded Funds, ETF’s. Some ETF’s goes up when the market goes up and goes down while the market is going down; example: XIV. Other Contra-ETF’s goes up during the time the market is going down and goes down when the market goes up; example UVXY.

Continued on Part II...

Caution
According to the Federal Trade Commission, 'How-To' Products Promise Extravagant Profits, Few Risks, While North American Securities Administrators Association Says 70% of Day Traders Lose Money. Please visit the FTC at the link above. The information provided on this site is for educational purposes only and does not give trading, investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. Because of the nature of financial leverage and the rapid returns that are possible, day trading can be either extremely profitable or extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Anyone who chooses to use the information here in real trading does so at their own risk and will be responsible for their gains as well as their losses.