Forex Trading Methods

LinkMarket.net

2005-04-01T05:46:00.000-08:00

#1 Free Link Exchange Directory On The Web - Link Market

I'm using LinkMarket.net to connect you with other relivant websites on Trading Methods, Tools and other Trading Blogs - when I find them.

Watch for the occasional recommendation!

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Weak Japanese Economy

2005-04-01T04:59:00.000-08:00

The Japanese Tankan survey for Q1 came out very weak. The key diffusion index for large manufactures declined to 14 from 22 in the previous quarter, the lowest in a year. The market had been looking for a number of +22/23. None of the underlying categories showed any progress as 4 fell and 2 were unchanged. And finally, with regard to profits for fiscal year 2005, the picture also looks very bleak. Clearly a disapointment for those looking for improvements in the Japanese economy.
Read more Forex News

Japan retreats from US dollar

2005-03-20T06:16:00.000-08:00

Japanese purchases of US treasuries FELL 1.4% to $702 billion in January, showing the fourth monthly decline over the past 5 months on record and confirming that the biggest holder of US treasuries is indeed reducing its exposure to the depreciating currency. Not only the January holdings are the lowest in 6 months, but it is the first time in 4 years in which Japanese holdings registered such frequency of monthly declines in a concentrated period of time.

The data from Japan suggest that the latest articulations from PM Koizumi regarding diversifying currency holdings was not a verbal misstep but a preliminary alert to what will prove to be a prevailing trend in the future as Japan seeks to reduce its exposure to Treasuries, currently about 0.1% of GDP. Thus, a gradual Japanese retreat from US dollar securities into non-dollar assets is inevitable in order to avoid massive losses on the central bank’s US dollar portfolios.

Source - www.forexnews.com

FOREX Definitions and Basics

2005-03-12T04:58:00.000-08:00

"Foreign Exchange" is the simultaneous buying of one currency and selling of another. Currencies are traded in pairs, for example Euro/US Dollar (EUR/USD) or US Dollar/Japanese Yen (USD/JPY).

Approximately 85% of all dailyforex transactions involve “the majors,” which include the US dollar, yen, euro, British pound, Swiss franc, Canadian dollar, and Australian dollar.

As a matter of convention, the dollar-yen exchange rate is expressed in yen per dollar. Hence, an increase in this rate indicates an increase in the value of the dollar versus the yen. In contrast, the euro-dollar exchange rate is expressed in dollars per euro. Thus an increase in this rate indicates a decline in the value of the dollar versus the euro.

Why Trade FOREX?

2005-03-12T04:54:00.000-08:00

WHY TRADE FOREX?

24-hour trading: Traders benefit from the ability to respond to breaking news immediately, day and night.
Superior market liquidity: More than one trillion dollars are traded every day in the FX market. The sheer volume of this market helps ensure price stability, as well as less gapping and price slippage.
Narrower dealing spreads: Normal bid/ask spreads are five pips or less, much tighter than a typical stock transaction.
No uptick rule: It’s easy to establish both short and long positions.
Increased leverage: Firms offer traders a 2% margin, compared to a 50% margin for equity markets.
No commissions or fees: Overall, FX has much lower transaction costs than equities or futures — an important point for active traders.

New Forex Trading Resource List

2005-03-09T09:34:00.000-08:00

Updated and refreshed with additional Forex Trading Listings!

www.futures-trading-primer.com/forex_trading

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Money Management Solutions

2005-03-05T08:12:00.000-08:00

Credit Card Applications - Student Credit Cards - Credit Repair - Secured Credit Cards - Credit Card Resources

Never Let Your Guard Down

2005-02-06T10:55:00.000-08:00

A trader must know and accept what the markets can do on the damage side to your equity, to your mental piece, and to your self esteem. You should expect that every day is a big suprise in trading. You must plan for any suprise before any trade is put on.

You can never let your guard down in trading. You must always know what the next step is for any situation. If you rehearse your cirteria for a trade, it can become second nature - just like driving a car becomes a subconscious effort for you when you are proficient at it.

Because you can never control what the markets will do, or how the order is entered in the pits, when a large fund will take profits, or enter a new position - you must start out with a trading plan that will take every angle that is important into account.

As commodities futures traders, we are not just looking for a few extra bucks to spend on a vacation - no, we are looking for returns in investment that would not be considered fair in any other investment. We are looking for the big return - that involves big risk.

Trading is a loser's game. You must learn how to lose. Expect it. Prepare for it. The biggest loser who loses small will continue in the game!

If you start out expecting the adverse market moves, and plan your actions around that, then you are not giving the market the power to control you position or emotions with adverse market moves.

Next - When to get out of a position...

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Futures Trading Forums

2005-02-06T09:58:00.000-08:00

I found a great resource site I thought I'd share;

Check out this great list of Commodity Trading Forums, Chat, Discussion Boards, Bulletin Boards, IRC, Hotcomm and Paltalk Rooms - http://commoditycentral.com/commodity-trading-forums.htm

Today, I clicked through this list and posted to a number of Forums, inviting people to review my blog, and my comments on Phantom of the Pits Gift.

Thank you for visiting, and please let me know if I'm missing some pointers!! :-)

Doug

No Judgement Approach to Trading

2005-02-03T07:20:00.000-08:00

Phantom of the Pits - In trading, rules are not meant to be broken for your own sake. The Rules bring you to a no judgement-type approach. you design your trade program and approach to tradking by keeping the major choice of positions within your program while keeping the confirmation to the market. Your only job is to follow your trade program while obeying Rule 1 and 2.

The rules take away the need to deside what to do during the trading day. You have a good idea of what to expect from yourself at all times, rather than guessing what will take place with your positions.

You will be proven correct with your positions, or you will simply get out of them. You don't stick around and increase your risks if the market has not proven your position correct. It is much better to get out and re-evaluate than to stay in and wait for the market to come back.

In addition, using Rule 1 will allow you to have sanity about your next trade. Your mental well-being is worth a lot in trading; you can trade well when you are thinking well. Remember it is not bad to be wrong - infact, you can expect to be wrong with, perhaps, 60% of your trades and still make a profit. Rule 1 hastens you to remove a bad trade, keeping the losses small.

The No-Judgement Approach to Trading simplifies your trading life. Knowing what to expect, and having those expectations up front from the entry of your trades greatly enhances your ability to make good trades.

Next - Never Let your Guard Down!

Risk Management

2005-01-28T08:13:00.000-08:00

You must take some risk, but never your maximum.

Rule 1 protects your initial entry position. Rule 2 protects your equity by ensuring that you are smaller when you are wrong.

Because you never place your entire stake at the beginning of a trade, as you are prepared to add to a correct position, you increase the likelyhood that you will be much smaller when you are wrong, and larger when you are right.

This important risk management strategy incorporates two separate layers of protection. Protection from the unexpected events that can take a trader out of the market.

Build these Phantom of the Pits trading rules into your trading plans, and
you can shift the risk away from a losing game, and even past the Zero-sum Game
theory into a profitable way of making a living.

Next post - Brining you to a No-Judgement type of approach.

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Do you love to be right?

2005-01-28T07:59:00.000-08:00

This is your enemy - to love to be right.

Phantom of the Pits

Rule 2 helps you eliminate the desire to be proud when you are right because the assumption no longer is to take profits right away to show that you are right. Rule 2 introduces the thinking that being right is the beginning of a trade and time to press your winners correctly.

Even before you place a trade, you must have an established plan for adding to a proven position.

Rule 1 plans for exiting the trade unless proven correct, and places the requirement on the Trader to place the orders. Rule 2 demands that you put only a portion of your expected position on at entry and be able to at least double your size when your criteria tells you its time to add, somewhere along the route of an expected move.

Rule 2 is a companion to Rule 1, and, taken together, the Rules tell you to have a complete plan in effect before taking the initial position.

Forex Currency Converter

2005-01-27T04:44:00.000-08:00

FOREX Currency Converter

http://www.nriol.com/resources/forex/

Forex Rates Updated Daily

Barchart.com

FOREX Cross Rates

Forex Symbol Key
AUD => Australian Dollar
CAD => Canadian Dollar
CHF => Swiss Franc
EUR => Euro
GBP => British Pound
JPY => Japanese Yen
NZD => New Zealand Dollar
USD => United States Dollar

World Currency Rates

2005-01-26T19:49:00.000-08:00

http://www.fxstreet.com/nou/dolargran.asp

World Currency Rates

U.S. Dollar - Major currencies

USD/EUR
USD/JPY
USD/MXN
USD/BRL
USD/GBP
USD/CHF
USD/CAD
AUD/USD
USD/NZD
USD/WON
USD/SGD
USD/NOK
USD/DKK
USD/SEK

Historical Data Foreign Exchange Rates Click here

Re-Think Your Trading Program

2005-01-26T07:43:00.000-08:00

If you don't put only part of your expected position on at the start of a trade, and if you don't have a plan for adding to your position - prior to entering the market - then you must re-think your trading program.

This is not expected thinking, without proper planning. Remember, Rule 2 will not show itself to you after you have made mistakes in the market. You will only learn the benefits of Rule 2 by experiencing the positive effects, or by careful reflection on the hidden benefits of using Rule 2.

Consider the favorable side of adding to positions when they are
correct;
Reinforces the correctness of your thinking
You are larger when correct
Prevents over-trading
Reduces the desire to be right

You must know why and how to press your winning trades before you will ever be able to incorporate the idea into your trading plan. Correctly executing these rules helps reduce the statistical risks of trading, but also guard against emotional risks in trading.

Next Post - on the Desire To Be Right, and how Rule 2 protects you from your own Ego.

As an aside...

2005-01-25T10:28:00.000-08:00

I'm supporting a new blog http://toolsandhardware.blogspot.com/

and this one too! http://after-retirement.blogspot.com/

Under-Funded or Over-Trading?

2005-01-20T04:38:00.000-08:00

Any time you trade a plan, you must determine the size of the position you wish to establish. Consider the total size of your position upon completion of your position entering. With Rule 2, we should be twice as large, or more, when you are right than when you are wrong - so be sure to work that into your trading plan from the start.

Anytime a trader does not incorportate a plan to add to winners, they may be under-funded, and unable to margin the additional positions. Over trading on the origional position is actually the problem from the start. If you risk it all on your initial position being correct, you will be defeating the trend-following usage of Rule 2, and are trading like a day-trader.

Remember, it is the nature of trading, and life, that you seldom recall the good effects of proper trading as the negetive effects. This will leave a plan to add to winners on the back-burner when it is time to add - unless you fully understand the need for this rule.

Phantom says "I want traders to ask themselves two questions;"

Do you put only part of your expected position on from the initial entry?
Are you planning for adds prior to your initial trade?

If the answer to either of those two questions is no, then you must go back and rethink your trading program.

Find More Trading Blogs

2005-01-20T03:27:00.000-08:00

There are a great number of Traders who are keeping Bloggs. Should you have an interest in a bit of research, perhaps you'll be rewarded with finding a mentor online.

Check out these syndicated feed search engines;

http://www.feedster.com/
http://www.blogdigger.com/
http://www.syndic8.com/

... and as a blogger... you will enjoy this...

http://www.blogrolling.com/

next post - more on Phantom of the Pits and his great trading phylosphies.

Adding Syndicated Feeds

2005-01-19T07:51:00.000-08:00

I'm enjoying the review of Phantoms Gift - but thats not all the preparation I'm doing for trading.

In my persuit of trading strategies that I can manage, I've also created a website on Futures Trading where I gather tips, strategies and best practices along with software, service and product reviews.

Today I added a syndicated feed for the Agricultural sections of the website to provide daily updates.

Corn Links 1
Corn Links 2
Corn Links 3
Corn Links 4
Soybean Links 1
Soybean Links 2
Soybean Links 3
Soybean Links 4
Soybean Links 5
Soybean Links 6

Doubts about a larger position?

2005-01-16T08:02:00.000-08:00

After introducing Rule #2 on the FuturesTalk Forums, a number of years ago, Phantom received a lot of feedback from traders who were following along at the time. Phantom of the Pits summarized it as follows;

There is doubt in traders' minds as to the real purpose of Rule 2 and why they
should be saddled with a rule that requires them to put a bigger position on
than they want to have.

He goes on to say

There are going to be several reasons why a trader does not want to come up with
a plan to add to winning positions.

Why did adding to a correct position cause hesitation in the traders who were studying under Phantom? Again, it's because of the thinking and the assumptions of the trader. Phantom noted that they were putting thier entire position on at the entry... but that's not how a total position is put on in trend trading.

A total position is a series of positions until the complete expected position
is established.

Its important to learn this rule by more than one example - though most traders will need to learn from their own experience - this is not a rule you learn by making a mistake... this is a rule you learn by being rewarded for using the rule.

Strategies for Adding Correctly

2005-01-12T05:06:00.000-08:00

Adding to a proven position must be done correctly without exception. This Trading Rule does not tell you how to add - that is your requirement in the trading plan you develop.

Some examples of adding correctly include different strategies for different trading situations. For instance, a day trader may wait for a proper retracement before adding, while a trend trader might wait for a breakout pattern. And because the day trader is looking to take profit from much smaller moves, probability suggests that the best strategy might be to add all postions at once - original and adds - and reduce or remove postions more quickly, using Rule 1.

Phantom suggests the following generality - Trend traders hold larger postions when they are correct while day traders start larger and get smaller when they are wrong. Risk and exposure have an element of time in a position - that is the edge day-traders seek to exploit, while trend traders expect larger profits by smoothing out the swings.

As you can see, adding correctly for a day trader is much different than adding correctly for a trend trader.

Correctly Adding Positions

2005-01-10T18:09:00.000-08:00

Correctly adding to a proven potions must be done so that a pyramid isn't established that will hurt the trader in a minor reversal.

- Phantom of the Pits

Phantom incorporates every means of protecting himself from negetive market turns, even when adding to a proven position, where he recommends that each add to an origional position should be done is smaller and smaller steps. He recommends placing trades in a 3:2:1 ratio. Should you place 6 contracts as your initial position, add 4 contracts for the first add, and only 2 contracts when you add again.

For my own part - this limits the markets that I should be trading, as I plan to start with only $10k. Because my trading plan limits risk by only permitting 5% of my account on an entry position, Phantoms add ratios would direct me to the Mini-Contracts at the Midam. I might be able to start all trades with 2 mini's, permitting me to add one more mini to trades proven correct, and stay within my risk restrictions.

I would have to trade mini's because part of Rule 2 states "without exception".

'Without exception' indicates that it is not an arbitrary decision on the traders part whether to add or not. The rule, Phantom says, makes no exception on adding to correct positions. The intent of Rule 2 is twofold:

Reinforce your correct postion in your thinking
Increasing the size of your postion when you are correct

Next post, I'll review a number of methods for adding to a correct postion - depending on your trading plan.

Rule Number Two

2005-01-10T05:25:00.000-08:00

Phantom of the Pits states his Trading Rule #2;

Press your winners correctly without exception.

Cutting your losses fast is only one side of the coin in trading. Phantom believes that without Rule #2, trading would still be a losing game because you never get an opportunity to recover from your losses. Rule #2 helps to ensure that you have a larger position when you are correct.

"Correctly" in Rule #2 means you must have a qualified plan for adding to your position once a trend has established itself. The add criteria will differ according to your trading plan. Day traders and trend traders look at the market in different time-frames - the add criteria would be very different for both strategies.

Rule #2 is important because it keeps you in a winning trade, and it impresses upon your own thinking about having a correct postion initially. As we spoke of earlier, most traders want to take their profits to prove they are correct - its human nature to think of getting out before the market turns and takes away any profits. But human nature is not often proper trading technique.

Consult with your Broker

2005-01-09T10:26:00.000-08:00

T h e r e i s r i s k o f l o s s i n f u t u r e s a n d s t o c k t r a d i n g . C o m m e n t s l i s t e d h e r e s h o u l d n o t b e t a k e n a s t r a d i n g a d v i c e . P l e a s e r e f e r t o a p r o f e s s i o n a l B r o k e r

The thinking of the Winning Winner

2005-01-09T07:03:00.000-08:00

Its a winning trade. This time we review the thinking of a winning trader.

The winning trader uses Rule #1 to get out of trades that are not proven correct, and feels the sting of big losses much less often. They don't feel a fear of loss-of-profit when holding a winning trade - just the opposite! Instead, they feel relaxed when a trade is in the black, and fearfull when a trade is in the red!

Now that the market has proven the trade correct, the winning trader will look to take further advantage - and add to the position.

As you see in all areas of life; As a man thinketh, - though the two traders may have executed identical market fills, it is their thinking that determines where the trade goes. Generally it may not be the intelectual training that is undeveloped, but the emotional quotient of trading that needs greater awareness. Fear and Greed are the two primary motivators, and the successful trader has a better perspective and awareness of their own emotional reactions.

Through the next several posts, I will review and paraphrase Phantom of the Pits Rule #2

Press your winners correctly without exception.

until then...

The thinking of the Winning Loser

2005-01-08T05:39:00.000-08:00

Its a Winning Trade! A trade that was profitable from the start causes a very different thought process to unfold in the minds of Losing and Winning Traders.

One or two factors weigh on the desicion making of the The Losing Trader that cause them to take profits early - and miss the big earnings they always wish for.

While the usual research has gone into reasons for the trade, perhaps the ego has also invested a piece of its identity into the trade... The ego is often boastful - a bragard that leaps on the winning position, takes the profits and runs about to family and friends holding it as a flag on a pole. The pats-on-the-back from family, the looks of envy from friends - seems like the feeling of success...

Or, perhaps our trader has been stung by a holding a few losing trades... and as the money starts to grow, they soon become anxious about the risk of leaving that profit exposed to the market. Fearing loss of profit, the position is closed. Feelings of relief for getting out of the position are soon followed by some celebration and a sence of accomplishment...

Maybe our Losing Trader fell victim to both of these feelings - and removed their profitable positions... just to see the trend continue and much larger profits lost.

The thinking of the Losing Winner

2005-01-07T09:55:00.000-08:00

Its a losing trade. But this time we review the thinking of a Winning Trader.

For the winning trader, the trade will be placed once the research has been completed, and the trader determines that the market has matched the criteria of the trading plan. A prudent stop-loss will also be set.

On the outside, both traders may have placed identical market orders. However, the winning trader doesn't put undue wieght on their opinion of the market. By assuming the trade is wrong unless proven correct, the winning trader is less likely to hold an unprofitable position.

The winning strategy when faced with a losing trade? Apply Rule #1 - Reduce or remove a position unless proven correct.

The Winning Loser takes quick action on trades that are not proven correct, limiting risk and losses, but more important is the built-in protection from the emotional pain of a large loss. Instead, the Winning trader has smaller losses, and new opportunities to seek.

Next, the thinking of the Winning Loser - The Losing trader is now sitting on a winning trade! How does their thinking differ from a Winning trader who is sitting on a winning trade...?

The thinking of the Losing Loser

2005-01-06T19:41:00.000-08:00

Its a losing trade. Its the ego that controls the emotions and thinking of the losing trader.

For the Losing Loser - Once the research has been completed for a trade, the ego places an emotional attachment on the conclusion, and the reasons for placing the trade. The research is sound, therefore we are correct in our expectations for the market. We prudently set our stop-loss at the next lower resistance level - feeling confident, and protected. And more often than not, we end up holding positions because the price action did not confirm our stop-loss signal. When price actions are flat - we sit immobile, reviewing our trading logs, double-check chart patterns, research news on market fundamentals... The ego holds on to the (sound) reasoning for the trade - and teases the imagination with the greedy possibilities... ... Until, alas, the stop-loss is hit, and a bigger loss is taken. Then, of course, the ego can point to a dozen reasons (outside of ones control) that caused the unexpected doom of the trade.

Press Your Winners Correctly

2005-01-06T18:56:00.000-08:00

I've reviewed Rule #1 for a number of posts now. It's importance can't be understated. But now its time for comments on Phantoms Rule #2.

Press your winners correctly without exception

"Sounds pretty elementary," says Phantom, "buy correctly is the key!"

Rule 2 does not mean just because you have a position in your favour that your must now add to that position. "Correctly" in Rule 2 means you must have a qualified plan of adding to your position once a trend has established itself, Phantom remarks.

He goes on to comment... Most traders are conditioned to want to take a profit to prove to themselves that they are right - and this reminds me of a comment in the book Remeniciance of a Stock Operator; the fear and greed are the two main emotions, and they are used differently by losing traders than by winning traders.

Losing traders fear loss of profit - and take profits early, greed keeps them in a losing trade, hoping to make money if they hold on... Winning traders fear a loss and exit losing trades quickly, and become greedy when proven correct, and add to their position.

In another perspective, I'd like to review writings about the emotions and thinking of the losing trader vs the emotions and thinking of a winning trader. I've compile quotes from a number of sources, and organized them into the following;

The Losing Trade
The Thinking of the Losing Loser
The Thinking of the Losing Winner

The Winning Trade
The Thinking of the Winning Loser
The Thinking of the Winning Winner

Trading is not easy

2005-01-06T18:23:00.000-08:00

Trading is not easy because you must control your own positions.

Most traders put on a position, set a stop-loss, and sit back, waiting for the market to do its own thing. And most traders lose money trading commodity futures.

It is your job to know when your trade is wrong - don't leave it to the markets to tell you.

Trading is NOT Gambling

2005-01-06T16:58:00.000-08:00

Trading is not a game - treat it as a business.

Change your behaviour to trade the method that gives you the best possible long-term outlook.

Treat each of your trades as a business transaction where you want only the best products in stock for the least possible amount of time in order to have the maximum profit with the least chance of failure.

Reading the works of Phantom of the Pits and creating this blog is an excellent way for me to prepare myself for real world trading again. Phantom points out that the best time to learn about trading methods, is when the market is closed!

Hope you are enjoying my excerpts and comments on Phantoms Gift!

Keeping Losses Small

2005-01-06T06:38:00.000-08:00

Critical to your trading success over time, is a deep understanding of Rule #1. You will better understand the rule the more you read it.

The most comfortable trading strategy provides rules that protect you from the demoralizing effects when you have a position that is proven wrong. If you are hoping the position is correct, it obviously wasn't proven to be correct.

Rule #1 forces you to take action without exception if the market does not prove your position correct.

"Most traders do the opposite," says Phantom of the Pits "and do
nothing until the market stops out the position, and then it isn't their
decision to get out at all - its the markets decision to get you out."

Phantom goes on to assert that Rule #1, over time, has proven to be the rule which keeps the losses small and keeps a trader swift and fast to take that loss.

Rule #1, again;

In a losing game such as trading, we shill start against the majority and assume we are wrong until proven correct! (we do not assume we are correct until proven wrong)

Positions established must be reduces and removed until or unless the market proves the position correct. (we allow the market to verify our correct postions)

Looking for more XML feeds

2004-08-26T10:37:00.000-07:00

I've been posting in all the futures trading forums that I can find, looking for a lead...

If you know of a futures trading firm or advisor who offers snips of their news and commentary in an XML or RSS format, please post the details here!

As a re-beginning trader, I've been adding all the market news feeds I can find into my my.yahoo.com homepage for easy monitoring.

And as a webmaster, I'd like to include specific feeds in different sections of my websites.

Any information would be appreciated.

AND if I don't find a source that offers this function - I'm just going to have to build one.

Better Understanding

2004-08-26T07:47:00.000-07:00

As I move along, reading about Rule #1 from Phantom of the Pits, I can see similar themes to the writtings in Remenisince of a Stock Operator. The same themes about human nature, and how our thinking changes under the influence of fear, greed and hope.

Phantom stresses - you will better understand Rule #1, the more you read it (think it, practice it). This Rule is very critical to success in trading.

A person's thinking when the market proves a trade to be bad is counter to what is productive... if you don't take an early loss - it becomes more difficult to take the loss as it gets larger. By using Rule #1 properly, you don't have to face the demoralizing effects of the market when you have a proven wrong position.

Most traders keep their postion until it proves to be wrong for them.
I say don't keep any position unless it proves to be correct.
- Phantom of the Pits

Quotes and paraphrases - my working book-report and thoughts on Phantom's Gift, as I prepare to trade again.

When to take no action

2004-08-25T22:06:00.000-07:00

Rule #1 is a more comfortable strategy because you must take action - without exception - if the market does not prove the trading position correct.

Don't wait for the market to tell you when the position is wrong. 'How many traders ever hoped their trade wouldn't be proven wrong, instead of hoping it was correct?' quips Phantom.

He further identifies that most traders do it the opposite way - by doing nothing unless they get stopped out.

Your thinking should be: When your position is right, you have to do nothing - instead of doing nothing when you are wrong!

Phantom stresses that, over time, Rule #1 has proven to be the rule which keeps the losses small, and keeps a trader swift and fast to take that loss.

Options Trading Strategies

2004-08-25T13:54:00.000-07:00

New Options Trading Strategies for Reducing Risk and Multiplying Profits

Learn How to Trade Options Like the Pros! Click Here

How to avoid Whipsaw

2004-08-24T18:58:00.000-07:00

“Whipsaw” is a word that strikes fear into the heart of every trader. The smaller your account the more afraid of being whipsawed you are likely to be. Whipsawing is when the market fills your entry order and your stop loss exit order in the same session, effectively stopping you out for a loss. So what can be done? Is there anything the small trader can do to avoid getting caught in these types of trades?

Click here to find out more about How to avoid Whipsaw.

Removing a Position

2004-08-24T16:47:00.000-07:00

Phantom of the Pits shines the light on the little-know sublties of trading truth... he says;

It is important to understand that we are saying the one criteria for removing a
position is; because is has not been proven correct. We, at no time, use as
criteria for removing a position, the fact that the market proved the position
incorrect.

Phantom goes on to explain

If the market does not prove the position correct, it is still possible the
market has not proven the position wrong.

If you were to wait to exit a trade until the market proves the position wrong, you are wasting time, money and effort, hoping the trade is correct, when it isn't. Remove the position early if it doesn't prove correct, Phantom advises.

Recall the first protective role of Rule #1 - to protect the trader from unexpected, catestrophic trading days, as I had likened to a seat belt in a car crash, or as in Phantom's analogy of looking both ways before crossing the street at a street light.

Now, there is a second level of protection offered by Rule #1. Cutting the costs of trades that float... not quite profitable, but not enough of a loss to justify removing the position.

Next... Let the market stop you out

Let the Market Tell You

2004-08-24T01:48:00.000-07:00

Phantom says - the correct way to control positions is to only hold them once they prove to be correct.

While it's wise to let the Market tell you when you are correct, you must never let the Market tell you when you are wrong. You must be in command of telling yourself when the position is bad.

If your trading plan, and your thoughts about your trade focus around the profit you might make, you are likely missing the detailed strategy for the losses you want to avoid. There is so much belief structure that underlies correct trading - that I was unaware of... and that I now seek to incorporate into my thinking.

Subtle things.

Like Rule #1 States: Positions established must be reduced and removed until or unless the market proves the position correct, while most traders do the opposite by removing positions only when they are proven wrong.

I remember again, the ego. The assumtion that I am investing, or putting my money down when the odds are with me, and, because I really believe in my position... I hold a trade that is losing. Hope. Fear. Greed.

Trading!

Starting Assumptions in Trading

2004-08-24T01:02:00.000-07:00

Remove postions when they are proven wrong, or, remove positions unless the market proves the position correct? Is this a reflection of short term trading phylosophy vs long term strategies? Is it the ego, and it's influence in trading reactions?

Phantom provides deeper details of his experience that makes the reasoning behind correct trading assumptions very clear. Put together, the phylosophies of his first trading rule can act as a seat belt in trading - protecting you from the suprize side, reducing the influence of hope, fear, greed and the ego.

By making the market prove you correct in order to hold a position is acknowledging that trading is a losers' game and not a winners' game. If you only remove your position because the market proves your wrong, you are acknowledging that trading is a winners' game.

... although I can't find the reference quickly, Reminiscences of a Stock Operator - a must read for all traders, covers a similar theme - but uses the contrasts between fear and greed...

Paraphrasing; --

The unsuccessful trader will take profits early, fearing loss of profit, while
holding losing trades justifying by ego and with hope. Profitable traders
cut losing trades fearing loss, and hold profitable trades based on greed.

-- and, without the quote at hand, I know I'm missing something in the translation.

Next...

What your thinking should be.

Trading Agriculturals

2004-08-23T07:59:00.000-07:00

The Agricultural Futures Markets are heavily traded and very liquid. The Seasonal aspects of Corn, Soybean, Wheat, Oats and Rough Rice offer plenty of opportunities for the shrewed investor.

S o y b e a n C o r n

Another Forex Source

2004-08-22T13:46:00.000-07:00

Check out my Mirror Blog

http://spaces.msn.com/members/forex/

How to Control your Positions

2004-08-22T07:05:00.000-07:00

Let the market tell you if your position is good to hold.

Buy low, sell high.

Cut your losses and let the winners run...

We've heard them all before, but once you understand the practice better, you'll agree

The Trading Plan

2004-08-21T19:35:00.000-07:00

Phantom of the Pits says

How you understand your plan is how you will react to a situation.

Trading is not a favorable game in most circumstances, and that is what we must use as our assumption in trading, Phantom says...

... and it's true. As a beginning trader, I often read, in my excitement, that commodities trading was a Zero-Sum game. For every winner, there is an equal and opposite lossing trade. My rational went on to include...

Gambling is when you put your money down and the odds are against you, Speculating is when you put your money down and the odds are with you.

Phantom points out slippage costs (I didn't factor in when paper trading), as well as commissions to be subtracted from the winners and added to your losers. It is also important to note the fact that the market spends much of it's time in an unpredictable mode (more slippage and commission costs)...

When I was doing my paper trading, my assumed costs were very light, but I didn't factor in the unexpected side of trading - the big move against the expected side of the trade. Of course, when I was trading for real, this happened much more quickly than I had anticipated... I didn't last long enough to feel the pressures of an extended period of unpredictable markets.

Writing this Blog is my means of carefully reviewing each assumption I have about trading - before I trade again. One of Phantoms quotes that rang like a gong for me - and I paraphrase...

The best time to learn about the markets - is when they are closed.

Trading Assumptions to Limit Losses

2004-08-21T07:07:00.000-07:00

Phantom of the Pits offers a number of analogies that help establish Rule #1 into your thinking.

Here's one;

When the walk light comes on, assume there is traffic that will run the red light at each intersection you cross.

Your response would be to look both ways before you cross. Suppose that you looked both ways before you crossed, but each time you cross, there is no traffic running the red light... should you cease to look both ways? Of course not.

This simple example demonstrates what might be a life-saving limit - but you will never know that if you do look both ways each time you cross. You can't know if it saved your life, because you are prevented from finding out by looking both ways before you cross.

Just like in trading, you have to plan for what is possible, and not just for what is probable.

If you were never to look at the intersection until proven wrong for not looking, wouldn't it be too late? It's the same in trading. The surprise side in trading is a possible outcome, but generally not very likely.

...linkbuilder...

Trading Resource List

2004-08-21T07:06:00.000-07:00

Preparing to Lose in Trading

2004-08-20T17:05:00.000-07:00

I've always been moved by the writings of Phantom of the Pits

As a means of preparing my trading system, I've attained Art and Phantom's permission to paraphrase his teachings.

Rule #1

In a losing game such as trading, we shall start against the majority and assume we are wrong until proven correct! (we do not assume we are correct until proven wrong)
Positions established must be reduced and removed until or unless the market proves the position correct! (We allwe the market to verify correct positions.)

While these trading principles seem obvious, there is a lot of phylosophy underlying this statement that one might come to understand... in order to have this trading methodology become a starting point to your approach to the markets, and to life.

The key to being a successful trader is to plan from the start 'what if I am wrong?' rather than to plan for 'what if I am right'.

A trader puts on a trade because they believe they are right, but the successful traders have also planned for the losing trade, and they live to trade another day.

Phantom stresses that in a losing game, such as trading, you have to protect yourself from things that may take you out of the market. In order to trade over the long term, a trader has to avoid the trading mistakes that expose to great of risk.

In order that this trading rule become second nature in all of your trades, Rule #1 must be understood correctly...

... more next time...

www.futures-trading-primer.com

Online Forex FOREX Trading - PRO-FOREX.com

2004-08-20T11:54:00.000-07:00

Online Forex Trading - PRO-FOREX.com: "The Internet broker PRO-FOREX.com allows you to work for 24 hours a day with four major currencies (EUR, JPY, GBP, CHF) against the US dollar on the spot, i.e. according to the current prices on the FOREX international exchange market. "

More Trading Tip Resources

2004-08-19T13:34:00.001-07:00

S t o c k a n d C o m m o d i t y T r a d i n g

All sorts of updates

2004-08-19T10:32:00.000-07:00

Both of my Futures Trading sites have tonnes of new content added.

Futures Trading Primer and Trading Methods

Check them out for vast trading system information listings

LinkBuilder

Forex

2004-08-18T18:35:00.000-07:00

Forex Trading Signals

Forex Trading Methods Blog

Trading Methods

FREE mini-forex course

2004-08-18T16:58:00.000-07:00

The new Leading Professional Currency Trading System shows you how to trade currencies like the Pros!

Be sure to check out Peter Bain's 5-Day Mini Forex Course, Past Trading Examples, and future Newsletters.

LinkBuilder

More Forex Info

2004-08-18T15:32:00.000-07:00

With all the Global policy and government change, the craze in oil prices, the threat of war and the insane deficit spending by the US Government, the has been a great deal more interest in Foreign Exchange Currency Trading.

Trading Methods that offer signals matching the many volitile world changes can be worth a fortune.

Trading Forex Options

2004-08-18T08:41:00.000-07:00

Turns out I have the Track N Trade Pro plugin module for trading options at hand... and I'm going to dig though some files to find the first CD of software.

In the meantime, I keep an eye on Foreign Exchange Currency rates with some basic free online chart services.

Every trader should have http://tfc-charts.w2d.com/ bookmarked!

LinkBuilder

Accumulating Wealth One Tick at a Time

2004-08-17T19:31:00.000-07:00

Accumulating Wealth One Tick at a Time

I've just received my copy of Track 'n Trade Pro on CD - (I like to have hard copies). While I'm used to MetaStock, the Video Tour sold me on the product... thought I'd give it some time on the treadmill.

You can also read a few details here

http://www.futures-trading-primer.com/track_n_trade_pro.asp

Forex Trading System

2004-08-17T10:21:00.000-07:00

New information on all aspects of Forex Trading

Check out this Currency Trading Video Course - it shows you how to stick with the very best "bankable trades," and enjoy as close to a "sure thing" as you'll ever get. To become a winning trader, you don't have to outsmart anyone, dream up a new strategy, stay up all night analyzing trends, or pay your dues by losing money the first year.

Phantom of the Pits

2004-08-17T09:44:00.000-07:00

Phantom of the Pits

Phantom's Gift is not a black box trading system... it's more like a how-to guide for changing your thinking and, thereby, your behaviour. This nearly Zen-like approach, can help the beginning futures trader grow to understand the psychology of futures trading.

There are just 2 main rules in trading, required to be successful, Arthur L. Simpson relays from the Phantom of the Pits. The principles of the Phantom's approach to trading can be applied to any trading system, just as the principles of Zen can applied to any theological view. What I mean to say is, if you want to be a successfull trader, apply your trading system using the Phantom's rules;

Rule Number One - Assume you are wrong until proven correct
Rule Number Two - Press your winners correctly without exception

http://www.futures-trading-primer.com/phantom_of_the_pits.asp

Forex Trading Course

2004-08-17T09:41:00.000-07:00

Professional trader and author Peter Bain's Video Forex Course demonstrates simple yet powerful pivot currency trading systems used by professional traders.

Read more at www.futures-trading-primer.com