The NASDAQ index is now in thin air and appears to be waning in strength. In my new video I show exactly what I think will happen to this market.
Unlike the Dow and the S&P 500, the NASDAQ index has reached unsustainable levels. This is a dangerous area for this index to be in and we would not be surprised to see downward pressure coming into this market later this year or into 2010.
As always our videos are free to watch and there is no need to register.
There several emini contracts out there to day trade, and I have been deluged with mail asking me why I just trade these two indexes. How about the other emini contracts?
It is a fair question.
In some of the postings on this blog you will see an important admonition: Day trade one contract with consistent success before you start trading with real money. I think that is an important consideration when learning the emini contracts.
I am intimately familiar with these two stock market indexes, as they have been an important part of my life for quite a while, and I am very comfortable with the price action in these two contracts. I might add, as an aside, that the NQ contract is a wonderful contract to learn.
That being said, I feel most comfortable with the ES and YM contracts because I am familiar with them. The ES in particular, because of the heavy volume (which results in wonderful liquidity) is a favorite of mine.
I have yet to experience slippage in the YM, though, when trading less than ten contracts and I feel confident in saying the YM is an easier contract to trade than the ES. I’ve had numerous novice traders tackle the ES from the onset and had less-than-satisfactory results. But when they switched to the YM, their luck changed along with the results. I just think the YM is far better starting point than the ES.
There are all sorts of anecdotal theories on why the YM is easier to trade, and none are definitive. Suffice it say it is simply easier and less subject to unusual movement at the odd moment, which is not to say that you don’t have to trade a YM chart, you had best pay close attention. But once you have found your groove on the YM, it will produce.
I was reading an ezine article this morning and it went through a laundry list of things required to be a day trader. I suppose the author’s system might very well work, but it certainly seemed awfully labor intensive to be truly successful. It also was very capital intensive and relied upon the trader’s ability to forecast directional market moves. Yikes!
Step 1.
Decide what you want to trade. I try to trade the most highly leveraged investments I can find because it maximizes my return. For me, that would be index futures contracts. They are liquid, accessible and trade very much like equities. They are also highly leveraged, which gives the trader great potential for profit, and conversely, great potential for loss.
Step 2
Start with the YM contract, I believe it is easier to trade than the ES contract. Don’t start trading with real money, use a demo account and paper trade. You will need to learn a system to trade, and I have made some videos that hint at my trading technique but plan a launch of my entire system in the near future.
Step 3
Once you can trade on paper for consistent profits, it’s time to trade with real money. It is different with real money, and I can’t explain why, it just is. The hallmarks of a good trader are excellent technique and unfaltering discipline. Never take a trade on a hunch. You have a system, use it.
Step 4
Money Management is of prime importance in trading. Never risk more than 5-10% of your capital on a given trade. You should open an account with a minimum of $5000 and only trade 1 contract until you have raised your account balance substantially. Remember, 1 contract.
I have all sorts of recommendations for brokers, margins…etc, but that will come in time. For now, realize that leverage is a disciplined day traders friend.
I use INO extensively to stay abreast of the breaking news and short term, medium term and long term trends in the market. If you are not using their triangle system, you are missing one of the finest charting programs on the market today. It is wonderful. Remember, you have to invest in YOUR OWN BUSINESS to be successful. Most people, though, just can’t get that concept down.
You owe it to yourself to investigate the eye opening features of this program. It’s money in your pocket.
It might surprise you to know that many days I trade I really don’t pay attention to whether the market goes up or down. Does that sound crazy to you? How can you trade and not follow where the market stands at a given moment?
I am scalper, that’s why. I am looking for very short fluctuations in the markets to exploit and earn 12 ticks, or three points. It’s my only goal in trading. I don’t care if the market it going up or down as I am as comfortable being long as I am being short the ES Emini contract. All I seek is movement and the ability to ascertain which way the market may move for the next ten minutes.
I don’t let any trades go overnight, ever.
I don’t let a winning trade turn into a losing trade. (This is sometimes easier said than done)
I have a system, and I never “guess” what the market might be going to do. The variables in my system must meet certain criteria before I trade.
If I don’t feel good about a potential trade, I don’t take it.
I use an 89 period SMA and if the price action is significantly above the average, I only take long trades and, conversely, if the price action is significantly below the average I take only short trades.
I avoid counter-trend trades like the plague, yet I find myself taking the occasional counter-trend trade. Don’t ask me why, I do not know why.
I use the MACD, CCI, Average True Range, DecisonBar and Stochastic indicators in combination to select my trade.
The entry points for the CCI and Stochastic indicators must be in agreement for me to take a trade.
I never break my entry rules.
I pay close attention to pivot points, and Fibonacci Retracement levels. I use these tools as background information, not primary indicators.
I recommend most people start with the YM contract, and then only after a month or so of paper trading where the trader can consistently profit on a daily basis.
There are no born traders, there are well trained, intuitive traders.
My mother thinks trading is for idiots. (I hope she is wrong, on this one)
On the CCI, pay careful attention to the +100 and -100 levels, they are your entry points.
On the stochastic indicator, pay careful attention to long and short crosses.
Never trade without stops, ever. Never trade without stops, ever.
Have a target profit point, too.
I sometimes let trades run, but you often risk giving back all your gains when you implement this strategy. Pigs get fat, hogs get slaughtered.
Decision Bar has kept me out of more terrible trades than I care to think of.
A change in the direction of the divergence line on the MACD might be a good reason to consider exiting a trade.
I never double down on a losing trade.
I’ve never been able to make head or tail of chart formations, as they make no sense to me. They may work for some people, I ignore them. To me, Head and Shoulders is shampoo, not a potential entry point.
While you should profit most days, there will be days when you don’t. That’s okay.
The market stayed well above the 89 period SMA today, so I restricted myself to long trades. There was one beautiful trade that started around R1 and blasted through R2, and that was really it for the day. I took a couple of long trades hoping the market might break out some, but nothing really materialized, and I exited the trade with small gains.
Chart courtesy of AMP Trading, get a free demo account and paper trade.
You can get a demo account, using Ninja Trader and practice to your hearts content at the above referenced link. You should be able to consistently, say five days in a row, post profits before you start trading a live account. Read some of the archives for my particular trading style, or apply a style you have studied to perfect your trading before you go live.
But how do you filter out all of those components of thinking that doom your trading success? Greed, anxiety, anticipation, overtrading, and a host of other psychological factors are the stuff of failure, not chart reading. Really, it’s how you think that will determine your success.
The initial phase of most bull markets is usually based in speculation, though. So you might argue that we are entering a new bull market, except this run up is actually quite extraordinary when compared with initial phases of past bull markets.
With some major announcements in the offing an hour prior to the opening, there should be some extreme volatility early on in the trading session as the traders sort the the meaning and long term ramifications of the GDP and employment numbers.
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