Monday’s Results: Price fell below our buy level before the open killing the trade. No entry on the short idea.

Quick Tip: Set Your Payday

If you’re like most retail traders you are focused on growing your trading account so you can increase your risk and ultimately your expected reward. Taking a “paycheck” from your trading account seems like taking a step backward.

The trading account is intangible. The figures on the statement don’t mean the same to you as a tangible reward. Psychologically, you NEED to be rewarded for a job well done. Make those wins REAL.

Here’s a simple formula for getting paid, growing your account, and improving your trading skills simultaneously:

1. Determine your payday (weekly, bi-weekly, monthly).
2. Log your trading account balance at the start.
3. On payday calculate your gain/loss in the account.
4. Pay yourself a pre-determined percentage of the gain. Take nothing if you lost.

If you’re more interested in growing the...

Friday’s Results: The suggested long entry stopped out for a 4.75-point loss (per contract).

Quick Tip: Thought Journal

Documenting all your trade setups, taken or not, is critical to improving results. It’s quick and easy to do. With many strategies the information can be downloaded directly from your trading platform. There is no excuse NOT to have this valuable data.

Then there is the more important information most traders ignore… their thoughts and feelings. Trader psychology author and trainer Dr. Woody Johnson suggests that 80% of trading success is based on your personal psychology. If that figure is anywhere near accurate then you should be keeping what he calls a “Thought Journal.”

Start with the trades you take. You want to make this habit easy to acquire. Immediately after you place the trade log your mental condition. Sharp? Alert? Foggy? Fearful? Describe your feelings. Did you follow ALL the rules? Log the results of the trade afterward....

Thursday’s Results: Neither trade triggered.

Quick Tip: Expectations

“What are you struggling with?” was the question I asked a group of traders recently. One woman said she had expectation challenges. She felt she needed to acknowledge that every trade cannot be a home run, or “10 to 1” as she phrased it.

I respect her self-awareness. Expectations is not a commonly voiced trading challenge. But it is real. You can expect too much and foster disappointment. You can expect too little and minimize your profits. Neither view is healthy for your ultimate results.

If you are documenting all the trades of your strategies (taken or not) then you will have hard evidence and know what to expect most of the time. The challenge arises when the market changes character and you are still “expecting” something different to happen.

In “The Disciplined Trader” by the late Mark Douglas, he identifies nine critical trading skills.

#6 - Learning...

Wednesday’s Results: Neither trade triggered.

Quick Tip: Steps

Without goals people drift through life never achieving their true potential. This is not opinion but documented fact from numerous psychological studies. No goals? No progress.

Small and “reasonable” goals are typical for most people if they bother to set goals at all. Yet, they require the same attention as big and “audacious” goals. Really. But there is a difference in the path. The execution.

You’re reading a trading blog so let’s assume you want to achieve the goal of being a consistent, profitable trader.

1. Ignore the urge to set a small and “reasonable” goal. That may be something like earn $1000 per month from your trading. It’s not enough to keep you trying. You’ll likely quit before you get there because the reward you seek is not compelling enough to you. Why suffer up the learning curve for $1000 per month?
2. Set the big audacious goal first. The...

Tuesday’s Results: The suggested buy at 4237.50 stopped out.

Quick Tip: Turn Losers into Winners

There’s statistical and observable evidence that the population of “successful people” and “winning traders” is much smaller than the population of mediocre, losing, and failed traders.

If that’s the case, then the best lesson you could learn and the surest route to success in trading is to emulate the winners. Copy their successful actions.

Setting aside their actual strategy rules, which you may never be privy to, think about how they handle losses. They have them, too. The answer is almost always their attitude toward defeat and loss. They don’t commiserate, sulk, and quit. They carefully inspect those losses to determine how they can minimize or avoid them in the future. They get up after being knocked down. Every time.

Every loss, failure, or setback is a potential goldmine of a learning experience. The formula is simple but not easy...

Friday’s Results: The suggested buy @ 43252.75 stopped out for a 5.75-point loss (per contract).

Quick Tip: Evidence Surprises

As the sayings go “words are cheap,” “actions speak louder than words.” Your strategy rules should be based on evidence and statistics not intuition and hunches.

In David Aronson’s “Evidence-Based Technical Analysis (Wiley Trading),” he finishes with a case study on how to perform data mining to find “edge” in your rules. The analysis was done one rule at a time. He didn’t connect two or more rules into complex sets. This made the study manageable.

What’s most interesting is that sometimes combining two rules that lose money can create a combination that does have edge!

It would be difficult to research many rule combinations without good software, like TradeStation has. Maybe that should be your next learning project. I can personally attest that a non-programmer can learn their...

Thursday’s Results: The suggested short @ 4504.50 ran 38.75 points to the next level where buying 4465.75 stopped.  

Quick Tip: Simplify

When you meet someone new socially the conversation usually leads to “What do you do?” Answering “I trade the market” usually brings the response “You think it’s going up or down?”

This is an important decision you always make before you trade. Is the asset you’re trading likely to go up or down and for how long? Before you can answer you need to identify the timeframe you’re trading. You can be Bullish long term but Bearish for today and vice versa. You may want to keep a grid with short, intermediate, and long-term timeframes for your Bullish and Bearish outlooks.

Opinion on direction and duration is worthless without evidence, analysis method, or data. You need a formula to ultimately answer the question. There are many. Here’s one that is simple and historically sound....

Tuesday’s Results: The suggested short @ 4414.50 stopped out for a 5.75-point loss (per contract).

Quick Tip: Admission

Five losers in a row yesterday and passed on a few trades that were winners. If this hasn’t happened to you it will. Afterward I received this text from a member of the team…

“I am sorry you took a beating today. You REALLY do lose gracefully. Well done! The worst thing about trading isn’t losing trades, it’s losing trades AND skipping the winners. Our minds play tricks with us on such days.”

So, what are the lessons here?

First, if you’re upset about losing you’re taking on too much risk. Lower your position size.

Second, review your performance. In doing so I realized that one trade did not fulfill all the rules. I shouldn’t have taken it. It was a momentary lack of discipline and attention. Knowing this and admitting it is a powerful tonic for improvement. But you won’t get better if you...

Wednesday’s Blog Levels: Nothing triggered in the day session

Quick Tip: Uncommon Success.

The chart above shows two trades from the Globex session leading into yesterday’s open. You’d call that the perfect night. Two 29.50-point runners from level to level. Set and forget. Wake up happy!

Unfortunately, it’s not common. But it does happen every month or so. As the great Wayne Gretzky said, “You miss all the shots you don’t take.” If you’re not planning a couple of set/forget trades for the Globex session before bedtime, you’re missing some big winning shots.

Oh yeah, sometimes you’ll wake up to the little losers. Missed shots. Small if you’re disciplined. No big deal.

If your trade plan doesn’t have a unique ruleset for the Globex session you should get one. Right here! We’ve recently introduced a new membership, only $99/month with the current coupon code. Just two S&P points. You’ll get all the...

Tuesday’s Blog Levels: Neither trade triggered.

Quick Tip: Embrace change.

Successful investors and traders alike have a rule-based strategy that provides them a financial advantage or “edge.” A combination of fundamental and technical analysis are typical components. Another analysis you can add to the recipe is investor “mood” commonly called sentiment. In other words, do market participants feel bullish, bearish or neutral about the future?

While every region and country has a unique economy, given the volume of international trade those individual economies are part of a larger “global” economy. The U.S. economy is the largest in the world but more importantly for us it is also the last market traded on the daily clock. This allows U.S. traders a glimpse at how the Asian and European markets are trading before our stock market opens.

Many years ago, I developed a simple indicator for world sentiment, which I call the World Index. The...