Trader Talk – November 10, 2011
Ron Lang – MajesticTrader.com
Tom Willard – RevolutionaryTrading.com
Neil Yeager – DTITrader.com
How long did it take you to find a trading method that worked consistently for you?
Ron – 6 to 12 months to feel comfortable with a few strategies. The biggest hurdle is dealing with the headline driven markets. Within 6 to 12 months you can hone in on a few different strategies. The less noise on the chart, the better.
Tom – It took me about 5 years. When I came into this in the mid 90’s, I didn’t think I needed any training. But I was picking the biggest losers. I started checking out fundamentals and charts, then found strictly technical analysis worked best for me. It doesn’t matter how good your technique is, you’re going to lose. When you get a hold of the psychology of it, that’s when you’ll really get better.
Neil – I fall right in the middle of these two guys. It took me a couple of years. I had to figure out what kind of trader I was. I started with currencies then went into futures and equities. I could nail down a trade in 12 months or so, but to figure out where I really felt comfortable, it took me about 2 years.
What advice would you give a struggling trader that feels he cannot succeed?
Neil – You have to get your head screwed on right. You have to have a positive attitude about trading. Accept, understand, and realize that the market doesn’t exist solely to take your money. There’s a 50/50 chance that you’ll be right on your next trade. Track your trades, the metrics of your trades. Understand that if you don’t know what your expected outcome is, then how you can know what to expect from your next trade. Track and journal your trade. Keep up with the reason you put on each trade. It will help you realize why you chose that certain trade.
Ron – Even the most expert traders are going to struggle at some point or another. The mental part of trading is one of the toughest. Trading is at the same level of stress as bomb disarmament. Fear and greed take over while trading, and that fear and greed can alter your trading plan. Move your stops up to just above break-even, so you can at least cover your commissions. Make less trades, make more money. Don’t over trade. If your system isn’t working and you’re following your rules exactly, do a half a trade. And evaluate through your trade journal why it didn’t work. Hire an educator or coach, they will probably charge less than your losses.
If you had to pick one trade idea (can be long or short term), what would it be?
Tom - I go to the market each day with a fresh perspective from the day trading view. The opportunities on some days can be awesome from a day trading perspective. IT is a little more challenging as an overnight trade. The key is to be patient and wait for the best opportunity. Watch and observe, don’t push it. The key point is this: I don’t kill the key profits from one day, by trying to trade the next day when the opportunity is not good. For swing-trading, I want more stability. I think short term, we have some downside here, but if the market will stabilize, we’ll see. Day trading is the bread and butter, from an income perspective. Check out VRTX , it has a lot of potential.
Ron – TAT – we entered this on Tuesday, we have a target at 40 70 ad 42 25. This has been way over bought, its in a strong supply resistance area. We’re looking to target down to around 38-40.
Neil – I’m a shorter term trader, really. The 1220 handle on the S&P looks good.
Ron: Can you walk us through a few factors you look at before buying or shorting a stock?
Typically, on longer swing trades, there are 20 -25 factors that we go through. Most of the picks that we side are within a week or 2-3 days. I love extreme price movements. I’ll look at those and filter them down. Within that I look at the Bollinger bands, if you see weakening volume, you know price is about to turn. Once I identify those stocks, I take it from the top down. What’s going on in the world and us markets, and what’s going on in the sector the stock is in, and what‘s going on in the sector the stock is in. Those criteria will determine whether I’m ready to go in long or short.
Tom: What advice would you give someone who has a fear of losing in the markets?
A fearful trader will sell early when the market is going their way. Also, a fearful trader doesn’t use stops. When you’re in a losing position, the los is on paper, you see it in the journal. When the fearful trader is losing, they hold on, because if they get out, then the loss is real. They don’t sell with hope that the market will turn around and go back up. So now, not only do they have a loss, they have a massive loss. This gets into revenge trading. This is how people can destroy their trading accounts in a day or two. One key thing that I teach, is that you have to realize that trading is an odds game. You have to accept the risk. When you accept the risk, you’ll trade better because you expect the losers. Take smart, calculated risks.
Neil: Can you briefly explain the trade set ups that you look for at the open each day?
I am a shorter time frame trader. My favorite trade is the first couple of hours in the morning. For me it starts with a plan, at least two hypotheses, one for a long trade and one for a short trade. I want to see where we are trading at the open relative to yesterday’s trade at least. This morning, we had a 20 plus handle gap, generally, I will trade into that gap. I do not trade to fill a 10 plus gap. All the market has to do is give me a reason to get short, so we get short. We’re targeting some 31 handles. On a regular day, I would not look for the market to reach those handles. Off the bell, it starts with a plan. One for long and one for short. Relative to yesterday’s range and trade. I want to see where we are this morning on the open, and it gives me an idea what to look for.
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