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  Simon Euers 12:09 pm on June 27, 2011 Permalink | Log in to leave a Comment
  Tags: trade recording, traders ( 4 ), trades ( 2 ), Trading ( 9 ), trading records   

  Winning is a Habit: Record Your Trades 

  For some reason most novice traders begrudge the fact they need to keep high-quality trading records. It’s another trap created by believing that trading is easy and every time we put a trade on it’s going to gang busters or, even if this one doesn’t, the next one will for sure. I just need to watch my bank balance going up and up! That’s all I’m interested in.

  When I work with traders, I hear it all the time, why would I waste time on keeping all those records? Or, the platform I use does it for me, why would I bother to do it again?

  Another reason for this apprehension (that amateur traders have about keeping trade records) is the fact that the results of our records represent the black and white, unemotional, truth of our trading AND that can be scary.

  Well the reality is it’s probably one of the main distinctions between professional traders and amateur traders.

  You think about traders working for a firm or a fund. Their trades are completely scrutinised by their superiors. The performance of their trading is analysed based on their trading records. Their entire employment is governed by them. Do you think they would be trading diligently?

  For individual traders, trade recording is one of the most underutilised tools available to them.

  That’s right, instead of looking at trade recording as a chore; you should be looking at it as a fundamental tool you can use to improve your trading. The correct use of trade recording is the main driving force of improvement.

  For instance if you give me 20 of your recorded trades, I can tell straight away weather you will be a successful trader or not. There’s no need to keep bumbling along, wondering if you’re ever going to make it as a trader. I can tell you straight away, just by looking at your past trades. I can also tell you exactly where you’re going wrong and what you need to do to fix it.

  You know if you haven’t got 20 past trades recorded in some form, then what does that say about your trading aspirations?

  But…Hey Simon gives us break I’ve only just started trading!! I haven’t had 20 trades yet!!

  They don’t have to be live trades. Paper trades should be recorded and analysed just like live trades.

  Isn’t it a better concept to paper trade, record and analyse those trades and then modify and improve technique according to the results of the analysis?
  Most people don’t want to go through that process. They just want to jump straight in and start making money…. and lots of it.  Well the statistics tell the story; Less than 10% of the individual traders who come to the market, actually last long enough to learn to become successful traders.

  Noticed I said learn to become successful traders.

  Trading is a skill. It’s behaviour. It can be taught. Assessing and modifying your past actions refines your trading process.

  “Some of the best lessons we ever learn are learned from past mistakes. The error of the past is the wisdom and success of the future.”

  Your records should be a complete log of all trades plus involve current account balances which are used for correct capital allocation.

  There are two components when you are recording your trades.

  1. When a trade is opened the position is should be recorded, as an open position. This is to remove the allocated funds from our trading bank.

  2. When the trade is closed the information is entered which closes the trade and adjusts our trading records and balances accordingly.

  This readjusts our total balance for correct allocation of funds to other trades.

  Here are some things that you may want to record, depending on what you are trading;

  Account Balance, Risk Allocation, Open date, Ticker Symbol, Type (Call, Put or stock), Strike, Expiry date, Option Price, Number of Contracts, Price stops, Profit targets, Total Trade Outlay, Close date, Number of Contracts Closed, Close Price, Amount Received, Brokerage Costs, Profit/Loss on Trade, Return on Trade, and Return on bank.

  So correct trade recording helps us allocate the right funds to each trade and then can be used as an analytic tool to identify and repair possible flaws in our trading routine.

  Make trade recording and evaluating a habit in your trading.

  Simon says Winning is a Habit.

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  Simon Euers 12:08 pm on June 27, 2011 Permalink | Log in to leave a Comment
  Tags: charts, indicators, stock market ( 8 ), Trading ( 9 ), Trading diary   

  Winning is a Habit: Keep a Trading Diary 

  Once you have a trading framework or structure written down it allows you to focus just on your game plan. It gives you some direction on what you should be doing. In other words, if you have a framework to trade options on the US market then there is no point looking at CFD’s on the Australian market or four X trading on currencies, what you want to focus on is options on the us market.

  Now, I’m not saying there doesn’t come a time when you want to expand your trading BUT you should only be doing so once, you have your trading well under control. Too many traders swap from instrument to instrument hoping to find the special secret one that’s going to hit home runs all the time….well to be honest, it just isn’t there. It is also important to note that one is not better than the other. Remember, it doesn’t matter what you trade, it’s how you trade it!

  So you have your over all game plan written down.

  Now a good place to put it is in what I call a Trading Diary.

  A trading diary is basically a recorded journal of all the things you need to watch to trade according to your trading framework. So you have your plan, you now need to observe the market conditions to identify trading opportunities that fit your plan.

  Write these observations down in your diary.

  This should be on a daily basis and it always should be done when the market is closed.

  Doing this type of work when the market is closed allows you to limit the impact of emotions and helps in reading the current market conditions without any bias.

  What we want to do is to set ourselves up for the next trading day, with clear and precise objectives. (If xyz stock hits this price I will do this.)

  But hey Simon, what do we actually look at?

  Well, that actually depends on what market you are trading but here is an example…

  Firstly, I record what I see in my charts. I actually write down what I see in my charts.

  That’s on the Dow, Nasdaq, S&P 500.

  Where is each day’s closing price is in relation to yesterdays?

  Where is the close in relation to the indicators you use? I use moving averages but you may use Bollinger bands. So, you would record where the price closed in relation to the bands. Is it pushing on the top band? Has it broken through the middle band? Or, is it resting on the bottom band?

  I also record the actual relationship of the moving averages I use. That tells me what direction the current trend is in and how strong it is.

  Some other things I record are things like..

  The advancing/declining issues, the up volume and the down volume, the new 52 week highs and the new 52 week lows and the Equity only put call ratio.

  If you are day trading or short term trading, you may do the arms index or the trin.

  I also look at what’s happening with the sentiment indicators: the vix, vxn and the qqv.

  So don’t you think that once you do that, you would have a good understanding of the current market conditions? And, if you do that on a daily basis would it not make trading decisions easier?

  Once I have an understanding of the current market conditions, I can then look at the charts of the open positions I’m holding. I do the same thing in relation to the closing price of the instrument I’m trading. Where is it in relation to my indicators and more importantly where is in relation to my individual trade plan for this trade?

  I write down what action I will take if certain things happen the next trading day. For example, if it closes below my key moving average, or if it hits my profit target or trailing stop I will exit the trade.

  That’s my open positions taken care of…I know exactly what I’m doing no matter what happens the next day.

  I then go through my watch lists and write down any stocks that look like they are setting up for my entry triggers.

  I tend to keep these in three separated columns, bullish, bearish or confused.

  All that information then is ready for me when I go live into the market.

  Do you think that sort of approach takes some of the emotion out of trading?

  Keeping a training diary over a period of time helps us to see what’s happening in the market well before most of the other market participants.

  When you make this a habit it starts to give you an inside view into the market.

  It starts to develop an awareness or sixth sense of where the market is heading.

  Now let me just stop on that point for a moment….It’s very important, in fact critical that we don’t make that awareness into a preconceived notion and get locked into thinking that the market will do what we think it will. That is a trader’s biggest blunder.

  By keeping a trading diary as a habit will help us to look at the market objectively as each day we are adjusting to the actual current conditions as they happen.

  That’s why……

  Simon Says

  Winning is a Habit!

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  Simon Euers 12:01 pm on June 27, 2011 Permalink | Log in to leave a Comment
  Tags: framework, fundamentals, stocks ( 7 ), Trading ( 9 )   

  Winning is a Habit: Building a Trading Framework 

  This first series I have called…Winning is a Habit!!!

  What do I mean by that? What I mean is that ultimately it’s your habits that create your results.To win you need to have winning habits.

  In this series, in each blog post, I want to give you a number of different actions that that you can immediately start to incorporate into your trading.

  You can start these things straight away, even tonight or tomorrow. This post is focusing on Building a Trading Framework.

  This is like your business plan for trading. You should spend the time to write it down. When you write something a whole new commitment to the process takes place.

  So this is a written plan of all the different components that make up your own trading style.

  It needs to address three key elements:

  1.  Indentifying the trend.

  2. Choosing the right strategy.

  3. Money management rules.

  It should Answer Questions like:

  What type of stocks are you going to trade? Are you going to trade just the biggest companies on the Dow Jones or are you going to trade the guys that make up the S&P500? Or, Do you like penny stocks on the bulletin board?

  If you are trading options then what type of options strategies will you use? Will just buy and sell put and calls? Will you use spreads, covered calls or other types of combinations?

  What will help indentify stocks in an uptrend or down trend?

  What indicators are you going to use? Moving averages, Stockastics, Macd’s, Bollinger Bands, Volume, price movement?

  Will you use Fundamentals as part of your analysis or just use charts and technical analysis?

  If you do use Fundamentals, what are the key ones you look for? Is it PE ratios, earning results, current debt or market capitalisation?

  How much money will you allocate to trading?

  How much to options? How much to any one single trade?

  What are you prepared to risk on any one trade?

  When will you cut your losses?

  When will you take a profit?

  What time of the day will you watch the market? What time will you trade?

  How often will you scan for new stocks?

  You need to know the answers to these types of questions. These and more all need to be part of your trading framework.

  They are the Guiding principles that help take out some of the emotions created by traders who simply don’t have a game plan and are more related to gamblers rather than traders.

  Fear and Greed run the market. If we have a trading structure it allows us to think independently of the herd mentality of the market. That’s not saying we going to trade against the trend. We always make the trend our friend, but it is saying we can independently make our own decisions based on our own trading structure and our own framework; not on what other people are saying or doing.

  Once you have a written trading framework, you then need to focus on implementing it into your trading routine. As you go, you can fine tune it but it is important you don’t just throw it out after a short period of time, give up on it and just go and try something else.

  It takes time to build your framework into a routine that you trust, you believe in and which becomes automatic behaviour, or in other words ….. a Habit.

  Simon Says – Winning is a Habit.

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  Michael Brook 2:18 pm on June 16, 2011 Permalink | Log in to leave a Comment  

  Hope – The Killer of Trading Balances. 

  For most traders, the process of trading is a highly individual experience. They sit in front of their computers, weigh up risk and reward, probability, pattern strength and other factors before committing themselves to a specific position. Often they experience a buzz of excitement when they are just about to enter the trade, followed by anticipation of profit or loss.

  Depending on the type of position a trader is in, what happens next can bring on a roller coaster of emotions and experiences. If the trade goes up, then typically positive emotions are experienced. If the trade goes does down, negative emotions are experienced.

  Expert and experienced traders set their stop loss positions and exit their positions with discipline.

  Novice traders or even expert traders who have had a few losses in a row, sometimes hold on to losing positions in the hope that those positions will come back to them. The lower the price goes the more intensely the novice trader will hold on to that hope.

  Often when novice traders are holding on in hope, they will do a number of things. They will research company reports and announcements to convince themselves that staying in is a good thing to do. They will look at comparisons between the fundamentals of their losing stock and those of comparable companies including relative valuations and stock prices. They will talk about the underlying upward trend of the commodity/market even when their position is going counter to the underlying upward trend. All of these behaviours are symptoms of traders attempting to justify to themselves, the hope that the price might come back to them.

  This rarely happens. Hope has destroyed far more trading balances than exuberance.

  From talking to many traders, the common response is that novice traders hang on in hope. This almost invariably destroys large chunks of traders’ trading balances (if not the whole trading balance) and they have to become a super trader in order to make back their losses. Trading then takes on a whole new level of difficulty for which the novice trader is normally unprepared.

  What to do if you are hanging on in hope.

  First, if you find yourself hanging on in hope for a position to turn around, ask yourself a number of questions.

  Has your losing position hit your 2% loss limit?
  Most trading educators recommend a loss limit of 2% of the trading balance. If the loss on any one position exceeds this amount, the position should be closed out. If the answer to the previous question is “yes”, you should exit it immediately.

  Does your trade conform to the rules of your trading plan?
  If you don’t have a trading plan then you should exit all your positions immediately and write one. If you do have a trading plan and it is within your rules, manage the position. If it’s outside the rules of your trading plan, you should examine closely what you are in the trade for.

  Finally, is the probability function with the trade or against it?
  The probability function is the probability that the trade will work. This changes constantly over time, hence it is described as a function. If the probability is against a trade succeeding, such as if you are going long into a falling market, then you should consider cutting your losses. If the probability is with the trade, as when the market is going higher and you are long, then you could be experiencing a temporary retracement and the position may be worth holding.

  If you are still holding the position after answering these questions, then you are probably either experiencing a manipulation pattern or you are clinging desperately to the hope that it will turn around and you will achieve the results you want from that choice.

  As traders, our results come from the combination of how well we are seeing the market and how well we are managing ourselves. By understanding the market and ourselves, we can profit from the limitless patterns that present themselves constantly.

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  Trader Lyn 11:15 am on June 7, 2011 Permalink | Log in to leave a Comment  

  Success Women’s Network Events 

  

  Since January 2011 my company, Stock Course, has been a proud sponsor of the Success Women’s Network. Here are some snaps of just some of the fun things we have been up to lately! They have launched 4 new areas throughout Sydney and on the Gold Coast. I was also lucky enough to be the guest speaker for the month of may, teaching women about the Art of Covered Calls ( how to rent shares for a monthly income).

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