Online Trading Futures
When is a Trade a Good One?
Today is which is a good time to start successfully trading the futures markets for profit ... If you have ever sat around and wondered just how good the trade was that you just made you are certainly not alone. Most people never really realize just how to tell if they have made a good decision. The simplest way to tell is your actual confidence in the decision that you made. If you feel like hiding after making the purchase then the first reaction should be that you made a bad decision. However, if you are eager to share the news with your friends and family then you can typically assume that the purchase you just made was a good one.
The best indicator of just how successful a transaction is does not always have to be measured in terms of profit though. If you are only looking to make massive amounts of money then you could very well end up being disappointed after your first transaction goes badly. Not all investors are going to find instant success in a bottle with the stock market and day trading is much harder than typical stocks. In order to actually find the results that you want, you need to take some time and carefully review your goals. What do you really intend to pull out of the stock market?
For those of you who actively trade (or desire to learn how to trade) the financial and futures markets, there are a lot of other things outside the markets you should be following. But, I guess my bigger message is for those of you that aren’t in the futures markets, whether you trade them or not, the futures markets have a significant impact on what happens in the other financial markets, including forex, currencies, options and stocks. That’s why you should soak up every piece of good trading knowledge like a sponge in a quest to clearly see the bigger picture.
If you are simply looking for a way that you can easily increase your knowledge of how the market works, then even a bad transaction is still a learning experience. If you aim and goal is to never lose any money then losing a transaction or two might seem like a fate almost worse than death. However, if you are careful how you use the experience you will rapidly discover that you are capable of increasing your knowledge and expanding your profits all at the same time. Because of the complexity that is involved in the stock market there are typically no clear cut answers about whether a purchase was a wise one or not.
Trying to decide if you feel that a trade was successful will depend upon your situation and of course, a successful trade for a beginning investor is not going to be the same as a successful trade for a highly seasoned investor. You need to consider that your successes will come in small dosages when you are first starting out. Expecting and demanding large amounts of success is simply not going to get you the results that you really need, nor is it going to be quite beneficial to your overall situation.
Taking the time to carefully evaluate each trade at the conclusion can also be a great way to help you be certain that you are making a correct decision. If you start to notice a trend of bad decisions on your part it can be useful to allow you to see this pattern begin to emerge and then work towards changing it before it become a habit that is impossible to break. These short evaluations can be extremely helpful and can really allow you to be positively certain you are making the right decision. Never live in fear that you are doing everything wrong, a successful transaction can occur even when everything seems to be going wrong, which can frequently occur at the time when you are least expecting it.
Amazing Method for Trading
An amazing method to sharply reduce your risk by staying in good trades, without getting stopped-out. Besides drawdown and risk reduction, it also lets you trade with relatively small stops to avoid large losses. This is a proven and scientific way to drastically reduce risk without significantly reducing profits. It can be extremely effective in sharply lowering risk but still keeping you in winning trades. It has been alleged successful traders try to keep this potentially money-making stop-loss methodology a secret so other traders don't use it!
Usage of stop-loss orders is normally critical to trading success. The most famous trader of all time, Mr. W. D. Gann, said repeatedly in his books and commodity course that it's always critically important to place a stop-loss order on each trade you make. That way bad signals and losing trades will not likely wipe out your trading capital, thanks to your stop-loss order giving you some protection.
Most systems and most trading methods require fairly large stop-loss orders. That is because stops are frequently based on one or more of the following logical (but frequently ineffective) methodologies:
a) Place a stop at a pre-determined percentage of the true daily trading range. For example, if the true daily range or average of recent true ranges (High minus Low, plus any gap between prior close and today's low or high) is say 83 points, then the stop may be set at perhaps 120% of that range or about 100 points. In the Deutsche Mark that equals $1,250.00 stop, plus any slippage that occurs.
b) Another method is placing a stop-loss just under the last swing-low or pivot-low. Note: A swing-low is a low point with higher prices on each side. For example, if last swing-low was at 7650 and price moves up for a few days to say 7750, then triggers a buy signal, stop may be placed just under the low price of the low day, perhaps at 7649.
That also represents a risk of over 100 points ($1,250.00+). Of course, the reverse is applicable on a sell, with the stop being just above swing-high.
c) Use a moving average penetration as a stop, i.e., place a stop on a long trade at just under a simple moving average, perhaps a nine-day average. The trouble here is that if we entered long at about 7750, by the time the moving average is penetrated by the price, the moving average may be well below the market (due to its inherent lag-time), at 7600 or so. That results in a stop-loss at 7599 stop, and a risk of about $1,900.00.
d) Still another approach is to place a stop under last week's lowest price. This method may be even riskier because last week's low may be 7550. That requires a stop of 7549 or lower, and a risk in excess of 200 points or over $2,500.00.
e) Another simple and a totally unscientific approach is known as a "money stop." It involves setting an usually arbitrary stop based on either the maximum money you wish to lose, or stop based on a reasonable sounding number of points or dollars.
For example, psychologically you may not want to lose more than $1,000.00, so you set your stop at a price equaling $1,000.00 loss potential. That number is arbitrary, so it may turn out to be either too small or too large, depending on the volatility and the market involved. For example, perhaps it's too small a stop for T-Bonds when they're volatile, or too large when they are dull. If using the $1,000 stop-loss in the Corn market or another low-risk low volatility market, it may be too large a stop to use.
Q. Is there a better way to set stops scientifically and more accurately, thus enabling me to keep risk low and still avoid getting "stopped-out" needlessly and stay in the potential winning trade?
A. Yes! By using "Drawdown Minimizer Logic." Drawdown Minimizer Logic is an amazing way to set stop-loss levels very tightly to guard against large losses, yet keep the stop scientifically and strategically placed just far enough away to prevent premature hitting of the stop-loss; thus keeping you in most trades.
Don't worry if this methodology seems too technical, because it's really much more simple than it first appears to be.
"D.M.L." is based on the maximum adverse movement (excursion) of past winning trades. For example, review the last "X" number of back-tested profitable trades and determine the adverse negative excursion incurred on each trade.
The idea is to look at the smallest stop-loss orders that would have kept us in at least 80% of the past back-tested winning trades. The worst 15% of those back-tested winners are eliminated from consideration.
Another important consideration is to review a sufficient sample of trades for statistical validity. According to statistical research by mathematicians, 30 samples are considered an optimum number to review. However, depending on your trading system's frequency, 30 past back-tested trades may take too long a period to test properly or reflect recent volatility.
Therefore, it may be best to work with a minimum number of 10 to 15 past trades. Ten to 15 back-tested trades should work well, but 30 trades are still considered an optimum number to use. However, if it's not practical to use 30 trades, you should at an absolute minimum use 10 trades to calculate the maximum adverse excursions. That way the numbers are still fairly valid from a statistical sampling standpoint.
If the past adverse excursions of those 80% trades went NO MORE than 15 Points negative before eventually being closed out at a profit, we can subsequently set our stop-loss at 16 points. Scientifically we should be able to stay in the vast majority of eventual profitable trades, yet have low-risk by risking only 16 points per trade.
Back-tested closed losing trades are not calculated, because with this amazing technique we only care about winning trade stop levels, not losing trades. The losing trades, of course will have potentially much larger adverse movements. By scientifically using the winners to calculate stop levels, we also take care of the losers by sharply reducing the losing trade stops.
"Drawdown Minimizer Logic" © will sharply reduce your risk level and drawdown potential. It's a proven and scientific way to drastically reduce risk without significantly harming overall profits.
This amazing loss reduction technique will allow comparatively small stop-losses, so your losses are small but still allow for consistent good size winning trades and possibly make lots of money with sharply reduced risk.
It's extremely effective in sharply lowering risk, but still keeping you in winning trades. Surprisingly, few traders use or have heard about this amazing technique, because it's rarely publicized due to the fact large successful traders want to keep it secret.
Many successful large traders use "D.M.L." as the most important ingredient in their trading. "D.M.L." may be the primary reason for their great success!
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