The Importance of Price Reading
Submitted: 30 Aug 10 15:24

It is amazing how traders make their trading decisions based on news that is published on either news or journals. The fact is that news is never new. It is also peculiar that a trader should make his trade based on the assessment or projections of market analysts, only to find that with every analyst that says market is going up, you can always find another that says the opposite. The problem is that actually none of them will be wrong, as very often, they will not put a time horizon for their projections, and thus at some point in time, they will always be right.

To look at the ebb and flow of the market, there is no better way than to see a simple price chart. You do not even need an indicator. Every market participants’ decision is reflected on the chart and it makes no sense that a trader should look everywhere, study every indicator, and not put what the chart is actually doing as the topmost priority in his decision making process. Every resistance, every support level tells a story.

Trading can be simple. A price that is oscillating upwards continuously means you should stay on the long side until subsequent peaks starts to taper off, and the converse is true. If price is going side way in a congested channel simply means no majority of the traders are agreeing on the price and you should wait until price breaks out of the range. By using simple price patterns, and investing enough screen time to identify various patterns that is able to repeat itself with some level of consistency, it is more than adequate to equip yourself with the tools to trade successfully.



Is It Possible To Trade For A Living?
Submitted: 18 Aug 10 14:24
Last Updated: 18 Aug 10 14:25

Trading for a living is a very attractive proposal to many. You can live wherever you want, and practically be the master of your life. It is no wonder many people will take the challenge and attempt to embark on this endeavour. It is true to a certain extent that many who has tried has gotten nowhere after sometime, but it is also a great news to know that there are people out there who are able to trade successfully and profit consistently from the market.

The key points you need to consider to even beginning to try to trade for a living is:

 1.       Have a trading system that is vigorously tested to ensure you possess the edge in your trading decisions.

2.       Be informed of the psychological demands that is required to trading successfully.

3.       If possible, have someone who is already trading full time to give the necessary guidance and mentorship.

Once these are in place, it is through constant practice and fine tuning to your mindset and method that will see you through to a successful trading journey.



The Importance Of Keeping A Tradelog
Submitted: 12 Aug 10 15:11
Last Updated: 12 Aug 10 15:12

Trading is a performance sport and in any activity where we desire to excel in, it is important that we keep track of our performance. Hundreds of trades over many years contributes to the health of your trading account and it is of utmost importance when there is a need to review your performance, you have something to fall back on. And I do not mean from memory. A trade log offers you access to the period when you are trading well and when you are not. You will be then able to pick out the reasons behind those periods and make adjustments accordingly to further improve your trading.

Another good reason for having a trade log is that it will police your trading and ensure you stay disciplined. If you resolved to write down every single trade that you took, you will know consciously the time when you break any trading rules. This effort to ensure that you do not ‘cheat’ (since you HAVE to write something whenever you take any trade) will help you to stay calm, focused and prevent you from swaying from your rules. We know that for many traders, it is often a few occasional deviation from their rules that caused huge damage to their accounts. Thus, if you can even catch yourself FIRST before you commit those trading sins, you will be doing yourself a huge favour and be even more profitable in the long run.



The Advantage Of Leverage In Trading
Submitted: 02 Aug 10 16:06
Last Updated: 02 Aug 10 16:07

Investopedia explains ‘Leverage’ as : The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Unlike Stock trading where the trader often needs to fork out in cash the full value of stock price, a leveraged instrument like Futures, only requires the trader to use a margin to control the full contract value. This allows the trader to have a small income outlay, but to be entitled to the full profit/loss of the actual transaction of the full value of the counter.

For example, a contract of E-mini Russell 2000 (ER2) Index represents 100 times the index price. If the index is trading at 500, the actual value of 1 contract of ER2 will be USD 50,000. In this case, the leverage is of the order of 100. Depending on the broker, you may need only a margin of USD500 to trade 1 contract. Thus if the index moves from 500.0 to 501.0, you will actually make USD100 (1 x 100). In the above example, a 0.2% move in the index has brought the trader an effective yield of 20%.

The power of leverage is a double edged sword. If the trader does not has a good exit strategy in case the price should move against him, the losses can be substantial. It is thus crucial that when one is considering trading a leveraged instrument, a sound trading system and loss management strategies has to first be in place.