Pre-Market Ritual

Do yourself a favor and give yourself enough buffer between the time you wake up and the time you take your first trade.  The last thing you want to be doing is feeling rushed into your first trade as this will set the wrong tone for the rest of your trading session.

Now you’ve heard my morning routine.  What does yours look like?  I’d love to see and hear your comments below.

It is a very helpful article thetradingedge.org for premarket ritual

Swing Trade Systems is unlike these sites.

A good source for trading strategy 

http://www.swingtradesystems.com/

Not just because it has nothing to sell. But more importantly, because its goal is to assist you in developing your own swing trading system. You, after all, are the person ultimately responsible for your own success (or failure) as a trader. So you might as well be in on the ground floor and guide the development of your system every step of the way.

To that end, this site is organized around the 5 key components of any successful swing trading system. Here you will learn about:

1. 1. Swing Trading Plans – general plans of action answering everything from why you want to be a trader to your general attitude towards risk

1. 1. Swing Trading Strategies – specific sets of instructions specifying exactly how you will conduct your trades

1. 1. Swing Trading Resources – the material and non-material means by which you will execute your trades

1. 1. Backtesting and Paper Trading – records of how your system would have performed historically and currently, using a fake trading account

1. 1. Live Swing Trading – the central component of a trading system towards which the other four components all eventually lead

Jesse Livermore’s 21 Trading Rules

1. Nothing new ever occurs in the business of speculating or investing in securities and commodities.
2. Money cannot consistently be made trading every day or every week during the year.
3. Don’t trust your own opinion and back your judgment until the action of the market itself confirms your opinion.
4. Markets are never wrong – opinions often are.
5. The real money made in speculating has been in commitments showing in profit right from the start.
6. At long as a stock is acting right, and the market is right, do not be in a hurry to take profits.
7. One should never permit speculative ventures to run into investments.
8. The money lost by speculation alone is small compared with the gigantic sums lost by so-called investors who have let their investments ride.
9. Never buy a stock because it has had a big decline from its previous high.
10. Never sell a stock because it seems high-priced.
11. I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction.
12. Never average losses.
13. The human side of every person is the greatest enemy of the average investor or speculator.
14. Wishful thinking must be banished.
15. Big movements take time to develop.
16. It is not good to be too curious about all the reasons behind price movements.
17. It is much easier to watch a few than many.
18. If you cannot make money out of the leading active issues, you are not going to make money out of the stock market as a whole.
19. The leaders of today may not be the leaders of two years from now.
20. Do not become completely bearish or bullish on the whole market because one stock in some particular group has plainly reversed its course from the general trend.
21. Few people ever make money on tips. Beware of inside information. If there was easy money lying around, no one would be forcing it into your pocket.

More from Linda Rashke

The following part is from Linda Rascke and her colleague , “Street Smart” a must read book.

1. It is important to initially trade a new concept or strategy on paper. Only by seeing a pattern over and over again will you truly feel comfortable with it. You must believe in its ability to repeat itself. Don’t be surprised if you find yourself actually becoming excited as you see the patterns begin to set up.
2. If a pattern does not make sense to you, don’t trade it. If you don’t have a 100 percent belief in it, you will not be able to overcome losing streaks.
3. All you need is one pattern to make a living! Learn first to specialize in doing one thing well. We know two traders who do nothing but trade the “anti” pattern from a five-minute S&P chart.  Another friend trades only “Three Little Indians” on tick charts. Traders can earn their living by trading any one of the patterns that we present in this book.
4.  Your biggest enemy in trading is going to be a directional bias, an opinion about market direction … whether yours, a broker’s or a friend’s. Shut it out! Learn to concentrate on the “right-hand side” of the chart-in other words, on the pattern at hand.
5. One of the things you will get out of this book is an increased ability to listen to the market.” Even if a chapter does not seem to suit your personal trading style, it should at least heighten your awareness of market action and price behavior at critical points.
6. None of these strategies is designed to be a mechanical system. Be grateful that they are not! If they were, a large fund would come into the marketplace and exploit the edge. It is estimated that over 90 percent of the large pools in the commodity markets are run on a mechanical basis, systematically attempting to exploit trends. It is very difficult for these funds to move large amounts of money on a short-term time frame. They do not have the luxury of using resting stop-loss orders without risking adverse slippage. They cannot be as nimble as the small speculator can-and herein lies your edge.
7. This brings us to the most important point. Initial stop loss orders are essential! Each strategy in this book will have you entering a protective stop upon being filled. Stops are necessary for your protection against worst-case scenarios. (Remember, we are trading on probabilities only.) All it takes is getting sloppy once, or experiencing the “frozen rabbit syndrome” in a bad trade, to undo the efforts of the previous 20 trades. Placing initial protective stops must become a habit that is never broken. As you will see, in most, if not all of the examples, your stops will risk only a small amount of money.

Market Wizard Linda Raschke’s Technical Trading Rules

1. Buy the first pullback after a new high. Sell the first rally after a new low.
2. Afternoon strength or weakness should have follow through the next day.
3. The best trading reversals occur in the morning, not the afternoon.
4. The larger the market gaps, the greater the odds of continuation and a trend.
5. The way the market trades around the previous day’s high or low is a good indicator of the market’s technical strength or weakness.
6. The previous day’s high and low are two very important “pivot” points, for this was the definitive point where buyers or sellers came in the day before. Look for the market to either test and reverse off these points, or push through and show signs of continuation.
7. The last hour often tells the truth about how strong a trend truly is. “Smart” money shows their hand in the last hour, continuing to mark positions in their favor. As long as a market is having consecutive strong closes, look for up-trend to continue. The up trend is most likely to end when there is a morning rally first, followed by a weak close.
8. High volume on the close implies continuation the next morning in the direction of the last half-hour. In a strongly trending market, look for resumption of the trend in the last hour.
9. The first hour’s range establishes the framework for the rest of the trading day.
10. A greater percentage of the day’s range occurs in the first hour then was the case in the past, and thus it has become increasingly important to trade aggressively if there are early signs of a strong trend for the day.
11. There are four basic principles of price behavior which have held up over time. Confidence that a type of price action is a true principle is what allows a trader to develop a systematic approach. The following four principles can be modeled and quantified and hold true for all time frames, all markets. The majority of patterns or systems that have a demonstrable edge are based on one of these four enduring principles of price behavior. Charles Dow was one of the first to touch on them in his writings.Principle One: A Trend Has a Higher Probability of Continuation than Reversal
    Principle Two: Momentum Precedes Price
    Principle Three: Trends End in a Climax
    Principle Four: The Market Alternates between Range Expansion and Range Contraction!
12. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word – Nobody! Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.

Basic Rules for Swing Traders

But first–the rules! Because of the short-term nature of this technique, swing traders must adhere to some very basic rules, including:

• If the trade moves in your favor, carry it overnight–the odds favor follow-through. Expect to exit the next day around the objective point. An overnight gap presents an excellent opportunity to take profits. Concentrating on only one entry or one exit per day relieves the pressure.
• If your entry is correct, the market should move favorably almost immediately. It may come back to test and/or exceed your entry point a little, but that’s OK.
• Do not carry a losing position overnight. Exit and play for better position the next day.
• A strong close indicates a strong opening the following day.
• If the market doesn’t perform as expected, exit on the first reaction.
• If the market offers you a windfall of big profits, take them to the bank on the close.
• If you are long and the market closes flat, indicating a lower opening the following day, scratch or exit the trade. Play for better position the next day.
• It is always OK to scratch a trade!
• Use tight stops when swing trading (wider stops when trading trend).
• The goal always is to minimize risk and create “Freebies.”
• When in doubt–get out! You have lost your road map and your game plan!
• Place your orders at the market.
• When the trade isn’t working, exit on the first reaction.
• ANTICIPATE!

Quantifiable Edges

Quantifiable Edges has been publishing quantitative research, systems, and trading ideas since 2008.  We utilize technical analysis concepts and quantify them in a way that allows traders to determine the edge that was provided in the past.  Breadth, volume, sentiment, volatility, Fed-induced liquidity, seasonality, and price action are all used to assess market conditions.  Gold and Silver level subscribers are led through Rob Hanna’s interpretation of the data in a simple and complete manner via the nightly and weekly subscriber letters.  Gold subscribers also have complete access to our subscriber area, which includes the Quantifinder, custom charts, trading systems (with code), special research, and more.

For additional insights into the Quantifiable Edges approach we’d strongly recommend:
1) Checking out the About Rob page, with links to interviews, webinars & more.
2) Taking a free 1-week trial.

The Quantifinder

The Quantifinder is Quantifiable Edges original functionality. There is nothing else like it anywhere on the web. The Quantifinder was designed to automatically search through our database of published research and extract anything that is applicable to the current day’s market action. This includes studies based on price, breadth, volume, leadership, and sector rotation. It looks at both daily and weekly data across a wide range of indices. All applicable studies are then published on the Quantifinder page, where you can easily see their bullish/bearish tendencies and a description of the research. From there it just takes a simple click and the publication containing the research is automatically pulled up for you.

Developing Your Trading Psychology Process

Some of the elements of peak performance that I’ve observed among successful traders include:

*  Pre-trading rituals to prepare for various market scenarios;
*  Meditation, biofeedback, self-hypnosis and similar activities to increase our focus;
*  Mental rehearsal of plans for the day;
*  Physical exercise to be energized for the day;
*  Taking breaks to renew concentration and stay in the right mindset;
*  Constructive self-talk through the trading day;
*  Looking at markets through multiple lenses to see fresh sources of opportunity and threat.

The bottom line is that trading psychology has to be something we do, not just something we think about.

 

Paul Tudor Jones

Trading style and beliefs[edit]

As reported in Market Wizards and the press, Jones futures trading style and beliefs are summarized as follows:^[18]

• Contrarian attempt to buy and sell turning points. Keeps trying the single trade idea until he changes his mind, fundamentally. Otherwise, he keeps cutting his position size down. Then he trades the smallest amount when his trading is at its worst.
• Considers himself as a premier market opportunist. When he develops an idea, he pursues it from a very-low-risk standpoint until he has been proven wrong repeatedly, or until he changes his viewpoint.
• Swing trader, the best money is made at the market turns. Has missed a lot of meat in the middle, but catches a lot of tops and bottoms.
• Spends his day making himself happy and relaxed. Gets out of a losing position that is making him uncomfortable. Nothing’s better than a fresh start. Key is to play great defense, not great offense.
• Never average losers. Decreases his trading size when he is doing poorly, increase when he is trading well.
• He has mental stops. If it hits that number, he is out no matter what. He uses not only price stops, but time stops.
• Monitors the whole portfolio equity (risk) in real time.
• He believes prices move first and fundamentals come second.
• He doesn’t care about mistakes made three seconds ago, but what he is going to do from the next moment on.
• Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.

Jones’s global macro trading style is based primarily on technical analysis, as opposed to value investing, with an emphasis momentum factors driving markets.^[19] In a 2000 interview, he suggested however he regretted not being more involved with venture investing in technology firms during the 1990s.^[20]

First Hour Trading

Assuming you have either started day trading or are looking to get into the game, I am going to shock you in this article.  What I will cover here would have saved me 20 months of headache if I just had someone give it to me straight.  Recent studies have shown that the majority of trading activity occurs in the first and last hour of trading.  Let me make this even easier for you, only focus on the first hour and watch how simple it all becomes.

Why First Hour Trading

Simply put, trading during the first hour provides the liquidity you need to get in an and out of the market.  On average the market only trends all day less than 20% of the time.  Most new day traders think that the market is just this endless machine that moves up and down all day.  In reality the market is pretty boring.  The one time of day which consistently delivers on sharp moves with volume is the morning.  Assuming you are doing this for a living you will need some serious cash.  Day trading isn’t something you should undertake with your lunch money.  If you were trading with a $100,000 per trade how much volume do you think your stock needs?  If you are really reading this article the first response from you should have been what’s the price of the stock.  Assuming you were already thinking that, you need tens of thousands of shares trading hands every 5 minutes.  Reason being, you need enough volume to enter the trade, but also enough that you can potentially turn around in a matter of minutes and close out the same trade you just put on.

– See more at: http://tradingsim.com/blog/first-hour-trading/#sthash.fFuO9WAM.dpuf