Quit Your Job To Trade Stocks? Trading is often viewed as a high barrier-to-entry field, but this is simply not the case in today's market. Now, anyone with ambition and patience can trade, and do it for a living, even with little to no money. Sounds fantastic? It is, and there are so many options available to people with the desire to put in the time to learn. The New Era of Trading. Changes in technology and increasing volumes on the exchanges have brought about a number of very low barriers-to-entry trading careers. In some cases no personal capital is required, and in other cases a small amount of capital will be required to get you started, in order to verify your commitment to trading. With markets so interlinked, it's always open trading time somewhere on the globe, and many of those markets can be accessed with relative ease. This means that even people who have full-time jobs or children at home can trade - it is just a matter of finding the right market and opportunity. This is not to say that trading is an easy business - it can be very tough to stay in for the long haul.
As we look at some different trading alternatives available in today's market, you will see that you are able to enter the market, but your ultimate success depends on you. We will look at these options in depth to see what they offer career wise, or if they can simply be used to generate additional income. The Options Available. People often think that full-time traders with advanced degrees and a high pedigree only work for investment banks. Equally as common is the thought that, in order to trade, you need large amounts of capital and expendable time. It is probably true that to get into an investment bank or onto a major institutional trading floor, you will need to have connections or a prominent educational background that sets you apart. Therefore, this alternative will not be focused on. In this article we will focus on how the average person, with extensive or very little trading experience, can enter into the arena of trading and creating wealth. The first option, and likely the easiest because it is so flexible and can be molded around daily life, is trading from home. However, day trading stocks from home is also one of the most capital-intensive arenas. This is because the minimum equity requirement for a trader who is designated as a pattern day trader is $25,000, and this amount must be maintained at all times. If the trader's account falls below this minimum, he or she will not be permitted to day trade until minimum equity level is restored either by depositing cash or securities. Therefore, potential traders need to be aware of the other markets that require less capital and have lower barriers-to-entry. The foreign exchange (forex) or currency markets offer such an alternative.
Accounts can be opened for as little as $100 and, with leverage, a large amount of capital can be controlled with this small amount of money. This market is open 24 hours a day during the week, and thus provides an alternative to those who cannot trade during regular market hours. The contract for difference (CFD) market has also expanded. A CFD is an electronic agreement between two parties that doesn't involve ownership of the underlying asset. This allows gains to be captured for a fraction of the cost of owning the asset. As with the forex market, the CFD market provides high leverage, meaning smaller amounts of capital are needed to enter the market. The stock market can also be traded using a CFD. While the stock is never owned, the contract allows profitslosses to be reaped from speculating on the underlying stocks or indexes by mirroring its movement. High leverage does mean higher risk , but if a trader does not have a large amount of capital, this market can still be entered with very low barriers. Educating oneself on the risks involved and building a strong trading plan are absolute musts before partaking in any trading activity, but when you're highly leveraged, it becomes even more paramount. Proprietary Trading Firms.
Proprietary trading firms have become very attractive with their training programs and low-fee structures. If the idea of trading from home does not appeal to you, then working on a trading floor might. Under this system, the trader is provided with firm capital (or leveraged capital) to trade and the risk is partially managed by the firm. While personal discipline is still very much required, trading for a firm takes some of the weight off of a trader's shoulders. Working for a firm may also require working in an office during market hours, although some firms allow traders to trade remotely from home. The perks of working with a trading firm can include free training, being surrounded by other successful traders, constant trading ideas, greatly reduced fees and commissions, access to capital and performance monitoring. Many proprietary trading firms will accept people who have shown initiative in their backgrounds and have some education in their prior field. This is because the firm can monitor a trader's risk, and those not showing promise can be released with very little overall loss to the firm. Pay in a firm is based on performance, and is normally a percentage payout of your net profits after fees. Some licensing may be required, but depending on the structure of the company this is not always the case. Passing the Series 7 exam will mean that there are more firms with whom you are available to trade. Each firm operates a little differently, so find one that suits your needs, personality and circumstances. Some require you to use some of your own capital.
If you run a search for a list of proprietary trading firms, you will be able to see what is available to you. Once you've decided which trading method fits you the best, the next step is crucial. If trading from home is the main interest, you must decide what markets you will trade in based on your capital and interests. You must then make a comprehensive trading plan, which is also a business plan (trading is now your business) and decide how you will operate as a trader. From there, explore different online brokers and compare what they offer. Seek out a mentor or someone to help you. Then, it is time to start trading. Beginner's Guide To Trading Futures. A futures contract is an agreement between two parties – a buyer and a seller – to buy or sell an asset at a specified future date and price. Each futures contract represents a specific amount of a given security or commodity. The most widely traded commodity futures contract, for example, is crude oil, which has a contract unit of 1,000 barrels. Each futures contract of corn, on the other hand, represents 5,000 bushels – or about 127 metric tons of corn.
Futures contracts were originally designed to allow farmers to hedge against changes in the prices of their crops between planting and when they could be harvested and brought to market. While producers (e. g., farmers) and end users continue to use futures to hedge against risk, investors and traders of all types use futures contracts for the purpose of speculation – to profit by betting on the direction the asset will move. (For more, see What is the Difference Between Hedging and Speculation? ) While the first futures contracts focused on agricultural commodities such as livestock and grains, the market now includes contracts linked to a wide variety of assets, including precious metals (gold), industrial metals (aluminum), energy (oil), bonds (Treasury bonds) and stocks (S&P 500). These contracts are standardized agreements that trade on futures exchanges around the world, including the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE) in the U. S. (For more, see How Do Futures Contracts Work? ) This tutorial provides a general overview of the futures market, including a discussion of how futures work, how they differ from other financial instruments, and understanding the benefits and drawbacks of leverage. It also covers important considerations, how to evaluate futures and a basic example of a futures trade – taking a step-by-step look at instrument selection, market analysis and trade execution. If you are considering trading in the futures markets, it’s important that you understand how the markets works. Here’s a quick introduction to help you get started. The NASDAQ Options Trading Guide.
Equity options today are hailed as one of the most successful financial products to be introduced in modern times. Options have proven to be superior and prudent investment tools offering you, the investor, flexibility, diversification and control in protecting your portfolio or in generating additional investment income. We hope you'll find this to be a helpful guide for learning how to trade options. Understanding Options. Options are financial instruments that can be used effectively under almost every market condition and for almost every investment goal. Among a few of the many ways, options can help you: Protect your investments against a decline in market prices Increase your income on current or new investments Buy an equity at a lower price Benefit from an equity price’s rise or fall without owning the equity or selling it outright. Benefits of Trading Options: Orderly, Efficient and Liquid Markets. Standardized option contracts allow for orderly, efficient and liquid option markets. Options are an extremely versatile investment tool. Because of their unique riskreward structure, options can be used in many combinations with other option contracts andor other financial instruments to seek profits or protection. An equity option allows investors to fix the price for a specific period of time at which an investor can purchase or sell 100 shares of an equity for a premium (price), which is only a percentage of what one would pay to own the equity outright.
This allows option investors to leverage their investment power while increasing their potential reward from an equity’s price movements. Limited Risk for Buyer. Unlike other investments where the risks may have no boundaries, options trading offers a defined risk to buyers. An option buyer absolutely cannot lose more than the price of the option, the premium. Because the right to buy or sell the underlying security at a specific price expires on a given date, the option will expire worthless if the conditions for profitable exercise or sale of the option contract are not met by the expiration date. An uncovered option seller (sometimes referred to as the uncovered writer of an option), on the other hand, may face unlimited risk. This options trading guide provides an overview of characteristics of equity options and how these investments work in the following segments: Enter a company name or symbol below to view its options chain sheet: Edit Favorites. Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages. Customize your NASDAQ. com experience. Select the background color of your choice: Select a default target page for your quote search: Please confirm your selection: You have selected to change your default setting for the Quote Search. This will now be your default target page unless you change your configuration again, or you delete your cookies. Are you sure you want to change your settings?
Please disable your ad blocker (or update your settings to ensure that javascript and cookies are enabled), so that we can continue to provide you with the first-rate market news and data you've come to expect from us. Binary Strategies: Do you Have 5 or 20 Minutes to Spare? Say you love trading binary options to take advantage of your underlying market view, but you hate waiting for expiration. It can be nerve racking, watching the clock down, and of course second guessing yourself. Your position may be in the money but you don’t like the risk of the underlying market reversing direction and making your binary worthless at expiration. Of course you can exit the binary early, but to maximize the profit on a binary, you have to wait until expiration for the full payout. The good news is now you have real short term binary options available where it easy to wait for the expiration. There are 5-minute and 20-minute binaries which you can now trade multiple times on your lunch hour. 20-minute Binary options (15 strike contracts) Wall St 30, US 500, US Tech 100, US SmallCap 2000 (ONLY) 5-minute Binary options (5 strike contracts) EURUSD, GBPUSD, USDJPY, AUDUSD (ONLY) The downside of the shorter time periods is that the premium or discount differential between the underlying and the strike is now much smaller. That cushion that binary traders leaned on or must overcome with the shorter durations can be wiped out quickly, so it is important to understand this relationship & have your market direction right. But the one binary relationship which seems to stay fairly constant is the pricing of the ATM binary. At this point the underlying market is trading at or near the binary strike where neither party has an edge, so naturally the cost for the buyer and seller should be fairly equal resulting in a binary trade price around 50. As the leading binary options exchange in the US, Nadex offers some of the best analysis of the world's markets specifically tailored to the needs of binary option and spread traders. Nadex analysts provide insights that will help you find short-term trades in both trending and flat markets.
The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex instruments include forex, stock indexes, commodity futures, and economic events. Nadex binary options and spreads can be volatile and investors risk losing their investment on any given transaction. However, the limited-risk nature of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction.
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EURUSD Is Winding It’s Coil. December 21, 2017. GBPUSD Technical View from MrTopStep. Recommended Articles. December 21, 2017. Intangible Assets Are Changing The Financial Landscape. December 19, 2017. US Industrial Production Rises In November. December 18, 2017. Wall Street Breaks New Records. December 14, 2017. Crowdfunding Is Redefining Capitalism.
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Trading When in a Full Time Job. Top section authors. Trading When in a Full Time Job. Is it possible to trade with a full time job? Most certainly yes, but challenges will arise for those that want to devote their limited time to two full time professions. In this article, I am going to address the debate over whether or not you can be a successful trader with a full time job or not. I will also provide 5 tips for making the most out of your trading while still working your full time job. To start out this article, I'll give a little background on my personal experiences in trading whilst working a full time job. When I first got involved in trading, I was a full time college student working a full time job who also wanted to become a full time trader. It doesn't take a mathematician to figure out that there's 3 "full-times" here, which should come down to about 120 hours per week, or with a 5 day work week that's 24 hours of work per day and even I need a little sleep. As a newer trader, it can be extremely difficult to balance a full time job with trading, but still it isn't impossible. Remember whenever you take on a new endeavor, it is going to require a great amount of time and attention to learn, practice, and gain the experience necessary to succeed. Trading is certainly no different, and I recall staying up late at night reading books, taking courses, watching videos, and posting questions online.
So after personally going through working full time and learning how to trade, I know it certainly is possible but will not work for everyone. It is going to require a great amount of dedication and planning to successfully manage your personal life, work life, and trading life all in one day. There are 5 tips that I would like to share with you to try and make this experience as efficient and effective as it possibly can be: (1) Choose a market that fits around your work hours. I personally started out day trading in the stock market, which looking back was a poor decision given my situation of having 3 "full times". The stock market is only open for about 30 hours a week, so if you aren't available to trade during these hours well then you're out of luck. A good choice for those who have time constraints due to a full-time job would be the Forex or Futures market. The best choice is Forex, which is basically a "24 hour" market and will let people with virtually any work schedule get some screen time whilst the market is open. Remember that even though Forex is a 24 hour market, there are times with much higher trading volume and higher liquidity, which ideally are the times you want to be able to trade. (2) Choose a trading style that gives you enough time to place and manage your trades. Again I personally started out day trading, which once again was a poor decision looking back on it from a time perspective. Swing trading is much less time intensive than day trading.
I've found that putting in a few hours to do research and then outlining your trades is the extent of time you will need to dedicate for swing trading. Plan on spending about 4-5 hours per week on swing trading, whilst with day trading you usually will spend 25 hours or more per week. Swing trading is also great because it allows the flexibility of setting OCO orders and leaving the computer to place your trades while you are off at work. This is a critical tool for those working full time, so if you aren't already using OCO limit orders definitely consider giving them a try. (3) Set aside a certain day of the week or time of day that you are going to dedicate to your trading activities and learning. If you're like me and insist on starting out in a market that is only open a few hours a week and trading with a style that requires a great amount of time like day trading, then consider requesting a fixed day off every week from your full time job that you can dedicate to trading. I always requested off Tuesdays and Thursdays and spent these days trading all day long. This worked quite well since I could only trade for a few hours a day on other days of the week. On a side note, if you do choose this, consider not making Fridays your "trading day" simply because in most markets, Fridays have much lower volume and less liquidity. You need to be logged in to post comments or rate this article. Re: Trading When in a Full Time Job. i am recent graduate from london and looking to trading full time which advice will give me. i m try to get in to prop house. The Motley Fool.
Are you looking to generate income from your investments? Open you eyes to investing in U. S. companies and using options to conservatively juice your returns. Do options scare you? They scare a lot of folks. Stock options — the kind that are traded on exchanges — have acquired a reputation for being dangerous and unpredictable, a thing that sensible investors should file in the same (circular) folder with ideas like “day trading” and “putting all of your money in a big pile and setting it on fire.” The reputation isn’t entirely unjustified. “Options trading” tends to work out as badly as “day… To keep reading, enter your email address or login below. Are you looking to generate income from your investments? Open you eyes to investing in U. S. companies and using options to conservatively juice your returns.
Do options scare you? They scare a lot of folks. Stock options — the kind that are traded on exchanges — have acquired a reputation for being dangerous and unpredictable, a thing that sensible investors should file in the same (circular) folder with ideas like “day trading” and “putting all of your money in a big pile and setting it on fire.” The reputation isn’t entirely unjustified. “Options trading” tends to work out as badly as “day trading” for many who try it, and to some extent options have been tarred by the same brush that made “derivatives” a bad word after the Great Bank Explosion of 2008. But we think options’ bad rep is overblown. With a little knowledge and care, options can be very useful tools — even for conservative investors. A helpful tool in uncertain times. Here in Australia, the options market is quite small and quite illiquid. The exact opposite is true in the U. S. The options market is massive, and growing quickly. Courtesy of cheap online brokers like OptionsXpress and Interactive Brokers, Australian investors can quickly, easily and cheaply trade U. S. options. Most investors will deal with standardised, exchange-traded options on stocks or indexes, which come in two basic flavors: puts and calls . A call allows you to buy (or “call away”) a stock at a particular price, and a put allows you to sell it — at your option (hence the name). You can buy puts and calls, or you can create and sell them — a process called “writing” options.
Either way, it’s usually only slightly more complicated than buying a stock — you’ll have no trouble figuring it out. The options you buy (or sell) are good for a set time period, after which they simply expire if unused. Those are the basics. Sounds simple, doesn’t it? But if you think about it for a minute, you can see a whole range of possibilities. At the simplest level, options are a low-cost way to take a position if you think a big move is coming. Think banks are in for another round of trouble, but don’t want the risk of a big short position? Buying puts on Bank of America (NYSE: BAC) or other banks lets you take that position with no more at risk than the cost of the options. Think Apple (Nasdaq: AAPL) shares will see a big bump once the iPhone 5 is finally released , but don’t have a ton of spare cash to invest? Buying calls lets you get some of that upside without a huge up-front cash commitment. But we’re just scratching the surface. How about a low-risk (really) way to boost the returns from your dividend stocks in times when the market doesn’t seem to be going anywhere?
Like, say, now? An options method for the rest of us, right now. We all know that a stock that pays a good solid dividend through good times and bad is a great thing to have. Great U. S. dividend stocks like pharma giant Johnson & Johnson (NYSE: JNJ) or chip and fizzy-drink king PepsiCo (NYSE: PEP) are the cornerstones of many portfolios. But stocks like these don’t tend to be big growers, which is why you can consider using a low-risk options method called writing covered calls to boost your returns. This is a simple method that any investor can use. “Covered” means that we own the underlying stock — that’s what makes it low-risk — and we’re writing calls, which means that we’re selling someone else the right to “call away” stock we own at a preset price. The nuts and bolts of covered calls. The first step is to choose a suitable stock, a company you like, but not one that’s likely to see major growth. This can be a stock that you already own, or you can buy one. Let’s say that you bought 200 shares of McDonald’s (NYSE: MCD) at $85. You think that while it’s unlikely to nosedive, it’s not going to go to the moon, either — that’s not why you bought it. You can write two calls (each option covers 100 shares) that give someone the right to buy the stock from you at $95 between now and mid-January.
As of writing, the market will pay you $1.50 per share for those calls, or $150 each. How could this play out? There are three possibilities: The stock goes way up. Surprise! The unexpected popularity of the shocking new Eel McNugget propels Mickey D’s stock to a whopping $110 in January. But alas, your upside is limited — your shares get called away at $95. Still, you make $10 a share in profit, plus the $1.50 a share you got for writing the calls. That’s a 13% gain right there, plus any dividends you collected — not too shabby for a blue-chip stock you held for only a few months months. The stock takes a nosedive. Or maybe the Eel McNugget is an epic flop, the stock falls to $60, and your calls expire unused. That’s a risk with any stock. But at least you made that $1.50 a share, and you can write another set of calls in January. The stock price stays more or less flat. It goes up a little, or down a little, but not over $95, and your calls expire unused. Congratulations!
You held a stable stock during a time of market uncertainty, and got some extra cash via those calls (and maybe a dividend, too). The upshot: An incremental advantage. As you can see, the biggest risk with a covered call method is that you’ll miss some of the upside if the stock suddenly takes off. But you’ll still profit — and if you think a stock is likely to take off, it’s not a candidate for this method. Writing covered calls isn’t going to make you a fortune overnight. But think of it this way: A stock like McDonald’s is worth owning for its steady, incremental growth and a solid dividend yield of about 3%. If you buy McDonald’s at $85 and write covered calls on it four times a year for about $1 each time, that 3% yield becomes more like a 7% or 8% yield — for a total of maybe 30 minutes of added work over the course of a year. Wouldn’t you like to own a stock like that? This article was originally written by John Rosevear and published on Fool. com. It has been updated. Article authorised by Bruce Jackson. Two New Stock Picks Every Month! Fools on Facebook. Stay Connected with the Fool.
A MOTLEY FOOL SPECIAL REPORT. How 1 Man Turned $10,000 into $8 Million. © 2009 - 2017 The Motley Fool Australia Pty Ltd. All rights reserved. ACN: 146 988 052 | Australian Financial Services Licence (AFSL): 400691. The Motley Fool Australia, PO Box 4635, Ashmore, Qld 4214. How to Make (and Lose) $2,000,000 Day Trading: The System & The Story. I’ve tried and failed to write this article ten times. Even after I finished, I thought it was terrible–actually I was just scared to share the story. I sent it to a reader who had asked me about trading. He replied: “ It’s different than most that I have read because there is no bullshit to try and look past and all of your readers appreciate that.” Thanks Garrett, here goes nothing: A Kind of Introduction To Day Trading.
This is about the lessons I learned while trading. The pitfalls people fall into and the ways people destroy themselves. There’s also the time I raised money for a hedge fund. Then my partner turned $30,000 into $2,000,000 in three months. It only took him two months to turn $2,000,000 into virtually zero. We’ll get into the details later. I mean trader as in “day trader”. From the time I was 15-22 I sat in front of 6 computer monitors watching charts go up and down. Why am I not doing it now? I didn’t make the billion dollars before hitting 22. Traders are unique in that they might be the only group of people more delusional than entrepreneurs. I say this lovingly. According to my calculations, there’s no reason I couldn’t have made a billion dollars day trading.
Never mind that 99.9% of traders are losers. Forget the fact that 80% of traders are depressed middle-aged men going through their mid-life crisis. (I saw one in the local library yesterday, he looked like he was avoiding his wife. I saw another today at Starbucks, he didn’t buy a drink and he smelled funny.) I was the exception. I was going to get my billion-dollar pay day before my 30 th birthday. And I actually was the exception. I made a nice chunk of money before stopping. I treated the thing with respect—not some get-rich scheme. It breaks my heart when I see people tell me they day trade and then see them following some bullshit newsletter or some coach with a fudged track record. When I see someone watching another FOREX algorithm sales pitch or drooling over some penny-stock report I just want to shake them and say You have potential! Stop letting yourself get scammed! Stop scamming yourself! If you trade without the proper preparation you’d be better off in Vegas.
This is not an exaggeration. Not only are there free drinks, sexy ladies looking for fun, and an obscene selection of Cirque du Soleil shows… your odds at pretty much any casino table are better than the markets . I mean this literally (like “literally” as defined by a dictionary)— you are guaranteed to lose money over any decent period of time unless you learn to trade well. And then even once you’re prepared and you feel you know everything there is to know about the markets, you’re still not guaranteed to win. That’s just the nature of the beast. That’s why I started meditating at 16. Trading is intense. In college I would make $5000 in the middle of class and then lose $10,000 a few hours later while watching a movie. That kind of thing gives you a different perspective on money. One last thing before we get into the meat of the post: Like Garrett said, this is probably different than anything else you’ve read on trading. Why? I don’t want to sell you anything. I don’t give a shit if you trade or not. Actually, I would almost rather you not trade…
most people would be better off spending their life doing other things. I’m not currently trading. I’ve double-checked my methods and they still work, so the information is current, I’m just not spending my life using it. The focus isn’t on the method—although I’ll give you all the dirty details. You’ve got to be fluid as a trader. The top hedge funds in the world hire mathematicians, physicists, meteorologists… they are constantly shifting algorithms. How do you compete with these people? You don’t. This will make more sense later. I don’t have any stake in you listening to me. For real: nothing is for sale. I’m not going to teach you to trade.
People that teach people how to trade or run newsletters giving trading ideas make more money by selling their ideas than using their ideas. They all have their own stories about why they are being so generous with their SECRET knowledge but it’s bull. (Not that all this information is bad, it’s just that you got to be careful—don’t follow anyone blindly.) (Wait, so what are my incentives for writing this? I just want you to like me—I want you to like me and this article so much that you subscribe for our newsletter and I can write more things. Also, I’ve been thinking about writing this for way too long and I had to do it.) I’m not trying to convince you the world is ending. Okay okay it’s time for the meat and potatoes. Meat and potatoes? Ha! You’ll be eating liquid gold with the information I’m about to give you! Yes, you too can be a Rich Kid of Instagram! Just kidding, you probably won’t do anything with it. (And that’s probably a good thing.) Someone did make $2,000,000 with this information though. For real, I watched it happen. Before we get to that story, we’re going to go through some of the major pitfalls new (and experienced) traders fall into.
Note: I’ve provided the meanings of some words but I’m going to leave the glossary work to you, Google, and other places on the Internet that like defining words more than I do. Why start with what not to do? Because not smoking cigarettes is more healthy than eating all organic. Because if you lose all your money then trading becomes kind of impossible, doesn’t it? “You can do a lot by avoiding bad as opposed to seeking good.” – Paul Graham, founder of Y-Combinator. DO NOT: Use Real Money Before You Know What The Hell You’re Doing. Warren Buffett’s #1 rule in investing is to keep your capital. He says that his regrets have mostly been acts of omission instead of commission. That is because he doesn’t throw money at something that he doesn’t think will work—and so he misses out on making money on tech bubbles but doesn’t lose his ass when they bust. (Honestly, Warren Buffett isn’t a trader… he plays the long term and hasn’t done anything but acquire massive companies—or huge pieces of them–for decades… he is one of the world’s best money-getters but not someone who will give you anything useful in trading.
) What does this mean for you? Paper trade before you put any of your capital on the line. (Paper trading is when you make trades with a fake account. There are tons of platforms you can use for this, I used TD Ameritrade’s Think or Swim.) How do you know when to start putting money on the line? When a system has proven itself. When has a proven system proven itself? For me, a month of profitable trading (and a statistically significant number of trades). This infers the next DO NOT: DO NOT: Day Trade Without A SystemMethod. If you’re trading willy-nilly you’re going to lose. I don’t even know exactly what willy-nilly means, but if you have to ask if your trading would fall under the “willy-nilly” category, then stop trading right f*&#ing now! You’re not George Soros, you don’t get to trade on your gut. You don’t need an algorithm running on a supercomputer—but you do need some sort of system that won’t let you be an idiot. You will tell yourself you don’t need a defense against being an idiot.
This is you being delusional. Believe me. I betrayed myself too many times before committing to my systems. You don’t win every time if you follow your methods but you do do a hell of a lot better. How Do I Create A System? So what makes a good system? We’ll get into this more later when I show you the exact system I used (don’t skip to it, this post will be useless if you do that). For now, this will be helpful when thinking about how to approach your trading: Offense . It tells you exactly when and how to enter a trade. Maybe it’s “3 of the 5 requirements must be met to invest 1 share, if 5 of 5 are met – 2 shares”. This is one line of emotional defense: trading will make you think that you can make a million dollars today, this is very exciting, you will want to fudge the rules. Warren Buffett only broke his rules when he got bored—notice when you’re bored. If you think you can take advantage of more opportunities in the market then alter your system, test it, and implement it. Remember: no willy-nilly!
Defense . It tells you exactly how to exit a trade. This means stop losses. (These are orders that automatically get you out of a trade when the market you’re in hits a certain price.) A common rule is to take 50% of your position (your money in the market) at a certain profit point, maybe 100% maybe 68.2% (this is a Fibonacci number that is extremely popular among traders). It also defines exactly how much of a loss you are willing to take on a certain trade. This must be determined before you enter a trade. If you don’t put a stop loss in your brain will justify your position over and over to you while your hopeful trade ends up losing you your house (and family). This is even more important than a strong offense — don’t go broke! Adding to a position. Sometimes you may want to make your position bigger as the market moves in your favor. You need to have a set of rules determining how you’ll do that.
Don’t complicate it. Every tool seems so powerful, so prophetic! Early on I had a habit of adding signals that I would wrap up into my system. I theory they should make your trading better. Maybe it does for a Harvard physicist, it didn’t for me. The more complex I made my system the worse I did, over and over. I would start simple, screw it up by adding a bunch of things people recommended, then go back to the drawing board. The best method I ever used was dead-simple (that’s the one we’ll get to in a little bit). Give yourself a ton of room for failure. Eight out of ten trades failed for me. That was fine because when I hit a winner it won big. But if you’re averaging eight out of ten trades failing, then it will be common to fail 20 times in a row. I’ve gone through streaks of 40 failed trades in a row. You’ve got to be able to survive those. My recommendation would be to risk 1% (or less) of the money you’re willing to lose on each trade. That gives you 100 chances for failed trades before you go bust.
It shouldn’t happen. (Of course, when I was twenty I was risking 10% on some trades… if I went bust it wasn’t that big of a deal.) It has to work. Again, test the damn thing. If it doesn’t make fake money then it certainly won’t make real money. There is a time and place for throwing caution to the wind and just going for it. Trading is the worst place for that kind of bullshit. The adrenaline that comes from the potential of losing thousands of dollars in a minute is enough—you’re mission is to keep a cool head. If you do this right, you have the potential for making a lot of money faster than any other method out there. (Excluding entrepreneurs who are insanely talented and simultaneously insanely lucky.
) The potential — chances are it won’t go that way. Chances are you’ll lose money. Or you’ll make money, feel like a god, trade like a god, and lose all your money. When you put real money on the line the game completely changes again. You think you’ve tested your method. You’ve gone the first month and everything looks solid. Great. Then you put money on the line. Shit gets real. You can’t seem to follow the system like you did in the test month. The market seems totally foreign again. You don’t believe me, that’s fine. For you it’s different. I don’t know how many times I told myself that.
I’m different. It doesn’t matter though, you’ll feel it the same as I did. To save yourself some money though, trust me, start small. DO NOT: Trade When You’re Emotional. I told you I started meditating at 16. It’s not because I was excited about being “in the moment” or that I was into Eastern philosophy. It was because if I didn’t I couldn’t trade. I’d mess it up. James Altucher talks about how he created algorithms for each of his methods and then let them trade for him while he was depressed an losing everything. I wasn’t smart enough for this (and my methods inevitably had some level of subjectivity to them) and so I manually entered all my trades. (Entering a trade or “putting on a trade” or “entering a position” just means you’re buying (or selling short) into a market.) James got to trade emotionally because he wasn’t actually trading. If I got emotional then I would get silly. You’ve got a system so this shouldn’t matter. But it so matters.
Imagine this: You’ve just gone long the corn futures market for 2 contracts. You’re up $5000 on a trade in two hours. Awesome, right? Hell no! This is what happens in the two sides (side 1 and side 2) of your brain: 1. I want to take this $5000 off the table now, that’s a great win. 2. Yeah, but look at this pattern—this could be the BIG trade—this could be $100,000 if I add contracts. 1. Yeah, but it’s more important to conserve capital. $5,000 is a great win. Maybe I could just take half off the table. 2. Don’t blow it. That’s $50,000 instead… 1. Fuck. The system says to sell now. 2. Yeah, but the system isn’t perfect.
You made it anyway—you can change it. You can feel it! 1. Yeah. But, the system… And then on and on. I said “imagine” but that exact inner-dialogue is something I went through twenty times a day every day for a long time. When did I make the right choice? (The right choice being following the system, not making money. A lot of people make money with a shitty trade and then think they have some special talent… of course they go bust within the quarter.) I made the right choice when I let reason reign. When did I make the wrong choice? When I was either excited or scared. Both fear and greed will destroy you. (Immediate greed that overtakes your rational decision—which has longer term greed in mind.) I’ve said this earlier, but it’s important to repeat: A. Some days you will feel like a worthless human being who has done and never will do anything worthwhile.
You will enter trades you aren’t supposed to because you’re afraid of missing out. You will exit trades before you should because your stomach is weak. B. The next day you will make a winning trade and feel like a god. You will forget whatever it felt like to lose and you will make trades outside of your method. You will enter trades you shouldn’t because you have the feeling that you can’t do wrong (the market may validate you for a couple days and make the problem worse). You will stay in trades too long because you “know” that the market will turn in your favor—no way could you be wrong! Your trading decisions need to come from numbers and predetermined rules. After years of deliberate practice and success you may actually get an intuitive feel for the market. Then begin introducing those feelings into your systems. Before then, no way José. DO NOT: Trade Based on Some Purchased System or Newsletter. Listen, if someone has a really kickass way to make money trading they sell it to a hedge fund or use it themselves. They don’t sell it to you for five easy payments of $300.
That being said, there are some decent newsletters out there. The James Dines letter being one of them. It may be worth signing up for a couple, but don’t rely solely on them. Experiment with their information. Test their ideas against your method. Do not follow them blindly. Think about the incentives at work… there is nothing in your favor. (This means, by the way, don’t follow the method below without testing it first. Just so you know–if I were actively trading it right now I probably wouldn’t have shared it.) DO NOT: Get Caught Up In Stories.
if you see this image – RUN! Your system either works or it doesn’t. People will devise elaborate narratives around their ideas they want you to buy into. They will spend countless hours telling you about this thing and why it’s the next took to make you a millionaire. They will scare you by telling you you’re going to miss out on the next big thing. They will tell you that you need them. You don’t. You need a system that works. Incorporate their idea into your system if you believe in it, see if it actually works. If it doesn’t, take it out. This isn’t a joke. Most people shouldn’t trade.
If you’re not willing to give everything to the market then it’s not worth messing with. Do what Warren Buffett says and put your money in the Vanguard S&P 500 index fund and go about your life. (Or invest in your own business.) Of course, as terrible as trading is, it’s also freaking awesome for the right people. To this day I get a warm fuzzy feeling when I see a price chart. I’m not joking. I feel at home and I see patterns and I get the urge to dive in… Maybe I will again. Who knows. For real: you should only trade if you are extremely drawn to it and if you can behave rationally (while remaining delusional). Alright.
here it is: I was on break before going into my junior year of college. I was trading, doing pretty well. I was having a particularly good morning when I received a picture message on my phone. It was a screenshot of my partner’s trading account. A couple weeks prior I received one that said $250,000. He had started with $30,000 only a few weeks before. I was freaking amazed. This particular day, though, I didn’t believe it was real. The image read: $2,000,000 (and change, whatever). That was a “holy moly” moment, to say the least. I stared at it for a long time. I texted back, “This isn’t real.” How did that happen?
How did he turn $30,000 into $2,000,000 in three months? Well, the method below. But also! (And this is a massively important “but”.) He was more balls to the wall than I’d seen anyone ever before. Every bit of profit was immediately thrown back into the trade so his position ballooned like crazy. I actually used the term “stapled to the wall”. He was insanely lucky. See that lumber futures price chart below? You see that massive move down? Yeah, he got that at the top and rode it straight to the bottom.
(He had a short position—meaning he made money as the price dropped.) He does have mental powers. THAT is a move! ne. This combination ended up with massive losses in the next couple months. He still ended with an awesome five-month return… but you were a millionaire for a month and then not… well, it hurts. I used this method with my balls about a foot off the wall and made great returns. I nearly doubled my personal account in six months and then was able to raise money from investors with that track record. Note: This method is specifically useful for commodity futures but can be applied more widely with certain modifications. Here is what we looked for: 1. Multi-Year High or Low. This method required constant awareness of price movements but not a lot of action.
With this method you probably won’t be making more than two trades a week—often you’ll make one every other week. It’s also a bit unique in that we are trying to spot tops and bottoms of markets, something that most people will tell you is suicide: “like catching a falling knife”. I just looked up the Corn Futures price chart at barcharts. com and found it sitting right at a multi-year low. This is a weekly chart (each bar represents one week) so we can see that we’ve missed the bottom last week. We can zoom in to see if that would have presented us an opportunity. The first is the simplest, this is the first filter I use to sort through charts: is it at multiyear high or low? You can see this quickly and skip it if the answer is no. If it is then go in for a closer look. (I will keep tabs on a bunch of charts sitting at these areas while I wait for the other requirements to be filled.) 2. Hammer, Morning Doji Star, or Abandoned Baby Candlestick. Note: I’m not going to get too technical here–just what you need to have a basic understanding and get started. I recommend you read everything at StockCharts.
com’s Stock School if you have any sort of commitment to this. Candlesticks are just another way to view pricing information on a chart. An emptywhite bar means that the price closed higher than it begun for the period of time measured by the bar. A red is the opposite, the bottom of the red bar is the closing price. The skinny area is the full area covered by price movement during the period covered by the bar. The second thing I would look for is a daily Morning Doji Star or Hammer Candlestick. A Hammer Candlestick: A Morning Doji Star: Here is an Abandoned Baby: Keep in mind we want these patterns at a multiyear high or low. Preferably with a gap. That means, for the corn chart above, we would want the price to open below where it’s current. The gap shows one last push up. The two candlestick show consolidation of price movements.
Basically, the price wasn’t able to follow through– signaling that this movement is out of gas. Now, if you don’t see one of these right away, don’t discount it totally. Check for the third requirement. 3. The Producers Are On Your Side. General Mills buys a metric shitton of wheat. They move that market big time. It would be nice to know what companies like General Mills are doing so we could be on their side, right? Yeah. And we can. And it’s pretty awesome. Now, General Mills and other large producers use futures markets to hedge price fluctuations more often than trading for a profit like us. So we don’t take them with a grain of salt unless they are making significant movement. Companies that trade over a certain amount of contracts are required to report the trades they make. These are collected in reports called Commitment of Trader Reports. You can get these reports here.
You can get them in a more useful form (a chart) here. Let’s see an example. I just looked up a promising chart of Soy Bean Futures: We can see a great multiyear low (which is more obvious in the weekly chart, note that this is a daily) and some consolidation. Okay, let’s see what the producers are doing–this information is available to us in the red line in the mini-chart below the main one. We can see here (and on here-just CTRL+F “soy” and you’ll see it) that producers (the RED line) are still significantly short soybeans and they aren’t in any rush to get long (“get long” means to buy). Because of this I’m not going to make a trade but I am going to keep an eye on this over the next few weeks to see if a cleaner setup emerges. (A setup basically means the boxes for your method are checked off.) We want to see the producers make a significant move in the direction of our potential trade. Here I would want to see a large movement toward zero. This is a fascinating topic. Check out Trade Stocks and Commodities with the Insiders: Secrets of the COT Report, it’s freaking amazing.
And if the $40 price tag looks too high, seriously reconsider trading as an option. 4. (Optional: For the insane ones) Balls-to-the-Wall-Re-Buy. My partner was able to make such insane returns because he caught a great run and leveraged it to the hilt. He put on a huge position and then used all the profits from each movement to make his position even bigger. That means you’ve got to hit a home run. I honestly can’t recommend anyone do that. This method alone demands more risk than most (even though you can use mini contracts to take smaller positions). I played more conservatively and did well. When I trade again, I’ll trade even more conservatively. Capital is the first requirement for trading–without it you’re out of the game. You need to set a stop-loss immediately after entering your position. I would give different markets different leeway depending on how widely they fluctuated normally. Corn might fluctuate 10 points daily on average while Crude Oil might fluctuate 20. I would give Oil more wiggle room ( not willy-nilly, mind you!
) The most important thing is that you set a stop loss with a loss that you can manage. It doesn’t matter how perfect a setup might appear, it could still lose money. You need to be prepared to take losers. Ideally your stop loss is below the previous low. Sometimes you won’t be able to catch it that close, but if you can you’re golden. (You trade seeing more of a movement for taking on less risk.) 6. Managing the Trade. Let’s say we get long Soy Beans. We’ve got our stop-loss right under the previous low. Version #1: The market moves against us and takes out our stop (this means the stop-loss is hit and we are taken out of the trade, we are “flat”). This is the most common scenario. Version #2: This is the more interesting version–the market moves in our favor! Yeehaw!
We’re not out of the woods yet though. Obviously we would love the market to take off in the direction of our trade and lead us to our fortune. If this happens then count your blessings and remember the feeling–because it won’t come often. Even when we get a winning trade, we have to work with it. It will go up a while and then back down, then up and then down. When we talk about “managing a trade” we are really talking about three things: 1. Adding to the position. We talked about this a little earlier. Essentially you can add to a position that’s working to double down. Say you get a strong movement in your favor, then it pulls back a bit to consolidate, you can add to your position to double-down on the move. **2. Adjusting our stop-loss. This is the one you will use most often (as in every winning trade). I like to move my stop-loss to my entry price as soon as possible. This means that if that market moves against you then you still don’t lose any money. I will normally wait until there is a new solid level of “support” created and then move the stop loss up to this new level. A support level is a price at which there is resistance to the market moving below.
This is usually created by a small pullback. Continue to adjust your stop losses as the market moves in your favor. 3. Reducing our position (taking money off the table). I alternated between taking 50% of my trade off the table when I had 100% and never reducing a trade unless I got out completely. Often taking 50% or 30% at a certain point is a good way to lock in trades, the only problem is that it limits your upsides. 4. Exiting. At certain reversal patterns I would exit a trade and not wait for it to hit a stop-loss. how we used to trade. Scary simple, right? (There are a few minor things omitted just for the sake of simplicity… these items decided most of the decisions.) You probably noticed that I didn’t give you any examples of perfect patterns (if you go back and look at a more magnified version of the lumber one you’ll see a perfect setup). That’s because it takes a massive amount of work to find a great trade. I may have to look through 200 more charts before finding a decent setup. If you’re really interested in this, go to BarCharts.
com (or download a trading platform, I like thinkTDA) and look through every single commodity futures chart you can find. Look at a 5 year chart, then if one looks promising look at a 1 year chart, then a 6 month. Keep a list of ones that look promising that you need to keep an eye on. Review these every day. Once a week review ALL the commodities again. When you find a good trade, make it on paper. Either literally with paper or with your program (again thinkTDA is awesome… I don’t even have an affiliate link for them, they’re not sponsoring this post… but now I kind of think they should :P). When you start to get good at it, dip a toe in with real money. That’s 4 steps and a ton of time. I was going to recommend more books for you to read but I’m not. If you want them in the comments I’ll offer some up but the important thing is for you to actually apply this knowledge first. Go and spend an hour looking at charts right now. This post ended up being fairly long… but the topic is huge . I glossed over a lot of technical stuff on purpose. The goal here was to give you an idea of what it is to be a trader and an example of a method to begin using. I’m happy to answer any questions you’ve got!
Just put them in the comments below or email me. Thanks for taking the time to read this! Let me know what you think – the good, the bad, the ugly – in the comments below. can i apply the same method on currency trading?…and which time charts is more suitable for this methods…. Do you think those techniques could be adapted to cryptocurrencies or that crypto is too volatile? Most coins don’t have multiyear charts because they haven’t been here for that long. What is your stance on that matter? with the help of a recovery expert i was able to recover my money from IQoptions. I recently recovered my initial investment from a scam broker. I had to resort to unconventional means to make this happen. I am open to share my experience.
Feel free to reach out. i suffered so much from this and lost over 200k so far and still now learning on my own and have not made a penny back rather i still lose. i feel it si door close to even regain what i have lost and i have 4 kids and old is becoming my middle name any suggestion. I have been scammed and scammed and scammed again. I invested with four binary companies and lost all of my investments totalling 290,000GBP. Then I was contacted by someone offering help – a company who specializes in binary recovery. I was scammed by them again. By the end of it all I had lost all of my savings and I was in serious debt. I was desperate for help and that made me vulnerable to recovery scams. My husband is not around anymore and I have an 8 year old son with learning difficulties. The pressure of being a single, working mother with a child who needs so much additional attention and support became overwhelming for me. I also felt too traumatized to trust anyone else and I was very afraid, but I had no choice other than to trust Geminihacks(dot)(com) They have been incredibly helpful and supportive and also very understanding about all of my fear and concerns they helped recover all of my funds back within a week using unethical means I feel quite , tremendously joyous about the decision to use Geminihacks (dot) (com). I really hope that others do not have to go through what I did, and I wish that I had realized before things were so bad that I was being scammed. I hope my story might help others to not be fooled the way that I was. Very solid article!
I use the COT reports quite often, and it is a helpful tool. Sadly, not a lot of traders take it seriously. It is understandable, not a lot of traders are long-term speculators everybody loves to day-trade, and for them it is useless. Again, Kudos on the article. What about algos administered by the market maker of your broker’s affiliate company that trade against your trades. No mention of that here or how to avoid them. Probably because there is not and that is why none of you ended up making money in the end. Hello, great honest article, and your absolutely correct about putting the time in. I’m thankful to be single with no kids. I had to disconnect my phone and stay off of social media just so I can put 8 to 10 hours a day studying..I wanted to ask you if you ever applied a similar method for Forex Trading? Thank You. Hi thanks for a well thought trading rules to go by! I’ve been trading stocks and now more into options and have doubled my money in 4 months. Like you said, having a set of rules are important and sticking to them until the end. It is harder to do because we’re emotionally driven all the time.
Keep the fire going. Thanks for your time! YLAN, are you day trading options or intermediate swing or longer term options or hedging them? Good, solid advice. I’ve been trading oil futures for several years and your post is spot on. Very helpful. Thanks for taking the time. Sticking to a basic plan that works and not getting emotional is a must. Irrational exuberance over “wins” or depression over losses will only lose you money. I’ve had a rough go. I’d love to learn how to trade. Read your article…alot of good information.
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