Edition 287 Wednesday, February 24, 2010
Edition 287 Wednesday, February 24, 2010 |
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Commentary by Andy Jordan
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There were no indicators for a really strong trade so far this week, as sometimes happens in trading. It is best to use this time to do other things. Lesson to be learned: we earn more money through ignoring weak trades than through "taking a chance" (gambling) on them. Until next week! |
On February 4 we told subscribers of our professional daily spreads & position/swing trading newsletter Traders Notebook, "Consider selling a March Japanese Yen 116-120 Call spread: buy March Jap. Yen 120 calls and sell March Jap. Yen 116 calls at approx. 40 ($500) or better. Suggested stop is 200% of the received premium (suggest buying back the spread whenever premium doubles). Target is to see the spread expiring worthless on 03/05. Suggest using about ½ of the risk you usually use for spread trades. Comment: The Yen has been in a nice down trend since December last year and regarding seasonality the down trend might continue. I am still expecting the Yen turning to the down side and will try to sell the spread with a nice premium."
Here's how we suggested managing this trade:
02/05 In at 40 or better.
02/10 Last: 10; suggest buying back the spread at approx. 13.
02/16 Out at approx. 10 or even better.
For more information about our daily newsletter, visit our Spread Website to find out more about Traders Notebook.
Emotions that go with winning and losing
by Joe Ross
Once a trade is entered, there are two possible outcomes: Win or lose. Between the two is the breakeven point, and because it is in-between, it’s psychologically significant. Losing is involved with fear and hope. Winning is involved with greed.
When on the losing side of a trade, the breakeven point is a place that inspires hope. Being human we have a natural tendency to avoid risk and loss. When in the agony of a losing trade, we tend to hold on and hope that the losing trade will turn around and return to the breakeven point, where there may be no profits, but at least there are no losses. But hoping often leads to losses in the end. Hope has no place in making trading decisions. The entry point and the protective stop should be determined before putting on a trade. When this is done properly, there is no reason to let hope, or any other emotion, influence your trading decisions. You should trade almost mechanically. If the trade goes against you, simply exit once the stop price is hit. Don't let hope play a role in your trading plan.
There are many good reasons to cut your losses, rather than hope for the losing trade to turn around.
The point of view a trader has from a winning trade is quite different. When in a winning trade, a lot of traders tend to take all their profits too early, again because they are averse to risk and potential loss. By exiting the entire position too early they don't let their profits run. This limits the size of the winning trades, so that across a series of trades, the overall profit is greatly lessened. But there's a way to lock in profits, let the trade run a little longer, and pile on a little more profit. Once the profit exceeds the initial stake, a stop can be placed at the breakeven point. This strategy lets you lock in some initial profits while virtually eliminating risk. The most you can lose is commission costs. Besides reducing financial risk, the emotional stress is also eliminated. And reduced stress means you can evaluate the bigger picture more objectively.
Unfortunately, many novice traders are so consumed with capturing a profit and showing a good profit/loss statement that they cannot follow through with moving the stop to the breakeven point. They feel the strategy inhibits them and may limit their potential profits. They wrestle with moving the stop back to its original point, where they entered, or simply canceling it altogether. This can be disastrous to a trading account. Stops should never be changed to a more harmful position or cancelled altogether. Such practices will stir up emotions that adversely affect trading decisions, and eventually lead to the end of a trading career. Discipline is always the best strategy.
There is an exception to allowing winning trades to run. That exception takes place in the situation where testing and research indicate that the best result will be realized by scalping—taking all profits at a specified objective. Breakeven enters the picture only between entry and the realization of the scalping objective.
©
by Trading Educators, Inc
Re-transmission or reproduction of any part of this material is
strictly prohibited without the prior written consent of Trading Educators,
Inc.
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There is no "one" way to trade correctly. Trading is as individual in its nature as anything in this world can be. The only thing that is right is what works for you.
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The Spread Scan weekly newsletter is designed to assist you in becoming a better, more complete trader by showing you, within the context of the markets, how to trade spreads.
In this newsletter you will see applications of spreading in the futures and commodity markets. Spreads are applicable to all futures markets including currencies, commodities, financial instruments, and stock indexes. It is even possible to trade spreads in the all-electronic intraday market using day trading techniques.
Spreads are based on seasonality, correlation, backwardation, chart patterns, and simple observation. Spreads follow the Law of Charts™ and can be implemented using the Traders Trick™ entry.
In each issue of Spread Scan, you will find an upcoming spread trade for your consideration in the following week. You will also find a review of an existing or closed spread so you can see and learn how spread trades are managed.
Spreads offer you the most efficient use of your margin account of any other way to trade. Many traders find they like them so much that spreading becomes their primary way of trading.
Each week we present spread trading examples and opportunities to help you become a more professional spread trader, and we provide you with helpful content of interest to traders.
Be sure to "white list" us to receive all your issues of Spread Scan, so that you can continue to enjoy learning through the best free educational trading information available, and so that we can inform you about additional educational services and products to help you grow as a successful and profitable trader.
Educator for Spread Trading and Editor of Traders Notebook & Spread Scan
Andy Jordan made his first option trade at the age of 18. Since then he has been fascinated by the world of trading. In 2002 he met Joe Ross, and became interested in spread trading. Andy was then intensively tutored by Joe Ross and personnel at Trading Educators. Andy is the founder and president of Jordan Trading, S. A. Even though Andy has shown through live chats and in several trading journals that he is able to day trade today's markets, spread trading has always been his preference. In addition to his own spread trading activities, Andy is the editor of Traders Notebook. For those interested in one-on-one personal coaching, Andy has developed and instructs an online course in spread trading, "Trading Mentoring - Trade with a Pro," during which he demonstrates all aspects of trading from choosing the trades on through how and when to enter the trades, manage the trades, and exit the trades.
Andy Jordan was born 1965 in Germany, but is currently living in the Caribbean. He has studied mathematics and business administration in Regensburg and Hagen, and holds a PhD in mathematics.
Joe Ross has been trading and investing since his first trade at the age of 14, and is a well known Master Trader and Investor. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.
Joe Ross is the discoverer of the Ross hook™, and has set new standards for low-risk trading with his concepts of "The Law of Charts™ " and the "Traders Trick Entry™." Joe was a private trader and investor for much of his life, but a serious health situation in the late 80's caused him to shift his focus, and that is when he decided to share his knowledge. After his recovery, he founded Trading Educators in 1988, to teach aspiring traders how to make profits using his trading approach.
Joe Ross has written twelve major books and countless articles and essays about trading. All his books have become classics, and have been translated into various languages. His students from around the world number in the thousands. His file of letters containing thanks and appreciation from students on every continent (now including Antarctica!) is huge. As one tutoring student, a successful trader, wrote: "You have no idea how much improvement in my life and in my trading efforts have those three days with you brought to me."
Joe Ross holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, Virginia. He is listed in "Who's Who in America." After 5 decades of trading and investing, Joe Ross still tutors, teaches, writes, and trades regularly. Joe is an active and integral part of Trading Educators. He is the primary author and Editor-in-Chief of the company's newsletters: Chart Scan™, Spread Scan™, and Traders Notebook™. He is also the editor of the Traders Money Club™ and the host of the free Traders Live Chat, the free European Chat for Traders, and the moderator of his popular trading forum.
Joe's philosophy for helping traders is:
"Teach our students the truth in trading — teach them how to trade"
Joe sets forth the mission of Trading Educators as follows:
For information about Joe Ross and Trading Educators, please follow this link...
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Copyright 2010. Published by Trading Educators, Inc.
Spread Scan is a complimentary educational letter.
The information contained in this educational letter has been carefully gathered from sources believed to be reliable, but accuracy cannot be guaranteed. Readers should not assume that anything written here is to be considered as a recommendation, or that any performances shown will equal performances of the past.
This educational letter is intended solely for purposes of information and does not purport to provide legal, tax, or individual investment or business advice.
Readers should consult with expert legal, tax, business, and financial counsel before considering any action on the information contained in this newsletter. The publisher and its associates, editors or employees may have taken positions in and may from time to time make purchases or sales within markets and market vehicles mentioned herein. Reproductions of this newsletter are prohibited except by permission.
Joe Ross & Trading Educators, Inc. own all rights, title and interest to this publication. No part of this publication may be reproduced, in whole or in part, or by any means, mechanical or electronic, without permission in writing from the Publisher. You have no rights to resell, reprint, reproduce, or digitize Joe's Spread Scan Newsletter. While all attempts have been made to verify information provided in this publication, neither the author nor the Publisher assumes any responsibility for errors, omissions, or contrary interpretation of the subject matter herein.
This publication is not intended for use as a source of any advice such as legal, medical, or accounting. The Publisher wants to stress that the information contained herein may be subject to varying international, federal, state and/or local laws or regulations. The purchaser or reader of this publication assumes responsibility for the use of these materials and information. Adherence to all applicable laws and regulations, including international, federal, state and local, governing professional licensing, business practices, advertising and all other aspects of doing business in the U.S., Canada, or any other jurisdiction is the sole responsibility of the purchaser or reader. Neither the author nor the Publisher assumes any responsibility or liability whatsoever on the behalf of any reader of these materials.
The Ultimate Method
Trade many stock index futures, commodity futures, currency futures, forex pairs, or ETFs or CFDs on any of the markets mentioned.
Joe Ross and Trading Educators are happy to release the Ambush Trading Method™, through which you can ambush many stock index futures, commodity futures, currency futures, forex pairs, or ETFs or CFDs on any of the markets mentioned. If you want, you can ambush more than one market daily.
AMBUSH A MARKET OF YOUR CHOICE
The Ambush Trading Method™, which has been both back- and forward-tested, takes trades based on the daily chart. The entries are based on two very simple indicators that measure volatility and direction of the market, that are used in a way that actually makes sense. It's not a hocus-pocus method based on optimized backtesting hundreds of indicator-combinations; it's based on common sense.
Follow this link if you want to own this incredibly effective trading method today
SPREAD TRADING - GET A PROFESSIONAL MENTOR BY YOUR SIDE
SPREAD TRADING is one of the least known and best-kept secrets in the world of trading. It is, in fact, one of the most consistently reliable, potentially profitable, and safest ways to achieve real SUCCESS in trading.
If you need a helping hand to turn your spread trading into a successful business, we encourage you to sign up for our 1-month "Spread Mentoring Program," a complete training experience with our professional spread trader, Andy Jordan.
The training is for all traders - beginning, intermediate, and advanced.
Together, you and Andy Jordan will define the steps necessary to reach your goals, and Andy will give you a detailed plan of how to grow your trading capabilities to a professional level.
OUR GOAL FOR YOU:
At the end of the one-month mentoring program, you will be able to trade spreads ON YOUR OWN! You will have YOUR OWN trading plan, and you will know precisely how to trade in a profitable and consistent way. For further details regarding Andy Jordan’s Futures Spread Mentoring Program, please follow this link to our Spread Trading Website.
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