We assume that you have already
experience in day trading. A lot of good books have been written about day
trading and trading principles, so we just want to mention some important
rules which concern our indicators.
- In the markets you have trading
ranges (flat, up and down), uptrends and downtrends.
- Don't trade in a trading range
market, especially when you are highly leveraged and you work
with close stops. It's just like a sparrow trying to dance with the
cranes.
- Don't trade every day - wait for
a trend. A trend is the only way for a small guy to stand a
chance in the market. It is better to make two winning trades a week
than churning your account every day and make your broker rich.
- We define a trend as a powerful
move in one direction which is likely to continue.
- There are various ways to define a trend;
a good way are the Global Futures Trend Indicators
shown on the start page.
- Don't go long in a downtrend and
don't go short in an uptrend, no matter how much it hurts to
miss an opportunity.
- Since it is impossible to anticipate every
market move, a good way for small traders is also to trade by
market behaviors which frequently appear.
- Become the master of one or two market
behaviors you feel comfortable with (market behaviors don't
work when economic data are released).
- You have to fight two enemies, namely
fear and greed and the latter is by far the biggest
one, especially if you are very greed driven as most of us are and find
it very difficult to sell. To overcome fear you need discipline to stick
to your market behaviors, because the market has a lot of tricks
to suck you in at the wrong time.
- The best way to fight greed is by putting
a limit order together with your stop, especially if
you trade the S & P futures. This will limit your profits too, but
how many days are there when the market moves up in a big way - very
few. And usually everybody who goes for the killing gets killed himself.
Besides this you are out very quickly with your profit and a lot of
things can happen during trading hours as you have probably experienced.
Therefore wait for the herd, take only a third, as
the pros say. It will of course hurt when you see the market go higher
after your limit was hit, but in most cases you will be grateful for
your limit order.
- The market is not a one-way street;
it gets stronger with every low and weaker with every high which is
taken out. Day trading and high leverage are therefore not a good strategy
for folks who want to catch every high of the market. The only exceptions
are The Global Futures Long and Short Entry Signals
and The Global Futures Bullish Take Off Formation
and The
Global Futures Bearish Sell Off Formation. Once you are familiar
with them you might use trailing stop loss orders.
- Don't ever chase the market - always buy
weakness and sell into strength. That means if you want to
go long in an uptrend on a 60-minute chart, wait for a break on the
5-minute chart to get a decent fill if you buy on market orders.
- Don't overtrade so you
can use wider stops.
- Remember that even the most reliable
indicator can fail, so don't bet the ranch on it
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