My advice did not sink in until she hit a period during which all of her trades were going against her, and she was facing a margin call. When i spoke with Karen, her normally self-assured demeanor had changed. She was scared. She was no longer looking forward to the next trading day. After losing most of her money, Karen struggled to make a trading decision private key wallet. The once confident, outgoing and independent trader was now grasping for outside advice from a variety of newsletters and other resources. She was desperate.
On the morning after a long holiday weekend, Karen called me and with a steady, confident voice, placed orders to get herself out of all of her positions. Over the weekend, she had read a book or two and had some conversations with her husband. It’s hard to determine which of these produced the “epiphany, ” but she now wanted to try a different approach — one of a longer-term nature (PT). After careful reflection, Karen recognized that she was at times impulsive, stubborn and simply not realistic (not good for a DT).
Even though she clearly could not devote the time necessary to be a day trader with her current work schedule and mentality, she realized that her routine and dedication must change completely no matter what the trading time frame. She was now dedicating 30 minutes during the day and/or evening to go over the markets. She adjusted her trading size to fit a longer-term approach but, most importantly, she had a plan, and that plan fit her schedule. She no longer had to make decisions in the heat of the moment. She started looking for longer-term trends that did not require hour-to-hour decision making.
Example #2. John started trading about four years ago. He seemed an agreeable enough person, but very business-like with no time for chit-chat. He wanted to trade online from the start because he had plenty of stock trading experience. John lived on the West Coast and was a real estate agent who did pretty well in the dot com bull market trading stocks until the market met its maker. Confident, willing to learn and fairly disciplined, he was trading with $25, 000 of pure risk capital, adequate for a first-time futures trader.
Days went by and every morning as i was going over my clients’ daily statements, I noticed that John was trading coffee. Not only was he trading coffee, but he was sometimes day trading coffee. I let him know that i would be pleased to talk with him about various markets if he wanted. He would call once in a while checking on fills and asking about different reports.
A few weeks down the road, John called and mentioned he would be in the L. A. area and would like to meet for lunch. During lunch, he mentioned his frustration over recent losses when trading futures. At this point, his account was down to about $14, 000 over a six-month period. I asked him why he was attempting to day trade coffee, and he said his brother-in-law was a coffee importer/exporter, and he thought that it would help him. The coffee market was open from 6: 15 a. m. to 9: 30 a. m. PST, which perfectly suited his work schedule, but as i found out later, not his personality.
I asked him to start writing a trading journal, which allowed him to look back objectively and find patterns in behavior that both helped him and hindered him. John’s journal revealed that he was frustrated with the slow fills of the open-outcry coffee market, and so he was quick to get out of winning trades and too slow getting out of his losers. He was trigger happy and at times traded larger positions than he should have.
I suggested that we change his “trading diet” around a bit and introduced him to the U. S. Treasury bond and the E-Mini stock index futures; both trade electronically and provide instant fills. These markets were perfect both for his schedule and personality.
I felt that these were good markets for both day trading and swing trading and recommended a few concepts in money management and trade management. The first was the maximum daily loss that he should set and place in a visible way as a reminder. The second was the setting of a daily profit target. Though it was somewhat hard to implement, if he could walk away when he was down to his maximum daily loss or when he reached his daily profit target, he would last much longer as a trader. It also would give him a better chance of succeeding down the road — in other words, smaller steps down that longer road.
John is still down in his account, but he is making progress. Here are a few tips that have helped him: Instead of buying and selling five contracts at a time and “starting and finishing” the trade this way, he now gets into his trades in multiples of three. In the past, John simply would buy five contracts when he thought he needed to go long and sell five when he felt he needed to take profits or cut his losses.
When John gets into a trade these days (let’s say in a long position), he will buy six contracts and place a stop loss on all six. Initially, he looks for a small profit on the first two contracts. (It helps him mentally to know “I took a profit on this trade. “) He then raises his stop loss and changes it to a four lot. He looks for a second profit target for two more contracts based on his support and resistance levels. If that profit level is reached, he can get “greedy” with the last two contracts. In essence, he now knows how to manage his trades in a way that increases his profitability. And, further, and perhaps as importantly (based on his personality), he does not feel like he is missing out on big moves if they happen, and he still locks in small profits when they present themselves by using the first and second targets.
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