Stock Trading Education Week of 2-22-16 Edition

When Trading Less is Earning More…

trading discipline

Trading Discipline

The Stock traders earning the most money this year, are those trading less…

I should probably clarify, I have no idea who is making or losing money. What I can tell you with conviction, is that day traders who can’t discern between a great idea, and everything else, are trading too often. A lot of stocks are in 4 week trading ranges. The institutional edge on the charts is slim pickings.

Be patient to enter, be patient when you do.

This is a common theme in my coaching calls. The angst of over trading is felt most when the stock market serves up 2 days of easy profits. Day traders are looking at their P&L and saying “That was awesome, but now I am even for the week…”

To get past break-even requires losing less, and holding winners longer. I can hear you thinking, “no s**t genius.” My reply would be, simple yes, easy no.

Trading less is winning right now. There will be a time for being aggressive, day trading is about cash flow until then.


 

Podcast: How to Predict the Coming Trading Day with Conviction

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Trading Psychology | The Psychology of Winning Traders


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How to Break a Trading Slump

how to break a trading slump

How to Break a Trading Slump

$HD earnings are out this morning and the stock is gapping higher. On the surface, the volatility is good, but is the move higher over with the gap?

A gap and sideways is frustrating. There is no other way to say it. You salivate at the potential price action, but then you get a dud. Then you force trades.

This vicious cycle is expensive.

This brings up a good topic- How to Break a Trading Slump…

If you are a member of our mentor room, you know I am very open about my early trading struggles. It’s the reason I am so passionate about helping. I already went through the tough times, my mission is to help you reduce and then eliminate the rough patches in your trading career.

If you’re struggling, you can quickly break it by getting back to basic criteria. Forget all of the amazing indicators and simply get back to tape reading. Specifically the most recent price action.

The recent move higher has frustrated a lot of people day trading because most of the stocks going higher are in down trends, so the sell-short is the correct trade. If this is you, try this simple fix:

For a long, trade only in the direction of:

  1. The current net change must be positive.
  2. The current change from the open must be positive.
  3. The current last price must be above the previous day’s high.
  4. The stock must be “well-bid for the last 2 days (higher-highs, higher lows)

This is one of my favorite slump busters. I am confident it will work for you. Go back and look at charts of the stocks you traded the last 5 days and I am willing to bet you will see a different picture.

To help you find stocks that meet this criteria (for longs), here is my scan, give it a try.


Stock Trading Education Video Training: Mentor Room

19 Mentoring Minutes that Instantly Make You Profitable…


Struggling Traders Pay for Losses Instead of Continuing Education

Trader Education

Trader Education Pays for Itself

Continuing education is a monster part of trading for a living. Could you imagine going to see a doctor or lawyer who hasn’t kept up with regulations or changes?

Yet that’s exactly what most traders do. They stop learning and they pay the price.

A good trading education starts with learning what to look at, but ultimately, it’s the screen time and really understanding the right questions to ask.

  • “What just unfolded?
  • What did I miss?
  • What didn’t I see?”
  • I got filled, what do I plan to do if it moves in my favor? If it moves against me?
  • When should I trade for cash flow versus hold trades longer? How do I know the difference?

Stock Trading is not a 9-5 Job…It’s Time to Stop Whining

The more prepared you are to answer these types of questions, the more distinctions you can make in price action, the more consistent your trading results will be.

It’s time to stop whining about trading a tough stock market.

If you’re a frustrated trader I have some news for you. This is the new normal Deal with it. Day traders need to admit the market is lacking a bias. This causes weak conviction.

This means you need to be a stock picker. Is this news? No. Look at the chart of the $SPY for the last 18 months. There are spurts in price action but for the most part it’s a trading range. The market has not been obvious, save for a few pockets as opposed to a few quarters.

Why the tough talk? Because too many traders are complaining. “I bought the high and it went lower…I shorted the low and it went higher…”

That happens to all of us. You stop focusing on the losing trades and ask yourself why you don’t earn more on the winners.

Trading is challenging, but very rewarding when you finally have a trading plan that makes sense for you. If you want a guarantee, get a job.

For me. I like it here in front of my charts. It’s not always easy but I didn’t sign up for easy. I signed up to be in control.

How about you?


$SPY Trading System

$SPY Trading System

$SPY Trading System

Are you using moving averages?

Here is a simple plan that flat out works, in any time-frame… I will demonstrate using the $SPY from 2-25-16.

Easily one of the biggest problems using a moving average system is the trigger will lag actual price. By their very nature, moving averages are slower. For this system we are going to use multiple moving averages and add a twist, we will add the close of the candlestick, as an extra trigger.

** I will give you the components and the plan. I will leave it up to you to complete the picture. Let’s have a discussion in the comments…

  1. Starting at 12pm on the $SPY chart below, use the 50 sma (heavy dotted line, as you main trend, nothing else in the stock market matters. This is your bias.
  2. The 20 sma is your momentum, and your trigger for entries and exits.
  3. the 5 ema (*note exponential here) is your slow entry and exit trigger, for half of your position.
  4. The close of the candlestick on the opposite side of the 20 sma is your fast entry and exit trigger.

Elements:

  • 5 minute chart.
  • 50 sma.
  • 20 sma.
  • 5 ema.
  • 5 minute candlestick.
spy trading system

$SPY Trading System

Stock Trading Education Week of 2-22-16 Edition

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Leave a Reply 9 comments

Wayne Reply

Thank you Peter. I appreciate your work. Would you elaborate on the triggers. Seems the shorter ma (5ema) would be a fast trigger. Confused labeled slow trigger. Thanks Peter.

    Pete Renzulli Reply

    Hey Wayne
    thanks for reaching out
    one of the problems with using moving averages is the lag on the entry or exit
    In this example, I recommend using the closing price cross and close as the first signal, and then the moving average cross as the second entry or exit

    the longer term moving average is your trading bias long or short
    so if you want to be long:

    if price is below the 5 and the 20 moving averages, the first buy is when the 5 minute candlestick closes above the 20 period moving average. (just after 3pm on this chart)
    the second entry is when the 5 crosses above the 20

    You would reverse the process for a short sale or an exit of a long
    first exit when the 5 minute candlestick closes below the 20 period moving average
    second when the 5 period moving average crosses below the 20

    using the candlestick for the first entry gets you a better price on your first entry and a better exit, but prevents you from making a full commitment until you get confirmation fro the moving average

Wayne Reply

Thank you Peter. In this example it looks as though it immediately turned short or exit. Also, shouldn’t be trading in the direction of the 50sma meaning in this example only take the short signals? Thanks again

    Pete Renzulli Reply

    No shorts!
    the 20 is above the 50 the entire time = long

Wayne Reply

sorry was looking at Friday not Thursday.

Wayne Reply

Friday looks short at 1 :30. If I had used this Friday in the ES, the 20 would have done a perfect job of keeping me short all day. Thanks again for all the info you freely provide. I appreciate you.

    Pete Renzulli Reply

    any time Wayne
    please reach out with any questions
    have a great weekend
    Pete

mike_tee_vee Reply

Hi Pete,
In the posted chart, would there be a fast entry just before 1pm when the bar closes above the 20 sma? Also, when does the 5ema cross the 20 sma? It doesn’t look like it triggers in the example.

Thanks!

    Pete Renzulli Reply

    Hey Mike
    I will post another couple of charts this week
    Friday was a little too much sideways for a good example
    moving averages no help in that type of market
    have a great day
    Pete

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