Product Description
This practical book provides you with everything you need to be able to day trade grain futures effectively. It opens with chapters explaining the author’s preference for the grain futures markets, and his reasons for preferring to day trade, before going on to explain the fundamentals of trading and the more specific knowledge required for his chosen approach…. More >>

Day Trading Grain Futures: A Practical Guide to Trading for a Living

Investors are always looking for ways to make money; for some this means buying and selling futures contracts, for others means buying and selling stocks. One such method is Forex day trading. Day trading in general, and specifically Forex Day Trading, is the practice of buying and selling various assets, such as futures, options, stocks and currencies, with the intention of profiting from the price volatility on a particular day. Trading Forex entails looking for variations in pairs of currencies and attempting to buy when their difference is low and sell when their difference is high.

A Specialized Form of Trading

In the beginning, day trading was only possible for financial companies such as banks because of the fact that few had access to the market exchanges and live market data. Now with the advancement of both the Internet and the processes of the stock and futures markets, individuals now have access the same market data and futures exchanges as these financial institutions. In addition, trading has become so affordable that just about anyone with a computer can make trades. Thanks to the computer age, Forex day trading is now more available than ever before.

Trading in your Bathrobe?

For many people, the year 2000 image of Forex day trading was middle-aged guys who quit their regular jobs to sit at home in their bathrobes making trades. Thanks to the Internet, we don’t have to see a sight like this! While this is definitely possible, it is a broader picture; if you have an Internet connection, you can receive Forex news. If you can receive news, you are able to do the technical analysis necessary to make decisions and then to make trades, no matter whether you are at home, in an Internet caf or on the beach. It sounds simple because it is; the hard part of Forex day trading isn’t implementing trades, it is knowing what trades to make.

Forex Day Trading is not for Everyone

As with any kind of trading, Forex day trading is not for everyone. The stories of great successes in day trading (which are usually sold in EBooks on the Internet) are more than overshadowed by a large percentage of people who lose money day trading Forex or any other commodity. The money that you invest is called risk capital for a good reason; when you start investing, you have put this money at risk of loss. Successful traders know that when they expose their money to risk, it takes research and experience to make Forex day trading profitable.

Forex currency trading for beginners includes some important steps. Like any other form of trading, the investor needs a trading plan to outline his or her strategy; do you plan to trade by scalping (only holding positions for a few seconds or minutes)? Do you plan to use trend trades, counter-trend trades, or ranging trades? These are the kind of decisions that come into play and you need to know what you are going to do before you do it.

In addition, Forex day trading requires the new investor to understand the importance of research and technical analysis; if you don’t follow the news, you can’t really know what’s going to happen with the currencies you trade. These days, there is a wealth of technical analysis tools available on the Internet. Finally, beginners need to have a system for charting trends and analyzing the movement for each currency they trade. For Forex day trading (and for all other types of trading for that matter), Japanese Candlesticks offers the best system for seeing movement in the market.

Conclusion

Forex day trading is not for everyone. It can be unpredictable and it is possible to lose more than you originally invested. If you learn Forex trading and the techniques and processes involved, it is possible to profit from Forex day trading. The good news is you don’t have to work in your bathrobe! (Unless you want to!)

Author: Stephen Bigalow
Article Source: EzineArticles.com
Provided by: Canada duty

In this article I will explain to you how to develop a profitable day trading system in five steps:

Step 1: Select a market and a timeframe

Step 2: Define entry rules

Step 3: Define exit rules

Step 4: Evaluate your day trading system

Step 5: Improving the day trading system

Lets take a closer look at these steps.

Step 1: Select a market and a timeframe

Every market and every timeframe can be traded with a day trading system. But if you want to look at 50 different futures markets and 6 major timeframes (e.g. 5min, 10min, 15min, 30min, 60min and daily), then you need to evaluate 300 possible options. Here are some hints on how to limit your choices:

Though you can trade every futures markets, we recommend that you stick to the electronic markets (e.g. e-mini S&P and other indices, Treasury Bonds and Notes, Currencies, etc). Usually these markets are very liquid, and you wont have a problem entering and exiting a trade. Another advantage of electronic markets is lower commissions: Expect to pay at least half the commissions you pay on non-electronic markets. Sometimes the difference can be as high as 75%.

When you select a smaller timeframes (less than 60min) your average profit per trade is usually comparably low. On the other hand you get more trading opportunities. When trading on a larger timeframe your profits per trade will be bigger, but you will have less trading opportunities. Its up to you to decide which timeframe suits you best.

Smaller timeframes mean smaller profits, but usually smaller risk, too. When you are starting with a small trading account, then you might want to select a small timeframe to make sure that you are not overtrading your account.

Most profitable day trading systems use larger timeframes like daily and weekly. These systems work, too, but, be prepared for less trading action and bigger drawdowns.

Step 2: Define entry rules

Lets simplify the myths of entry rules:

Basically there are 2 different kinds of entry setups:

Trend-following

When prices are moving up, you buy, and when prices are going down, you sell.

Trend-fading

When prices are trading at an extreme (e.g. upper band of a channel), you sell, and you try to catch the small move while prices are moving back into normalcy. The same applies for selling.
In my opinion swing trading is actually one of the best trading strategies for the beginning trader to get his or her feet wet. By contrast, trend trading offers greater profit potential if a trader is able to catch a major market trend of weeks or months, but few are the traders with sufficient discipline to hold a position for that period of time without getting distracted.

Most indicators that you will find in your charting software belong to one of these two categories: You have either indicators for identifying trends (e.g. Moving Averages) or indicators that define overbought or oversold situations and therefore offer you a trade setup for a short term swing trade.

So dont become confused by all the possibilities of entering a trade. Just make sure that you understand why you are using a certain indicator or what the indicator is measuring. An example of a simple swing daytrading strategy can be found in the next chapter.

Step 3: Define exit rules

Lets keep it simple here, too: There are two different exit rules you want to apply:

Stop Loss Rules to protect your capital and

Profit Taking Exits to realize your profits

Both exit rules can be expressed in four ways:

A fixed dollar amount (e.g. $1,000)

A percentage of the current price (e.g. 1% of the entry price)

A percentage of the volatility (e.g. 50% of the average daily movement) or

A time stop (e.g. exit after 3 days)

We dont recommend using a fixed dollar amount, because markets are too different. For example, natural gas changes an average of a few thousand dollars per day per contract; however, Eurodollars change an average of a few hundred dollars a day per contract. You need to balance and normalize this difference when developing a day trading system and testing it on different markets. Thats why you should always use percentages for stops and profit targets (e.g. 1% stop) or a volatility stop instead of a fixed dollar amount.

A time stop gets you out of a trade if it is not moving in any direction, therefore freeing your capital for other trades.

Step 4: Evaluate your day trading system

The first figure to look for is the net profit. Obviously you want your system to generate profits. But dont be frustrated when during the development stage your day trading system shows a loss; try to reverse your entry signals. On our website http://www.rockwelltrading.com you already learned that trading is a zero sum game: So if you are going long at a certain price level, and you lose, then try to go short instead. Many times this is the easiest way to turn a losing system into a winning one.

The next figure you want to look at is the average profit per trade. Make sure this number is greater than slippage and commissions, and that it makes your day trading worthwhile. Day trading is all about risk and reward, and you want to make sure you get a decent reward for your risk.

Take a look at the Profit Factor (Gross Profit / Gross Loss). This will tell you how many dollars you are likely to win for every dollar you lose. The higher the profit factor the better the day trading system. A system should have a profit factor of 1.5 or more, but watch out when you see profit factors above 3.0, because it might be that you over-optimized the system.

Here are some more characteristics you might want to consider besides the net profit of a system:

Winning percentage

Many profitable day trading systems achieve a nice net profit with a rather small winning percentage, sometimes even below 30%. These systems follow the principle Cut your losses short and let your profits run. However, YOU need to decide whether you can stand 7 losers and only 3 winners in 10 trades. If you want to be right most of the time, then you should pick a system with a high winning percentage.

Number of Trades per Month

Do you need daily action? If you want to see something happening every day, then you should pick a day trading system with a high number of trades per month. Many profitable day trading systems generate only 2-3 trades per month, but if you are not patient enough to wait for it, then you should select a day trading system with a higher trading frequency.

Average Time in Trade

Some people get really nervous when they are in a trade. I have heard of people who cant even sleep at night when they have an open position. If thats you, then you should make sure that the average time in a trade is as short as possible. You might want to choose a system that does not hold any positions overnight.

Maximum Drawdown

A famous trader once said: If you want your system to double or triple your account, you should expect a drawdown of up to 30% on your way to trading riches. Not every trader can stand a 30% drawdown. Look at the maximum drawdown the system produced so far, and double it. If you can stand this drawdown, then you found the right day trading system. Why doubling? Remember: your worst drawdown is always ahead of you.

Most consecutive losses

The amount of most consecutive losses has a huge impact on your trading, especially when you are using certain types of money management techniques. Five or six consecutive losses can cause you a lot of trouble when using an aggressive money management.

In addition this number will help you to determine whether you have enough discipline to trade the system: Will you still trade the system after you have experienced 10 losses in a row? Its not unusual for a profitable trading system to have 10-12 losses in a row.

Step 5: Improving your system

There is a difference between improving and curve-fitting a system. You can improve your day trading system by testing different exit methods: If you are using a fixed stop, try a trailing stop instead. Add a time stop and evaluate the results again. Dont look at the net profit only; look also at the profit factor, average profit per trade and maximum drawdown. Many times you will see that the net profit slightly decreases when you add different stops, but the other figures might improve dramatically.

Dont fall into the trap of over-optimizing: You can eliminate almost all losers by adding enough rules. Simple example: If you see that on Tuesdays you had more losers than on the other weekdays, you might be tempted to add a filter that prevents your day trading system from entering trades on Tuesdays. Next you find that in January you had much worse results than in other months, so you add a filter that enters trades only from February December. You add more and more filters to avoid losses, and eventually you end up with a trading rule that I saw recently:
IF FVE > -1 And Regression Slope (Close , 35) / Close.35 * 100 > -.35 And Regression Slope (Close , 35) / Close.35 * 100 -.4 And Regression Slope (Close , 70) / Close.70 * 100 -.2 And MACD Diff (Close , 12 , 26 , 9) > -.003 And Not Tuesday And Not DayOfMonth = 12 and not Month = August and Time > 9:30 …

Though you eliminated all possibilities of losing (in the past) and this trading system is now producing fantastic profits, its very unlikely that it will continue to do so when it hits reality.

Author: Markus Heitkoetter
Article Source: EzineArticles.com
Provided by: Smart cooker

Did You Begin Day Trading As An Indicator Only Trader?

Did you start day trading after buying a book on technical analysis, and getting a charting program – probably a free one that you found online – in order to save money? While reading your book you learned about trading indicators which could ‘predict’ price movement, and what do you know, the ‘best’ indicators were actually included in your free charting program – let the games begin.

Now that you have all the day trading tools that are necessary, the book for education AND the free charting program with those ‘best’ day trading indicators, you now need a day trading plan so you can decide which ones of those ‘magic’ day trading indicators you are supposed to use. This really is a great book, besides telling you how to day trade using indicators to ‘predict’ price – it also said that you need a trading plan to day trade.

So what should this plan be? The book told you about trend following using an indicator called macd, and it also told you how it was possible to pick the top or bottoms using an indicator called stochastic; my guess is that you picked the stochastic indicator to start your day trading – this must be the ‘best of the best’ since this indicator was going to ensure you of entering your trades with the ‘best’ price. Amazing, simply amazing how easy this day trading stuff really is. In fact, why even bother taking the trades, each time your indicators give a signal – just call up your broker and tell him to stick $100 in your account.

My book was Technical Analysis of the Futures Markets. My charting program was TradeStation with an eSignal fm receiver; that was the one that if you hung the antennae wires just right, and you put enough foil on the tips, you might even get quotes. I had sold a business before I started trading so I did have some capital – isn’t that how everyone gets into trading, you either sell a business or you lose your job? My indicator was the macd as I had decided that I was going to be a ‘trend follower’ instead of a ‘top-bottom picker’. I also decided that I was going to be ‘extra’ clever, if one indicator was good than two indicators must be better, so I added a 20 period moving average. My first trade was a winner, then after many months of extensive therapy, I was finally able to forget the next twelve months – ahhh the memories 

Learning To Day Trading – The Learning Progression

Beginning to day trade, or learning to day trade, as an indicator trader is very typical. This is also logical when you consider – HOW are you supposed to initially learn how to trade? Trading indicators are available to anyone who has a charting program, and simply using line crosses, or histogram color changes, provide ‘easy’ signals to understand. If you will also take the time to learn the arithmetic behind your indicators, as well as learning what each indicator is specifically intended to do, not only is this a logical way to begin, it is also a good ‘step’ in your learning progression – understanding the WHAT you are doing, instead of attempting to create ‘canned’ indicator only trading systems, without any regard as to WHY you are trading this way.

This does become one of the ‘sticking’ points in your learning progression, as you come to find out that you are unable to profitably trade indicators as signals only – now what? Now what – you ‘can’t’ develop your own indicators, so you start doing google searches for day trading indicators and start buying your ‘collection’ – they don’t ‘work’ either. Now what – you buy a mechanical trading system – what does hypothetical results may not be indicative of real trading or future results mean? Now what – you start subscribing to signal services OR you start joining the ‘latest and greatest’ chat room – am I really the only person using the signals who isn’t profitable?

Now what – you never learn how to trade.

I began trading as an indicator trader, and I did try to learn everything that I could about the various indicators, as well as trying to combine indicators that were consistent with how I wanted to trade – I just could never develop a mechanical day trading system from what was available to me. I read a couple more books that didn’t really help me, so I then started looking for someone who could teach me. From what I now know about gurus -vs- teachers, I am very lucky that I got involved with a money manager-trader who taught me a tremendous amount, but I still couldn’t get profitable, in part because there was also ‘pressure’ to learn how to trade using real money. As well, any discussions or thoughts about trading psychology and the issues involved, especially to beginning traders, was non-existent.

Now what – learning but losing – I stopped trading.
Learning to trading using real money, and ‘scoffing’ at trading psychology as simply individual weakness, really was something that I now regard as misinformation. I always mention this as I now feel that this cost me as much as a year of time, and was very close to costing me my trading future, as stopped trading was VERY close to quitting trading. How can’t trading psychology be real to a beginner, when you consider that you are risking losing money at a very fast pace as a day trader, and when you further consider that you are also doing this when you really don’t know what you are doing – this is NOT by definition being weak. And if trading psychology is real, how are you going to learn to make ‘good’ trading habits with real money while you are fighting the implications?

Now what – not trading and not ready [quite] to quit – still studying and searching.

Probably the single most important ‘thing’ that got me to a next step in learning how to trade, was the concept of a trading setup, and that a setup and a signal were not the same. This was extremely meaningful to me, as it also led to an understanding of how to better use trading indicators for the information that they can provide, but not to use them as trading signals – in essence I began learning about trading method where discretion could be consistently applied -vs- trading system that was mechanical and arithmetic rules.

Traders who are indicator only traders, are also what I refer to right side only traders, that is they are always looking at the right side of their charts for an indicator signal. BUT what about the left side of the chart, what about price and patterns, what about market conditions – WHAT about the relevant ‘things’ that are ‘moving’ price, instead of indicators only as an arithmetic derivative of price, and thus, one that is dependant on the time frame that you have chosen to trade from? These ‘thoughts’, along with the concept of trade setup, became instrumental in the development of a trading method, and how I came to turning my trading around.

When I think about the steps in my learning progression – I would list them as follows:

2/95 – 6/96

indicators only

teaching service that included signals

learning to trading with real money and trading psychology issues

stop trading

6/96 – 3/97

understanding of trading psychology issues

learning about trading setups concept

trading method -vs- trading system

trade setup – trade trigger are not the same
method development

understand the importance of the left side of the chart and what is happening ‘across’ the chart

related trading setups and how/when they triggered

indicators + pattern

indicators + pattern + price

indicators + pattern + price + market conditions

3/97 – 11/97

able to paper trade profitably

able to real money trade profitably

able to trade for a living

Indicator Only Day Trader – Setup Including Indicators Method Day Trader

I have attempted to discuss the way I started day trading, and the way I think many-most traders typically begin. Along with this, I have pointed various issues and problems that I had – those regarding how to learn to trade, and then progressing into a profitable trader. My experiences have been both personal, as well as those of many traders that I have worked with over the last 8-9 years through Tactical Trading – that a very large number of these problems are due to day trading only with indicators, the specific indicators used, along with trying to turn these indicators into a mechanical trading system. This is not to say that this can’t be done – I simply couldn’t do it. However, I would strongly suggest that anyone who is in the early stages of day trading, or struggling with their day trading, consider these things that have been discussed.

Author: Barry Lutz
Article Source: EzineArticles.com