click for larger image
So why do so many traders lose money? Fear and greed for one. Time wasted trying to find a holy grail to make them millions with $100 is another reason. There is no secret to trading. Why would you do the same thing over and over and expect a different result?
If you can’t follow 5 basic rules, you will lose and continue to lose.
1. NEVER risk more than 1%-2% of your account on a trade. Money management is key to longer term profits.
2. NEVER panic sell, or panic buy. So you missed a setup, so what. The market is always here. Don’t chase. Price will always find some equilibrium and create another setup.
3. ALWAYS follow the trend. Yes, you can fade a market and fight the trend, trying to pick a top or bottom. But if you can’t take risks, or panic sell at losses, then you can’t fade. Fading is fighting, you will get a bloody lip.
4. ALWAYS have faith in yourself and your system. Trading is 90% in your head. Moving averages, trend lines, indicators, fancy pattern, monkey business, and magic lines are easy to learn. What is hard is controlling your fear and your greed. A good system has profit targets and stop losses.
5. ALWAYS remember that losses are part of the game. You are going to be wrong. Trading is no place for ego.
So there you have it. 5 Rules for Trading, follow them or lose.
Now how do we trade the chart above. It’s a system I put together in 20 mins, using ThinkorSwim.
- Use a 200 EMA for longer term trend. Have a rule that if you are unsure, you dont take a short if price is below, and you dont take a long if price is above.
- Use a 20 HullMovingAvg for scalping and entries/exit with the longer term trend. Price cross above (buy), price cross below (sell).
- Use multiple timeframes and understand the scope of your trade. Are you taking a long in a longer term down trend ? If so, then that should give you a different target/stop than taking a long in a longer term uptrend.
The indicator on the bottom is a MACD (moving average convergence divergence) variation of my own. It’s a SMI stochastic, with a linear regression based histogram at its simplest form. It shows you momentum and potential overbought oversold.
What is the best way to use it all?
That is up to you. I have given you an outline and a simple intraday trading system that is profitable to trade. What I don’t cover is how to spot support and resistance, draw trendlines, and price action. Price action is how something trades.
There are things you need to understand about the instrument you are trading.
How does price move?
Does it gap?
Does it move up and retrace repeatedly?
Is there slippage?
On a side note,GOOG’s business is to organize the worlds information. If there is something you dont understand or dont know a term. Google it, take charge of yourself and your trading. Simply ask the question in google.com’s search. GOOG has spent millions and employs Phd’s to make the search heuristic.
Some google results …..
Attached .zip file, unzip and import into ThinkorSwim studies