Here's a reality check as we slam headfirst into the January markets. The vast majority of retail traders lost money in 2007 and will lose money next year, despite ample doses of education, enthusiasm and brilliant ideas. In fact, at least 80% of all at-home speculators will eventually give up and wash out of the financial markets.

How can you buck this enormous tide and make 2008 your most profitable year in the trading game? To state the obvious, the best way to start making money is to stop losing it.

In that regard, here are 20 ways to staunch the bleeding and get back into the winner's circle in the new year. Happy holidays, everyone!

1. Don't trust the opinions of market gurus. Remember that it's your money at stake, not theirs. Listen to what they say, then step back and do your own homework.

2. Don't believe in a company. Trading isn't investing, so you need to focus on the price action and forget the balance sheets. Leave the American Dream to Warren Buffett.

3. Don't break your entry and exit rules. You made them for bad trades, just like the one you're stuck in right now.

4. Don't try to get even. This isn't a game of catch-up. Every action you make has to stand on its own merits. Take your losses with detachment and make your next trade with absolute discipline.

5. Don't trade over your head. If your last name isn't Kass or Cramer, stop trading like them. Just concentrate on playing the game well, and stop thinking about making money.

6. Don't seek the Holy Grail. There is no secret trading formula, other than good position choice and solid risk management. So why are you looking for it?

7. Don't forget your discipline. Anyone can learn the basics of the trading game. Sadly, most of us will fail because of a lack of self-control, not a lack of knowledge.

8. Don't chase the crowd. Tune out the groupthink and dance to the beat of your own drummer. Get out of the chat rooms and off the stock boards. This is serious business.

9. Don't trade the obvious. Everyone sees the most perfect-looking patterns, which is why they set up the most painful losses. Simply stated, if it looks too good to be true, it probably is.

10. Don't ignore the warning signs. Big losses rarely come without warning. Don't wait for a lifeboat before you abandon a sinking ship.

11. Don't count your chickens. That delicious profit isn't yours until you close out the trade. Trail stops, take blind exits and do everything possible to get that money into your pocket.

12. Don't forget the plan. Remember the reasons you took a trade in the first place, and don't get blinded by greed or fear when the position finally starts to move.

13. Don't have a paycheck mentality. You don't need to get paid every week or every month, as long as you take advantage of the opportunities as they come. Classic wisdom: traders book 80% of their profits on just 20% of the days the market is open for business.

14. Don't cut corners. There are very smart folks out there working full time to take advantage of your mistakes. Fight back by examining your results, updating your plan and finding working themes for the next session.

15. Don't ignore your intuition. Listen to that calm little voice that tells you what to do and what to avoid. That's the voice of the winner trying to get into your thick head.

16. Don't hate losing. The best traders lose money on most of their positions, so get used to the pain of losing. And there's a side benefit: the losing teaches more about winning than the winning itself.

17. Don't fall into the complexity trap. Traders who can't see the market are looking for it everywhere except in the price action. In truth, a well-trained eye will find more profits than in a stack of technical indicators.

18. Don't confuse execution with opportunity. Expensive software won't help you trade like a hedge fund. Pretty colors and flashing lights make you a more nervous trader, not a better one.

19. Don't project your personal life onto your trading. Trading gives you the perfect opportunity to find out just how messed up your life really is. Get your own house in order before you play the financial markets.

20. Don't think that trading is fun. The trading game should be boring the vast majority of the time, just like the real-life job you have right now.

It's December and getting close to the time when traders need to wrap things up and evaluate their profit-and-loss performance for the year. Unfortunately, most folks speculating on the financial markets in 2007 face major disappointment when they look at their results and realize how tough it's been to make money.

Sadly, most traders follow the same worn-out strategy over and over again, regardless of market conditions. They just buy upside momentum and hang on, hoping the bottom doesn't drop out of their positions. But as we know in this volatile trading year, almost every sharp move higher or lower has been followed by a vicious counterswing.

It's easy to dismiss this ragged price action, believing it's just an aberration in an otherwise perfect bull market, but nothing could be further from the truth. In reality, a choppy and dangerous tape is the most common environment in which traders need to risk their capital and book results.

That's why the concept of market timing is so important. Regardless of short-term conditions, every position is forced to negotiate a minefield of conflicting time elements in order to book profits. Simply stated, it's the gateway through which you take on monetary and emotional risk.

So what's the best timing strategy for your next trade? Unfortunately, the correct answer changes over time. As a result, market players must plan each trade within the context of the current environment, reward-to-risk profile and pre-chosen holding period. The good news: This extra effort pays off handsomely on their bottom lines.

Had a tough year picking your fights and choosing your exits in 2007? Well, it's time to shake it off and get ready for the new year. To help you get things started on the right foot, here are 10 things you can do to improve your market timing.

1. Sell Rallies: Stop selling short into selloffs. Instead, wait for weak rallies to fail at resistance. Then use the breakdown of a two- or three-day topping pattern to enter your position.

2. Play Pullbacks: Pullbacks work in all kinds of market conditions, so use them to take on all kinds of exposure. Stand aside when a new trend gets underway and stalk the chart until a counterswing forces price back to the level where you wanted to play it in the first place.

3. Enter in Quiet Times: The best time to enter a position is just before a breakout or breakdown. That way you can sell your position for a nice profit after other traders trip over themselves to get on board. Find these setup points using narrow range and volatility contraction patterns.

4. Follow the VIX: The most profitable trades show up when the crowd is leaning the wrong way. How can you see this happen in advance? Become a student of sentiment and track the Market Volatility Index (VIX) for reversals after sharp peaks and valleys.

5. Keep Sector Lists: A rising market floats all boats, even the leakiest ones. But in tough times, it's wise to play the strongest stocks in the strongest market groups. To this end, keep sector lists that show relative performance on a weekly basis, and then limit your trade search to the cream of the crop.

6. Mark the Gaps: Watch the gaps on the major indices and assume every one will fill, sooner or later. Avoid aggressive trade entry after a gap unless the market is in a running trend. Expect indices to turn on a dime as soon as a gap gets filled because smart traders use these pivot points to take profits and establish contrary positions.

7. Match Time to Opportunity: Decide your holding period before you enter the trade, and then stick to it. Are you scalping, daytrading, swing trading or picking up an investment for the grandkids? Keep separate trading accounts if you want to do all of the above.

8. Exit in Wild Times: Take profits in high volatility, whenever possible. Prices move through relatively narrow boundaries most of the time. Wide swings, triggered by greed or fear, open the floodgates and let the market move very big distances over short timeframes. Use these magic moments to book your profits and jump back to the sidelines.

9. Track the Pivot Points: Focus your attention on prior highs and lows, whether they're two days old or printed in the last decade. Traders use these focal points to make the majority of their entry and exit decisions. Learn to wait for the second test of a high or low, rather than jumping in too soon and getting stuck in a double-top or bottom reversal.

10. Read the Tape: The numbers on your trading screen are far more important than the pretty pictures they draw on the charts. Memorize key levels on your favorite stocks and then watch what happens whenever price approaches one of these inflection points. Yes, tape reading takes years to learn but it gives you a lifetime edge, so it's worth the effort.

Nobody's perfect. Even the most successful traders do the dumbest things every single day the market is open for business. We can't lose sleep about these gaffes, slip-ups and blunders, because imperfection goes with the territory. However, it's our responsibility to take remedial action so these costly mistakes don't overwhelm our profits.

Simply stated, the most urgent task of risk management is to save us from ourselves whenever we screw up. The trading game demands instant decision-making in a fast-moving, real time environment. As a result, there's often little opportunity to consider the consequences of our ill-advised actions until after the fact.

New traders think they'll wake up one day and stop making rookie errors. But that isn't going to happen, because the market gauntlet forces us to deal with the twin emotions of greed and fear. These potent forces have tremendous power to blind us poor humans. But, at the least, we can mitigate their influence and keep it from undermining our efforts.

In that regard, here are 10 ways that traders screw up on the line of fire and 10 ways you can minimize their impact to your bottom line.

1. Bad timing:You sit on your hands, watching a big rally or selloff. You want in, but you're too scared to act. Finally, the fear of missing out overcomes your better judgment, and you jump in. The move stops dead cold as soon as you enter the market, and you're left holding the bag.

Hint: You'll never have enough information to act. Look at the technicals, trust your instincts, and pull the darn trigger before it's too late.

2. Overtrading: You want to be a big player, so you margin up on every position, thinking you're headed for huge profits, Instead, the losses mount quickly, and you get into a heap of trouble.

Hint: Every position has a right size. Never trade over that amount, and forget about using margin until you establish a long track record of profitable trades.

3. Listening to experts: I get angry mails whenever one of my recommendations goes the other way. Guess what -- you shot yourself in the foot if you listened to me, because you let someone else tell you what to buy or sell.

Hint: Make your own decisions, and take responsibility for your own actions. Anything else is just a cop-out.

4. Emotional reactions: The pleasure of profits makes you feel like a gunslinger, while the pain of losses hurls you into a black hole of despair. In both cases, you lose the control you need to survive as a trader.

Hint: Get trading emotions under control by taking positive action in all your other activities of life, such as health, family and financial stability. That will clear your head and keep you frosty as an ice cube during the market day.

5. Powerlessness: I have a bad habit of pulling good trades off the table just a few minutes before they make a big move in my favor. Apparently my subconscious mind sees the profit I'm about to make and decides I don't really need it.

Hint: Tell your subconscious mind to shut up and get out of the way. Do that affirmation a thousand times, and it will start to obey like a housebroken puppy.

6. The big picture: The financial world is a scary place with a death-dealing crash lurking around every corner and under every rock, so you trade it that way and lose a fortune. Guess what -- you're confusing macro economic events with micro stock plays.

Hint: Trade what you see, not what you think, and don't let the big picture ruin what's right in front of your nose.

7. Easy prey: You're so excited about a new play uncovered in your research that you can't wait to place a buy or sell order. Bad move, Charlie Brown. The first hour of the market day is often the worst time to enter new positions. They see you coming, sucker.

Hint: Pick your trade entry price in advance and place deep limit orders that won't execute until the market moves in and takes them out.

8. Gadget dependency: We spend thousands of dollars on questionable software and chat rooms, hoping they'll fill in the black holes in our knowledge. The bottom line: Kilobytes and real-time calls can't overcome a lack of skills.

Hint: Some professionals still draw their charts by hand. Why not save your money until you see the market the way they do?

9. Playing the lottery: Trading and gambling are different animals, but you'd hardly know it during earnings season and before big economic reports. How often do you carry a big position into earnings, hoping to get a pop from the news? Hmm, I thought so.

Hint: Get out of all positions before earnings news because, in reality, you have no definable edge in holding them through the maelstrom.

10. Profitable illusion: A coveted position moves in your favor, making you feel like a genius and triggering an ugly wave of overtrading. But you've forgotten that the money isn't real until you actually put it into your pocket.

Want to trade successfully? Just choose the good positions and avoid the bad ones. Poor trade selection takes a heavy toll as it bleeds your confidence and wallet. You face many crossroads during each market day. Without a system of discipline for your decision-making, impulse and emotion will undermine skills as you chase the wrong stocks at the worst times.

Many short-term players view trading as a form of gambling. Without planning or discipline, they throw money at the market. The occasional big score reinforces this easy money attitude but sets them up for ultimate failure. Without defensive rules, insiders easily feed off these losers and send them off to other hobbies.

Technical Analysis teaches traders to execute positions based on numbers, time and volume.This discipline forces traders to distance themselves from reckless gambling behavior. Through detached execution and solid risk management, short-term trading finally "works".

Markets echo similar patterns over and over again. The science of trend allows you to build systematic rules to play these repeating formations and avoid the chase:

1. Forget the news, remember the chart. You're not smart enough to know how news will affect price. The chart already knows the news is coming.

2. Buy the first pullback from a new high. Sell the first pullback from a new low. There's always a crowd that missed the first boat.

3. Buy at support, sell at resistance. Everyone sees the same thing and they're all just waiting to jump in the pool.

4. Short rallies not selloffs. When markets drop, shorts finally turn a profit and get ready to cover.

5. Don't buy up into a major moving average or sell down into one. See #3.

6. Don't chase momentum if you can't find the exit. Assume the market will reverse the minute you get in. If it's a long way to the door, you're in big trouble.

7. Exhaustion gaps get filled. Breakaway and continuation gaps don't. The old traders' wisdom is a lie. Trade in the direction of gap support whenever you can.

8. Trends test the point of last support/resistance. Enter here even if it hurts.

9. Trade with the TICK not against it. Don't be a hero. Go with the money flow.

10. If you have to look, it isn't there. Forget your college degree and trust your instincts.

11. Sell the second high, buy the second low. After sharp pullbacks, the first test of any high or low always runs into resistance. Look for the break on the third or fourth try.

12. The trend is your friend in the last hour. As volume cranks up at 3:00pm don't expect anyone to change the channel.

13. Avoid the open. They see YOU coming sucker

14. 1-2-3-Drop-Up. Look for downtrends to reverse after a top, two lower highs and a double bottom.

15. Bulls live above the 200 day, bears live below. Sellers eat up rallies below this key moving average line and buyers to come to the rescue above it.

16. Price has memory. What did price do the last time it hit a certain level? Chances are it will do it again.

17. Big volume kills moves. Climax blow-offs take both buyers and sellers out of the market and lead to sideways action.

18. Trends never turn on a dime. Reversals build slowly. The first sharp dip always finds buyers and the first sharp rise always finds sellers.

19. Bottoms take longer to form than tops. Fear acts more quickly than greed and causes stocks to drop from their own weight.

20. Beat the crowd in and out the door. You have to take their money before they take yours, period.


Neophytes think their trading flaws will vanish after they get a few years of experience under their belts. But nothing could be further from the truth. In reality, even market professionals make costly mistakes that could have been avoided.

On Wednesday I made 17 trades and cashed in a series of big winners. It was a good day, but it would have been better if I didn't throw money away with stupid trading mistakes. But I rarely lose sleep about these errors, because it's hard to play the game with perfect discipline, day after day.

The market forgives traders' mistakes in easy times, letting us profit despite bad judgment and poor timing. But it's a different story when no clear trend guides the price action. In choppy and confused markets, a big loss can follow every small error.

It's natural to make a few mistakes each day, because trading requires a thousand real-time decisions. Often the best we can do is to limit damage and understand the types of brain cramps that rob our pocketbooks.

These popular errors run the gamut from mental blunders to misguided opinions. Not surprisingly, the most common ones also cause the most damage. For example, consider how much money your blind love of tech stocks has cost you in the last six years.

We can't eliminate trading mistakes, but we can limit their destructive power. Start by listening to the little voice in your head, and let it question every trading decision you make. In no time, you'll find a dozen ways you're losing money for no reason.

Let's start with the trader who should have just taken the day off. There's nothing worse than trading trends in a choppy market, or choppy conditions in a trending market. So make sure you know the type of environment you're trading in before you hit the enter button.

Most traders feel compelled to be in the market each day, even when we have absolutely no edge to play. This common impulse is also a major trading mistake, because it forces us into bad positions just for the thrill of being in the action.

The solution: Learn to sit on your hands when the trading gods have nothing to offer.

Traders hate to lose money and don't want to admit it when they're wrong. So they press on with bad positions rather than cut their losses, trying to turn lemons into lemonade. Invariably this triggers a bigger loss than they would have incurred if they had just admitted the mistake right away.

Persistence in bad trades can turn controllable losses into uncontrollable disasters. The inability to cut losses is the major reason that traders wash out of the markets. The bottom line is that you don't know what your stock will do, despite all your research and commitment. So always be prepared to hit the exit button at a moment's notice.

Traders also undermine performance by cutting profits on good positions. This is usually a self-denial issue, in which we understand at a subconscious level that we're in a great position. But for some reason we don't want the winning experience and exit with a small profit just before the trade would pay off in big bucks.

My most common trading mistake is being too early in new positions. I have a great eye for market direction but often hop on board well before that stock is ready to go anywhere. This puts me into a highly vulnerable spot where any small wiggle will shake me out for a loss.

You see a great trade setting up and get all excited. But seeing a pretty pattern isn't the same thing as playing it for a decent profit. Timing is everything in the markets, and we get ahead of ourselves by jumping into positions that aren't ripe. So slow down and wait for the perfect moment to pull the trigger

Of course it's just as easy to be late to the party. Being late means being unable or unwilling to pull the trigger, because you're waiting to see what everyone else does first. Unfortunately, everyone else is ready to get out of that stock by the time you're finally ready to get in.

Being too bullish or too bearish will also cost you a fortune over the years. It's your job to come into the market without preconceived notions about price direction. I know this is hard to do when a thousand folks are talking their positions. But you need to fall back on the old wisdom of trading what you see, not what you believe.

Even smart traders show a dumb tendency to ignore the forces of gravity in their positions. We worried too much about gravity back in the 1990s, when everything was going up. Now we need to pay a lot closer attention to it. Simply stated, stocks go down when they can't find buyers, regardless of how few sellers are out there at the time.

Stocks can fall for a very long time on low volume when they can't gather an enthusiastic crowd of investors or speculators These slow-bleed declines will cut right through common support and moving averages, despite everything you know about technical analysis. So learn to cut and run when gravity grabs hold of your position.

Finally what is the single biggest trading mistake of 2006?

It's ignoring the big picture and acting on impulse. Although we're in a broad sideways range this year, legions of traders keep buying at the highs and selling short at the lows. You can solve this major mistake by stepping back at least once a week and looking at the weekly charts.

Managing open positions is the most difficult task the swing trader faces. Danger can rear its ugly head at any time and turn a healthy profit into a nasty loss. Too often, we jump into a good setup, only to watch it fail because of poor trade management. This is especially true with newer traders who think the markets are little more than a pick-and-play game.

Experienced players take the time to master the intricacies of the trading day. This is a broad-ranging task that requires considerable devotion. But the payoff is worth the effort because it keeps them out of danger and protects their bottom lines. To get you started on the long road to effective trade management, here are 20 ways to turn that great idea into cold, hard cash.

1. Decide in advance how actively you should manage open positions. The pros watch every tick and act on short-term swings. Part-timers read the morning paper and learn everything they need to know. Your own efforts need to fall somewhere in between.

2. Choose your playing field wisely. Track the weekly price bars if you invest; the daily bars if you're a swing trader; and the 60-minute bars if you play hard in the intraday markets.

3. Outline a specific strategy to deal with overnight positions. Learn when to stay put and when to jump ship ahead of key reports and news.

4. Set aside time and capital for unexpected opportunities. Fresh ideas show up all the time and demand your attention. Build a routine that filters these prospects quickly and efficiently.

5. Align your positions to current market conditions. Overall sentiment, external shocks and volatility affect the success or failure of your trades.

6. Trade with the buy- or sell-swing within the market. Most of the time this tracks a three-day cycle for swing traders and a 21-day cycle for position traders. Find your place in the swing and take advantage of those who execute against nature.

7. Have a proactive plan for the first and last hours of the trading day. Newer traders should sit on their hands during this time, but the pros can use it for most of their decisions.

8. Become a student of time-of-day tendencies. Markets tend to trend within narrow time windows, while fake-outs take control for the rest of the day.

9. Choose a set of averages and indicators you're comfortable with, and then leave them alone. Learn to interpret conflicting information rather than searching for the perfect indicator.

10. Track the Tick indicator closely and watch its short-term cycles. The Tick has a life of its own, and it will save your neck if you let it.

11. Keep one eye on your positions and the other on the indices. When a stock moves more sharply than an underlying index, it should continue to do so. This becomes very important when the index starts to move.

12. Follow round numbers on everything in the market. Watch how your positions react to 10, 20 and 30. Round-number support and resistance can be greater than old highs or lows.

13. Look for breakouts and breakdowns of the two-day range. This will tell you if your stock is trending, or running in place.

14. Become a student of price gaps and categorize each one. Then tell yourself what you'll do the next time your trade hits one.

15. Recognize when you're wrong and need to get out. Find the price that ruins the trade, and don't outthink the market when it gets hit. The move could be a fake-out or the start of something big.

16. Don't overanalyze your positions. Let each one speak for itself. If it has little to say, get out and move on to the next trade.

17. Become a tape reader. Look for early warning signs of a move against your position or confirmation you did the right thing.

18. Trade small if you're new at the game. This will teach you important lessons at a very low price when you make a mistake. Neophytes should concentrate on learning how to trade and not worry about making money.

19. Increase position size during winning streaks because your performance suggests reduced risk. Reduce position size during drawdowns and wait for the clouds to pass.

20. Build a contrary relationship with the crowd. Your profit rarely follows the direction of the herd, so stand against it whenever possible.

What if you could just glance at a price chart and find good trades immediately? It's not as hard as you think. Start by looking for recurring patterns and trends, and then see where price is trading on this "pattern tree." It should tell you right away if there's money to be made.

Stage analysis defines your location within the market universe. Stan Weinstein documented this powerful technique in his classic Secrets of Profiting in Bull and Bear Markets. He described how market action can be broken into specific stages of development.

Each stage has its own characteristics and favors certain strategies over others. For example, uptrends are better for buying stocks, while downtrends are better for selling short. It may sound simple, but many of us do exactly the opposite.


I've reconfigured these mechanics into a concept called pattern cycles. These focus on the cyclical aspect of stage analysis, and how traders use them to capitalize on a wide variety of market flavors. Pattern cycles track markets through repeating crowd behavior. They are evolutionary -- i.e., one phase naturally progresses into the next. They signal the strategy that works best in the current phase, and what to expect from the next one.

What are these repeating cycles? They follow the common TA language we've learned over the years -- bottoms, breakouts, uptrends, new highs, tops, breakdowns and downtrends. Each phase also defines a trend-range axis that carries price sideways, upward or downward in a predictable manner.


One overriding factor complicates market-stage analysis: It exists in more than one time frame. In other words, markets will be at one stage on a weekly chart, a different one on the daily chart and yet a third on the intraday chart. Traders must deconstruct this trend relativity to achieve accurate price prediction, and take advantage of a specific stage.

Trend relativity errors wash many traders out of the markets. We recognize a stage and throw money at it. But we might forget a longer time frame that's moving against our position. You can overcome these errors by defining holding periods that align to the stages being traded. In a broad sense, this is the same process that divides market players into scalpers, daytraders, position traders and investors.


Opportunity peaks at the interface between different stages. Here are three examples. Breakout trades appear where bottoms gives way to uptrends. Pullback trades develop where price retraces to the edge of the last phase. Bursts into new highs awaken an assortment of momentum trades.

Pick your strategies wisely. There's a time to buy breakouts and a time to sell short. There's a time to press your positions and a time to take whatever the markets give you. And there's definitely a time to chase momentum and a time to trade pure price sensitivity.

Stage recognition errors hurt the investing public as well. Look at the multitude that got crushed buying the dips when the markets descended from the bubble top in 2000. And in these bear market days, investors forget that bottoms take time to develop, and returns need to be measured in years, not days.

Value investors enter the markets when bottoms are forming. Momentum traders come in during strong uptrends and downtrends. But sadly, the public enters during tops and climaxes. So whether you trade or invest, take the time to identify current stages in your individual stocks and in the broader market. This ultimately defines the best way to play your hand.

Remember that standing aside is a proactive strategy through certain stages. You won't make money when market conditions don't match your holding period or trading skills. Instead, sit on your hands and let the market come to you when the cycles makes no sense. This requires discipline, but it will keep you in the game for the long run.

Swing traders can take the next step and master a variety of stages. This lets us capitalize on a broad range of market environments. We become breakout traders when markets are on the move, but play the swing game when they're just chopping around. Diverse skills enable us to sell short when markets decline, or work the edges during extended ranges.

For restless souls like you and me, this opportunistic style offers a great way to make our favorite hobby a full-time job.

Short-term traders have a distinct edge over investors in this wicked market environment. We can use our timing skills to profit from the few opportunities, while avoiding most of the ugly shakeouts and air pockets. Fortunately, longer-term players can employ similar strategies to improve their returns while all of us wait for better days.

Most human beings have real lives away from the markets and can't watch every twist and turn of the ticker tape. In truth, even the most data-crazy traders need to step back at times and follow the price action from a greater distance. Of course, the challenge is to find a way to stay fully informed, without getting buried in all the daily minutiae.

Remote trading offers a powerful way to play this convoluted market and still have time for family, friends and career. Admittedly, it takes a strong stomach, but you'll be rewarded greatly for your efforts. All that's required is reliable access to your open positions, if and when you need it.

OK, I think we're just about ready to go. Let's take a look at 10 powerful techniques to trade remotely but effectively.

1. Long-term charts: Weekly price patterns work very well for folks unable or unwilling to watch the short-term markets. Just keep in mind that you'll need to focus on trade setups lasting for weeks or months instead of hours or days. The hard part will be in picking the entry point that takes full advantage of the longer-term trends.

2. Trade smaller size: You don't have to be a gunslinger to book long-term profits. Stop using margin, take small positions, and then get out of the way. This lowers risk considerably by letting price jump around without shaking you out of good trades. Even a hundred shares can produce outstanding gains when held for weeks or months.

3. Choose wisely: Pick the right stocks to trade. This means you should forget about Chinese rockets, thinly traded biotechs and secondary agricultural players. Instead, limit your portfolio to slower movers that are less likely to exhibit overnight price shocks. More-lethargic sectors that let you sleep at night include: cleaning products, packaging and beverages.

4. Play the exchange-traded funds: ETFs let you take on measured exposure to entire market groups. This has both benefits and disadvantages for remote traders. On the plus side, you can avoid company news that sends individual issues through the roof, or over a cliff. On the negative side, you have to play against automated programs that dominate these instruments.

5. Loose stop-loss strategies: Remote traders need a quick nightly review to check out the day's progress and readjust their stop losses. Longer-term position stops aren't placed in the same way as a day trader or a swing trader. You keep them loose and out of the way, making sure they'll only get hit if there's an obvious change in trend.

6. Apply weekly Bollinger Bands: Long-term Bollinger Bands show remote traders the most favorable periods to enter and exit positions. It takes patience, though, because many weeks will pass between major trading signals.

Here's a hint: Place a weekly 5-3-3 Stochastics under the price bars and look for convergence with Bollinger Band signals.

7. Let the market come to you: Place deep limit orders and sit on your hands until they get hit. Look at the weekly pattern and find the price where weak hands will get shaken out. That's where you want to place your buy or sell order. You won't get filled every time, but this technique will get you into many great trades at perfect prices.

8. Use dollar cost averaging: Long-term trades are price-sensitive because of the great distance between closing bars. You can address this challenge by combining classic investing and trading techniques. Build the position over time with dollar cost averaging, but line up your entries with large-scale support and resistance. For example, add to your position each time the market pulls back and tags a horizontal weekly Bollinger Band.

9. Play the index cycles: Negotiate the minefield of conflicting trends with a smoothed Wilder's RSI (relative strength index). Place a 14-day RSI, smoothed by 7-periods, under the S&P 500 index chart. Then watch for major turns below 20, and above 80. These cyclical shifts are highly predictive and tell you when to establish longer-term positions.

10. Master the waiting game: Stalk your long-term setups and do nothing until the market planets come into perfect alignment. It's easy for remote traders to feel left out of the action and start chasing the market. But their edge relies on absolute detachment until their chosen entry prices come into play.

A pattern is only as good as the price action that follows it. Many players get caught up in the hunt, thinking all it takes to trade is a good setup. Unfortunately, this approach is a great way to lose money.

Trade setups are predictive archetypes, nothing more and nothing less. Some evolve with textbook perfection, while others show no regard at all for your expert opinion.

Good trade execution is a three-step process. You find the pattern, you study how price interacts with it, and you decide whether or not to pull the trigger. A good percentage of setups never reach the moment of decision and should be discarded without a second thought. Many traders have trouble with this limitation, because they expect the markets to pay off like a racetrack, through a simple pick-and-play strategy. In other words, they take positions the same way a gambler bets on horses. But the markets don't work this way, and setups can't be treated like tipsheets.

When I post a new pattern, someone always asks when they're "supposed" to take the trade. I tell them to take it when they get a buy or sell signal. Of course, this makes things worse, because many folks don't know what signals look like. So perhaps a little instruction is in order.

The execution target defines where to buy or sell short. A good setup points to this price through support-resistance, pattern recognition and the reward-risk ratio. A couple of limitations affect execution targets, though. First, any external forces that might affect the trade opportunity must be considered as well before taking the trade. Second, the target will change dynamically as new data alter the setup. It's possible a single tick will affect the calculated reward-risk ratio and bust the intended trade entirely.

The execution zone stands between current price and the execution target. This is an attention boundary for your trade entry. You shift focus toward the execution target when price penetrates the execution zone. So where do you draw this important interface? Place it at a distance that allows adequate time to examine whether or not to take the trade when price hits the target.

Use common sense to identify useful execution zones. Look at recent volatility and measure a fixed distance from the target. Or locate the last support level your setup must pass through before reaching the execution target, and place it there.

You have three entry choices on most trade setups:

  • Enter in congestion near a breakout or breakdown.
  • Stand aside when the breakout or breakdown occurs, and wait for a pullback.
  • Try to get in as a breakout or breakdown starts, and hope to get filled at a good price.

Each entry strategy fosters its own execution zone/execution target combination. The key is to enter long near substantial support, or sell short near substantial resistance. Of course, this is harder to do than it sounds. Emotions rise in moving markets, and the decisions we take in the heat of battle may not be the best ones for that setup. But that's part of the fun of swing trading.

Let's look at two examples.


Genesis Microchip (GNSS) had a triple-bottom short setup last week. But bad timing empties trading accounts on this volatile stock. So when was the right time to sell it short?

Genesis printed a NR7 (narrowest range bar of the last seven bars) just before collapsing into the mid-40s. This would have been an excellent place to enter, but it would have required seeing the signal just before the close, and then jumping in. The trader could also sell short the next morning when the stock gapped down, but a bad fill would place the position at risk for a reversal or short squeeze. The third method is still on the table. Genesis may still rally back to the breakdown level and present a very low-risk entry.


Manhattan Associates (MANH) also set up an interesting short sale last week, but the outcome was quite different. It sat near a double-bottom failure, but overnight news gapped up the stock. Because the failure never triggered, there was no risk from short entry choices two or three. But there was risk if a short position was entered on the prior bar, in the bottom congestion.

The good news is this narrow zone triggered an exit signal as soon as the stock gapped up above it. And the fill on a position in this quiet zone would make any loss more palatable.

Execution can be the weakest link in an otherwise great market strategy. After all, it's a lot easier to find good stocks than to trade them for a profit. So how do we enter the market at just the right time and capture the big moves we see on our charts?

Here are 20 rules for effective trade execution. Try these out the next time you're getting ready to pull the trigger.

1. Seek favorable conditions for trade entry, or stay out of the market until they appear. Bad execution ruins a perfect setup.

2. Watch the tape before you trade. Look for evidence to confirm your opinion. Time, crowd and trend must support the reversal, breakout or fade you're expecting to happen.

3. Choose to execute or to stand aside. Staying out of the market is an aggressive way to trade. All opportunities carry risk, and even perfect setups lead to very bad positions.

4. Filter the trade through your personal plan. Ditch it if it doesn't meet your risk tolerance.

5. Stay on the sidelines and wait for the opportunity to develop. There's a perfect moment you're trying to trade.

6. Decide how long you want to be in the market before you execute. Don't daytrade an investment or invest in a swing trade.

7. Take positions with the market flow, not against it. It's more fun to surf the waves than to get eaten by the sharks.

8. Avoid the open. They see you coming, sucker.

9. Stand apart from the crowd. Its emotions often signal opportunity in the opposite direction. Profit rarely follows the herd.

10. Maintain an open mind and let the market show its hand before you trade it.

11. Keep your hands off the keyboard until you're ready to act. Don't trust your fingers until they move faster than your brain, but still hit the right notes.

12. Stand aside when confusion reigns and the crowd lacks direction.

13. Take overnight positions before trading the intraday markets. Longer holding periods reduce the risk of a bad execution.

14. Lower your position size until you show a track record. Work methodically through each analysis, and never be in a hurry.

15. Trade a swing strategy in range-bound markets and a momentum strategy in trending markets.

16. An excellent entry on a mediocre position makes more money than a bad entry on a good position.

17. Step in front of the crowd on pullbacks and stand behind them on breakouts. Be ready to move against them when conditions favor a reversal.

18. Find the breaking point where the crowd will lose control, give up or show exuberance. Then execute the trade just before they do.

19. Use market orders to get in fast when you can watch the market. Place limit orders when you have a life outside of the markets.

20. Focus on execution, not technology. Fast terminals make a good trader better, but they won't help a loser.

As in many other markets, technical analysis has become very popular in the foreign exchange market. At the core of its popularity is huge liquidity created by the market and around-the-clock trade 1.4 trillion. $ Daily amount. A lot of participants and a significant amount of money that passes through the market every day, implies that market-based instruments, namely the currency pairs, rarely spend too much time in a narrow trading ranges and have a tendency to develop strong trends. In addition, more than 80% of the volume is speculative in nature and, as a result, the market often reaches extreme levels, and then adjusted. New trends and possible breakthroughs occur frequently, and provide multiple opportunities for the technically educated traders to enter and exit positions. Opportunities are not limited to trade on the trend, as well as quite often there are opportunities for trade in the range, allowing traders to effectively sell to the top of the grounds and bands.

In this article we wish to consider one based on the technology strategy that works particularly well in the foreign exchange market. The proposed strategy is based on the trade to intra-day trend and prednazna Chen to capture the counter-trend movement of the round values to the currency market known as "figures". This strategy involves an attempt to take advantage of the tendency of many market participants to place orders at or near the big round numbers.

The natural psychological tendency to make round numbers especially attractive to speculators, while the larger players, or a corporation that is involved in trade in the currency market for the purpose of hedging, may prefer to round numbers for the purpose of convenience of calculation. Irrespective of this, short-term counter-trend movement of round numbers occur frequently. Here are the rules for this strategy:

Long position:
• determined by the location of the currency pair that is trading significantly below its intra-day 20-periodnoy simple moving average. It may be 5 -, 10 - or 15-minute schedule.
• a long position when the currency pair is on a few points below the figure.
• hosted an initial protective stop order is not more than 15 points lower input prices.
• when the position becomes profitable on the initial risk, rose half position, while the remaining part of the position of the stop order is moved to break-even level. The freeze order is moved, as the price moves in your favor.

Short positions:
• determined by the location of the currency pair, which has traded above its intra-day 20-periodnoy simple moving average. It may be 5 -, 10 - or 15-minute schedule.
• a short position when the currency pair is on a few points above the figure.
• hosted an initial protective stop order is not more than 15 points higher input prices.
• when the position becomes profitable on the initial risk, rose half position, while the remaining part of the position of the stop order is moved to break-even level. The freeze order is moved, as the price moves in your favor.

This strategy essentially puts you on the same side, where the inter-bank players with access to the flow of orders. The strategy has a greater chance of success, when another important level of support or resistance, such as simple moving averages, Fibonacci levels, or bands Bollindzhera, converge just to the figure.

24-hour nature of the market, which is unique for currency trading, provides an additional advantage for the technical traders. Experienced traders know that at certain times of the day, some currency pairs have a higher probability of trading in a range or a high probability that the break from the intra-day consolidation. For example, the British pound tends to be traded more actively in the European and the London trading session, but kept in a narrow trading range during the Asian and U.S. sessions. Typical intra-day trading strategy for the British pound in this case should be associated with the deployment orders for a breakthrough within days of consolidation before the opening of the London session.

Transparency and the characteristics of round-the-clock trading of foreign exchange market make it particularly contributes to the trade policies based on technical analysis. Technical analysis is very popular in the foreign exchange market and is used across the spectrum of participants, from hedge funds to the intra-day traders.

Custom Search