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Trader's Tip
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Your method should be simple. Areas, direction, entry and exit timing are all that is needed for success.
- John Novak | |
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Today's Featured Article
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Positions to fill: 100+
Open to all Active Traders or Ex-Investors
Job Description: Seeking to find individuals that no longer wish to have someone else control their financial destiny. Must be willing to put in several months of long hours and must take direction well. Must have a great work ethic, honesty and humility.
Pay: Unlimited earning potential
Benefits: No employees, No Bosses, No ongoing cost of goods, vacations whenever and wherever you want. Finally having the financial freedom you have worked so hard for your whole life.
Trading for a living is the job. I am going to outline several quick steps for you to get on the right path from day one. We can teach you all of the basics of the job in 10 days or less. You just need to be willing to spend a few minutes to learn some basics, which I will outline below.
The purpose of this article is to educate you about the path that will be required for your new job. Education is the path that you must take in order to graduate and ultimately to trade the market profitably. The textbook that you will read will be the charts and your indicators, the context in which you interpret the indicators will build your trading rules and the manner in which you act upon those rules will be your trading plan and execution.
Based on my experience in training traders, here are a few of the key concepts that we teach and have proven effective over the last 10 years.
I will break this down into 3 parts: The Edge,
The Education, The Execution |
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The Edge:
You must have an advantage over the market-what do I mean when I say advantage? You must have a highly effective method for evaluation of the overall potential reward for placing a trade versus the overall potential risk that will stack the odds in your favor. There are a million different ways to skin the "trading profits" cat and you must choose the one that you can learn easily, understand completely and implement to perfection if you wish to be very successful. Having a good teacher to hold your hand through the education will also come in handy.
Since I already have the edge I am going to use my example for educational purposes (
you can demo my T-3 Fibs ProTrader software here); you may feel free to use your own methodology. The edge is based on automated Fibonacci support and resistance areas (red and blue lines) and Trend and Momentum based indicators to help determine if an area of support or resistance should hold. Trigger lines and Macd BB is what they are called.
This is a typical trend trade on the ES mini contract, small S&P 500 futures contract that is worth 50 dollars per point per contract (share) traded. Chart annotated with numbers so you can follow.
If you cannot view Example Chart 1,
go here.
- You will see that the market has made a strong trending move through your Fibonacci support (blue line top left) and turned it into resistance (red line same price at 894.50). This is the area that we would like to sell when it retraces back to it.
- Your Macd bb lines have made a strong move through the zero line.
- You start to pull back to your Fibonacci red resistance line for a potential short-sell.
- You notice that the Macd bb lines are moving with momentum outside the Bollinger band towards the zero line. This tells you that you must wait for higher areas.
- You will notice you have reached your HIGHEST area, which is the Fibonacci resistance. The fact that your large triggers are still very wide and pointing straight down will allow you to still take a short position.
If you cannot view Example Chart 2,
go here. - You must WAIT for the market to turn and the Macd bb lines to turn PRIOR TO ENTRY. You will enter as close to the top as you can when you pull back towards the 576 small trigger lines.
- I have marked up what is the 144-tick chart to fine tune this "pullback" to the trigger line area. If you will notice the market almost makes a 78% retracement. At the same time the Macd bb lines on the 144-tick chart make almost no retracement. The 894.00 area is your least amount of risk (approx. 1.5 points) and most amount of reward. Again you will use the Macd bb lines to judge the strength of the market and your likelihood of reaching your initial targets. The reward potential on this trend trade to the 576 outer bands and Fibonacci area was almost 7 points giving you over a 4:1 risk reward ratio initially.
- Ultimately this trade loses momentum after bouncing off of the 884.50 price giving you the actual potential of almost 8-9 points. (400-450 dollars per contract)
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The Education: I would like to cover is the process of marking up your historical charts. It has been recommended that you take the time to review at least 1000 historical trades prior to even thinking about using a simulator like Ninja Trader or the Tradestation Matrix to make any real executions in the market.
The main reason this is important is to build experience. Screen time and experience when you ONLY watch today's charts is VERY SLOW and not the most effective use of your time. Let's face it, you only get one day of education when you look at one day of charts.
To maximize your screen time and shorten your learning curve, marking up historical trades is a must.
There are few steps you want to take when learning.
- At first you can review your education by annotation of historical charts by "cheating" and seeing the next wave of price action. This is vital to make sure you are doing the correct trades. Learning with hindsight.
- Then you will do a "bar by bar" analysis with yourself. Starting the chart at the beginning of the day and slowly moving it forward one bar at a time and marking your trades as you see them happen. Seeing the trades as they materialize.
- Once you have properly marked up at least 1000 trades and are able to prove to yourself that you can see the market "semi-live" on a bar by bar basis, and then you are ready to take your knowledge to the market.
- This is when you will simulate the live market and build your confidence and expose any weaknesses you have in reading your advantages. This is done with no real money at first. Consider it your test to see if you have completed your education.
Execution: This is the time you take your newfound job skills to the market to be paid for your work.
- Once you have successfully simulated at least 250 trades with a winning % above 50% and can consistently make points every week in the market, you are then finally ready to start trading one contract. (Approximately 2500-5000 dollars in your account).
- Most new traders will start with one no matter what your account size. Let your winnings work and only add contracts with winnings from the market.
As with any professional position that you stand to take home over 1 million
dollars annually in compensation, you will need to work smart as well as hard
to make the kind of living from trading that you desire. Everything worthwhile
takes work. Hard work makes things good and more hard work makes good things
-- GREAT! |
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About the Author
John Novak
is President of Nexgen Software Services Inc. John is the developer of the T-3 Fibs ProTrader indicator package. He has been involved in the marketing and distribution of Technical analysis software for the last 13 years. He has devoted the last 10 years to the automation of a popular discretionary methodology that he taught in seminars for over 2 years to many successful traders that was centered on Fibonacci analysis of both time and price. With the help of his software programmers they have automated this entire Fibonacci process into a fully automatic program. He spends his days working on constant improvements in his analysis in predictive indicators for traders and spends
the day trading his own methods. | |
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