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Friday, October 24, 2008

Daytrading Mindset - Demo Vs. Live Trading

We have taught nearly 1,000 people how to daytrade the mini-Dow or S&P emini index. Of those traders, nearly all were able to successfully trade our simple index strategy on their demo accounts (we only know of 2 exceptions that reportedly could not even get consistent on the demo. One man claimed that every single trade he made was a loss. In my mind that would be as hard to do as to make profit on every trade).

If your day trading strategy is consistently successful on your demo account, then what is the difference when you go live? Mindset! It all boils down to that in your trading (in my opinion this is true of life in general, but you see the results immediately in trading - especially day trading).

I really hate to call what we do as index traders, day trading. That is only because of the negative connotation the term brings to mind. Stock trading is what most people think of when they hear the term day trading. Regardless of what type of trader you are, you will have to come to terms with the fact that each trade depends on YOU. What frame of mind you are in at the time you place those trades will have a HUGE impact on how many of those trades are successful.

Most traders think that it all boils down to the technical and/or fundamental analysis of the markets. This is where they spend all their time and money, but they never get around to working on the mindset. They feel the real key is in becoming a great market analyst. However, the world is FULL of good market analyst (just watch CNBC or Bloomberg for examples) who are not able to trade. They too didn't have the right mindset and had to take jobs instead.

So what is the right mindset for a trader (or day trader)? That would take volumes of articles to answer. A good start is to read Mark Douglas' book "Trading In The Zone". Don't end your mindset training there, but it is a good start.

Another good exercise is to keep a traders diary. Write down what you were thinking and how you were feeling as you made your trade. Do this immediately after the trade so that you can be as accurate as possible. Do this on winning trades and on unsuccessful ones too. You should notice that on your winning trades everything felt easy and sure. Once you notice the difference, don't enter trades unless your mind is in the correct frame!

It's amazing how the human mind is able to pick up on the overall mood of the market. Douglas calls this being "In The Zone". We have always referred to it as getting a "Market Feel". Some traders have felt that it was impossible, while others gain that market feel advantage rather quickly. The difference is always in the mindset of the person. Some people are naturally much more in tune with their emotions, and they don't let them effect their mind while trading.

Many traders get hung up in all the technical tools that are available today. They reason that if they can just add the right tools, they will become successful traders. After working with hundreds of traders over the years, I can tell you for certain that you will NEVER be successful unless you have the right mindset.

Monday, October 20, 2008

Mini-Dow Trading Tip - Watch the Big Board

We are often asked why so many of our index trading students are now trading the Mini-Dow successfully and not the S&P Emini. While any index will do, we especially like trading the mini-Dow while watching the Big Board.

Because of the faster movement of the Dow versus the S&P 500, the mini-Dow more closely follows it's big board parent.

So if it is just a matter of speed, then the mini-Russell would be even better right? Not exactly. The problem with the Russell is the low volume. This will no doubt change in the future. The mini-Dow had too low a volume for our money just a couple years ago, but that has now changed.

One more reason why we prefer the mini-Dow is that we like no-cost tools, and it is much easier to find a reliable Dow chart. In fact there are many online that work just fine.

No matter which Index you prefer, we feel it is an advantage to watch the big board chart, and not the mini chart. We also prefer the 5 minute time frame.

Many traders watch both, which is what I did years ago before deciding to focus on the big board. Here's why. I found that I would not move on what the mini chart was telling me unless I confirmed it with the big board. A popular confirmation among traders. It finally hit me that if I would not make a trade without confirming it with the big board, then why did I need the mini chart at all?

When I dropped the mini chart and focused on the big board movement, my trading improved. I have since confirmed this strategy with Hundreds of my students and other traders. Just recently, one of my students who moved on to using the mini-chart (a paid service I might add), came back to our style and is now focusing on the no-cost big board chart we use. He also confirmed that his trading improved, and he now sees why we focus on the big board.

The mini chart (even in the 5 min time frame) is like trading with a 1 minute chart. There are too many head fake moves that get you in a trade before it has fully developed. The big board averages some of those moves out for you. It keeps you on the sidelines when you should be. Sure, you might not get in as early on some runs, but in the long term it will save you!

It is difficult to catch any move from top to bottom or vice versa, but by watching the big board you can fairly easily get a nice chunk out of the middle (or many chunks with our BIG MONEY small trades strategy). A few nice chunks a week will keep you from needing a bail out plan!


Doug West has taught thousands how to grow wealth with
simple Index Trading and by eliminating debt & interest
charges. Get his Debt-Free Report at no cost.

You can also watch him make live Mini-Dow trades by visiting his site.

Thursday, October 16, 2008

Index Trading Better Than Ever

With all the wild swings in the market, the financial MESS with the banks and the crooks on Wall Street, folks are scratching their heads trying to figure out how to make money in the stock market.

The so called "Experts" on CNBC, Bloomberg, and other news networks are trying to call the bottom of the crisis. Even Jim "Mad Money" Crammer has been telling his loyal stock-trading followers to buy GOLD! He also is saying that long-term buy-an-hold stock trading will NEVER be the same. We couldn't agree more Jim!

However, for Swing Traders, the market is Better Than Ever! We appreciate and enjoy trading the Index. When the market is swinging, there is No Better time to be trading the index. While we like the Mini-Dow, Any index sure beats trading stocks these days (and always has in our opinion).

While stock and commodity traders are trying to figure out how low this market could go, Index and Swing traders are willing to follow it down as low as it wants to go. "Let it Fall" is the cry of the day.

Think about it, why would anyone in their right mind want to buy a stock these days? Or an ETF for that matter? With simple index trading you don't have to be concerned about PE ratios, insider trading, golden parachute escape plans, decadent officer vacations, earnings reports, or all the other YUCK things that come with picking stocks!

If you were going to short a stock you still need to do your research on all the above and more. And if you short it, the stock might be up 15% in the morning before dropping to minus 20% in the afternoon. Most stock traders are not able to hang on for that type of roller coaster ride.

If you trade the index, the set ups come to you. No research, we don't really even care if the CEO runs off with all the money. We just want the market to MOVE! The more it moves the better. And, we really don't care which way it goes. Up or Down, just as long as it moves.

If you have EVER even thought about Index and/or Swing trading, now is the Time to Act on it! While all the stock investors are scratching their heads, you can be on your way to the bank (on second thought, maybe it would be better to keep it under your mattress).

Thursday, October 2, 2008

Are You Debt-Free Yet?

We have been telling our readers for some time now that the best thing you can do for your finances is to get completely out of debt. The mess on Wall Street really brings that strategy to light.

While big companies are falling to the way side, the firms with no debt and cash reserves are doing just fine. That is Exactly the position you need to be in as an individual. If you are not paying the typical amounts to interest and taxes, you are going to be in a MUCH better situation than most people are these days.

No doubt inflation has effected the family budget.

The Bush oil men started their plan of bringing on HUGE oil and gas prices several years ago. They apparently never stopped to think that if the common folks are paying 3 times what they are used to for gas, they might not be able to pay their mortgage bills, car notes, or credit card usury fees (which many families have been forced to run up to pay for their gas).

Now the financial backbone of the country is in crisis, and Wall Street is scratching their heads trying to figure out what went wrong.

Of course, now that Lehman, Merrill Lynch, Fannie & Freddie and many others in the financial sector have waved bye bye, folks are wondering where it all will end?

My guess is that this HUGE economic mess is no where near finished. Who knows, it might even lead into the Great Tribulation mentioned in the bible. No matter what happens, we better all take steps to protect ourselves now, and not wait on Washington to fix it.

Statistics show that most folks who declare bankruptcy could have saved themselves with just a few hundred extra dollars per month. That is a very realistic goal for most home biz entrepreneurs. There are many ways to do that much and More online.

If you are in the business of helping folks created income streams at home and/or online, then you could likely be part of the solution. Our feeling is that it will be the entrepreneurs of the world that pull us out of this.

We favor the strategy of increasing income, and decreasing debt at the same time. Many people will wait until they are completely debt-free before they look toward increasing income. Why not do both at the same time? With just a little planning, you can be well on your way to the lifestyle you want. (In many cases you can cut out the fat and find additional money for debt reduction without increasing income at all.)

One thing is for sure, with their record, we can't wait for Washington!