The Dimensions of a Successful Trading Entity

Many considerations go into creating and running a successful trading entity. We’ll look at the most popular which get the most attention, right through to the most important, which usually get the least attention.

Here is the list:

1. Entry signals
2. Risk management
3. Exit signals

4. Reliability
5. Reward to Risk
6. Opportunity
7. Capital management

8. Objectives
9. Familiarity with Markets
10. Resources
11. Mindset
12. Style
13. Management

Most, and by most I mean probably close to 80-90% look at number 1 and that is it! That is a startling reality, but a reality nonetheless. But there is a reason this happens. Most new traders are unaware that such a large number of traders ultimately fail in this business, and more importantly, this fact is well known by the very people who market trading in this way.

But enough of that, let’s look at some serious considerations you should make and the order in which you need to do it.

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The index futures trader…

I received an interesting email recently from a 11+ year experienced index futures trader who wanted to know if a particular program would enable him to take his trading to the next level.

At first I wasn’t sure which program he was referring to and also at what level he was trying to get to, let alone which level he was currently at.

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Which one are you?

Some traders will go through system after system, teacher after teacher, wasting thousands of dollars not only in useless systems but in lost trades before they realize they’ve been approaching the markets from the wrong standpoint because they’ve been trying to trade the wrong type of system.

The two types of traders are the mechanical type trader and the discretionary type trader. Therefore, there are two types of trading systems, a mechanical system and a discretionary system. The difference between the two is quite large not only in the way the market and possible trades are analyzed but in the psychological make-up of the trader themselves.

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I have spent an awful lot of my personal time putting together a 69 minute video for traders that I believe will open the door to understanding how to trade successfully.

This video is a trading system I call the 4 T’s trading system, and in this video you’ll learn the trading system itself, the rules and how to trade it. It will also show you I apply leverage to it, but more importantly how to use leverage with the trading system to achieve a goal or objective.

However it doesn’t end there. By the time you have watched this movie, I believe you will be able to take any trading system, not just the 4 T’s system and use it to achieve your goals. If you already have what you believe is a work-able system but are unable to make it work, this may answer your problems.

If you do have any questions after watching the video I urge you to send them to me, via the question form link which you’ll also find on my blog. I plan on answering any questions regularly so do send them along.

It is quite long, so make yourself a cuppa and enjoy
http://financialmarketfisherman.com

To your success
Dean Whittingham

Your Exit Strategy Should Be A Function Of You and Your Trading Needs

In my last post I spoke about getting back to the basics of trading when you find yourself struggling. I also mentioned that it was not the complete picture and that an exit strategy is more a function of the trader themselves. In this post I explain why.

There are many ways to formulate an exit strategy. Other than an initial stop loss, which is there to get you out of a bad trade, exit strategies are used to achieve a goal. A lot of traders don’t understand this concept and therefore pay little attention to it, spending more of their time worrying about entries.

Those that do consider the exit strategy important may still place more importance on finding the exit strategy that proves to be the most rewarding when back-testing. Although this is important it is only half the picture. An exit strategy also needs to support you the trader and help you achieve your goals.

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For the beginner or struggling trader

All professions whether it be sport, business, or trading have what are called the basics and if you’re starting out in a new profession, the basics form the foundation or the core. However if you’ve been practicing your profession for quite some time and feel you’ve gone off track or are not hitting your goals, usually the best thing to do is just get back to the basics: and trading is no different.

This is not an article based on emotional discipline or psychology, it is based on the basics of a trading plan, and it really doesn’t matter if you’re long term or short term, the basics apply to most market participants. Some may have trading plans that are quite different to the basics however for the majority who are relatively new to trading or are struggling, the basics are by far the best approach to adopt.

The basics are split into three and are:

1. Determine the trend
2. Wait for a pullback
3. Enter on an event or pattern

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Do you know?

Visit forums, join memberships, purchase tuition with member areas for support, read books, talk to fellow traders etc and you can be guaranteed you will come across many who will be struggling with a whole host of reasons why. Some will even appear as experts but beneath the surface are struggling with some aspect of their own trading system or style. But do you know what the hardest thing any trader will have to do is?

1. Learn the jargon – no way, this is easy and it just takes time.

2. Find a profitable trading system – there are hundreds of thousands of them, in fact many are just given away for free nowadays.

3. Back test and paper trade – c’mon, I know many people don’t like hard work but you’re way off here.

4. Learning to read charts – kids like reading charts as they look at the green thing and they say, “Hey that’s going up”, or if they see a red thing they say “that’s going down”.

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Why Markets Correct

Markets move up because market participants believe in the fundamentals behind the market. At a certain point it is seen that the fundamentals change and the market corrects, however the reason fundamentals change is not because of some external event, but because of the participants themselves. In other words, an excess of bullishness creates bearishness; it is the participation itself in the market that creates the shift and thus the correction or bear market.

To understand this phenomenon, we must first look at how commodity cycles occur.

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and learn to sit on your hands; for example, how do I quit chasing a stock etc?

I remember someone asking me once, how on earth do you remain detached from your emotions when it is emotions that cause you to want to become a trader anyway? In actual fact it’s more like; emotions cause you to want to find financial freedom, but it means the same thing.

I agree, emotions do play a huge role and it’s even more pointless if you set out to achieve a financial goal in trading, so that you could enjoy a lifestyle goal, such as going on a cruise, only to not enjoy the cruise! All that work for nothing.

But let’s get serious.

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What you must do before buying any trading system

Now that our markets are going through some serious volatility, there are alarm bells ringing and expert’s opinions are being sought more than ever. But what you’ll also see more of now are the marketing of trading systems that work in both bull and bear markets; or how easy it is to ‘short’ a market.

Because of this I have written a 20 page report called ‘The Black Hole of Trading: what you must do before buying any trading system’. To put it mildly, I am disturbed by the number of traders that struggle, and I know this from being in the trenches with other traders who have committed money to a particular system (support forums etc), questions I get asked, and surveys and polls I have been conducting over the last 18 months.

But what disturbs me even more is that the reason traders struggle seems to elude not only the traders themselves, but also the very people who sell the trading systems. It’s simply just not enough to give someone a set of rules for entering and exiting a market based on a few indicators; if it was we’d all be raking in the bucks!

My 20 page report will explain to you why most struggle regardless of the system they are using; and what you can do about it. This isn’t some psychological emotional mumbo jumbo where I’m saying you must trade without emotions (I think this line has been overused); heck, the reason we get into trading is because of emotions. No…this is real meat that all traders and those seeking to trade must consider and apply first before buying any trading system.

The Black Hole of Trading

After reading my report please leave your comments below; I’d be very interested to hear your thoughts.

Happy Trading

Dean Whittingham
Pentagonal Trading © 2004 - 2007