The goal of every day trader is to enter high probability trades and profit as the price increases. Most traders use a group of indicators, oscillators, and price action to determine the exact set up that will maximize their potential for a winning trade. But there are two outcomes of any trade; the goal is profit, but things don’t always turn out the way a trader has it planned. There are no 100% trades, nothing is guaranteed. Even the best trade setups have the potential to lose money. In short, trading is all about probability.

What do you do when your well-planned trade starts to head south?

Let’s say a trade you frequently use has a 70% success rate. I would take this trade every time I got a chance. Why? The odds are in your favor, though there are few trades that have a 70% success rate. The other side of the argument is the 30% failure rate. In normal trading, then, three out of every 10 trades are going to result in a loss. Losing trades are an integral component of every day trading system and learning how to lose is an essential skill for all traders.

Prior to every trade set up, I make a subjective assessment of the level of risk I am willing to assume if I take a given trade. One component of that risk assessment is where I will place my stops. Typically I use Welles Wilder’s Average True Range to help me to determine the potential profit in a given trade. Though past market action is not a guaranteed indicator of the potential in a trade, it gives me a good idea what the current market mood might be. I do not like to risk more than 16 ticks on any trade and usually inclined to use 8 to 12 ticks as a good stop loss points. I am relatively risk-averse and running long stops is not a practice in which I engage.

Let’s start with a hypothetical day trade. I have taken the high success rate trade set up. I go long. Unfortunately, the market price begins to swing the wrong direction. I really liked the set up prior to executing the trade and feel the market will go in the right direction. But it doesn’t. I have set up with 12 ticks as my stop loss and the current market price is -8 ticks below my entry price. Worse yet, I am still convinced the trade will eventually reverse and move upward, but it looks like it’s gone up breakthrough my stop of -12 ticks before it changes direction.

What should I do?

The answer to this question is simple and unequivocal. I never move my stops to accommodate a losing trade. Ever. This is a hard and fast rule in my trading methodology. I understand probability, and accept the potential risk and reward inherent in every trade. Even on a high probability trade that may reverse direction, I do not move my stops. Why? If the trade is already negative, why would I potentially increase my risk exposure by moving my stops to accommodate the negative price action? I have no real knowledge that the trade will reverse and start climbing in price. The truth is simple, I want the trade to move upward because I will profit. Wanting a trade to move upward as opposed to knowing the trade will move upward are two very different realities. One of the most important principles in my personal trading methodology is understanding the difference between fact and fiction. In other words, I let the price hit my stop and I am out of the trade with a loss. I generally give high probability setups every chance to reverse to a positive outcome, but I will not increase my risk exposure based upon my emotional attachment to a trade.

I think learning to lose the proper way is an extremely important concept to understand. In my experience, I have watched day traders repeatedly move stops to accommodate adverse price direction. The result is fairly predictable, the day trader ends up losing more money than he or she initially intended. The result of moving stops to accommodate trades increases your risk exposure. I like to stick with my initial risk assessment and let the trade play out. Sometimes it’s easier said than done, almost painful, but I never move my stops.

- About the Author: I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit. Would it be convenient to receive valuable trading tips every night in your email? You can sign up for our free video series by Clicking here These videos contain advanced trading strategies and will enhance your trading knowledge immeasurably. Best of all, they are free! So get your free videos and start trading like the pros. Article Source

Ultimate Swing Trader Saturday morning update:

They’re taking the Ultimate Swing Trader OFF the market at 5:00pm EST tomorrow and there are only 7 seats left in the exclusive 4-week FX Live training!!

There is nothing wrong with being a skeptic and there is also nothing wrong with being convinced something is actually as good as it sounds.  Watch this short video and see the UST system produce REAL results.

==> Visit Official Ultimate Swing Trader Website

In the video you hear directly from a UST coach.  He’s just one in the team of expert traders you’ll interact with when you sign-up and secure your spot in the FX Live training.

Not to mention if you grab the system now you’re still eligible for killer bonuses.  You’ll receive the Ultimate Day Trade System at no extra cost, and have everything shipped to you for free!

I can’t say there will still be spots left in the FX Live training by the time you read this.  I know they almost hit their quota the first day it became available.  With a jam packed curriculum it’s no surprise.  The classes will cover the entire UST strategy PLUS everything you need to become that forex genius trader, all in a matter of weeks!

Sign-up today:

==> Visit Official Ultimate Swing Trader Website

I personally think they’re underselling this package – but hey it’s a great deal for you so I’m not going to say anything. ; ) Although, I have a feeling the next time they release the UST and FX Live training it will come with a higher price tag.

You don’t have much time. I’m sure the FX Live classes will fill-up before they shut down TOMORROW at 5:00pm EST!

Don’t procrastinate, order now

==> Visit Official Ultimate Swing Trader Website

Rob Trader – Forex Expert

Article Source:http://www.articlesbase.com/day-trading-articles/ultimate-swing-trader-is-it-worth-it-less-than-24-hours-to-decide-1771076.html

You may have heard a bit about day trading in recent months or even years, but do you really know what it’s all about?  Due to the allure of quick turn-around on investment, learning how to be a day trader is something that millions of people are jumping into.  But does that mean this is right for you?  Let’s take a look at day trading to see.

At the most basic level, a person considered to be a day trader typically uses a brokerage firm to leverage market momentum.  In day trading, actual trades have a short lifespan, with traders ending each day with no positions at all.  This is where the term “day trading’ comes from.

Recently, online trading has made it a bit easier to learn how to be a day trader, how to read stock reports, and basically how to become your own broker.  It is estimated that there are over seven million people in the United States alone who engage in online trading.  Of this estimate, day traders number around 10,000 people.  Why such a small number compared to the overall population of online traders?  Well, day trading is much more risky and time consuming than tradition stock market buying and selling.

To invest here and there in the stock market, you simply buy shares of any particular company that you so desire and then hold onto them until they are worth selling.  Engaging in the stock market in such a way eliminates the need to learn how to read stock charts and often even hiring a professional broker.  With just the basic know-how, you can easily find stocks worth investing in and also determine how long to hold on to them.

Day trading, on the other hand, requires a bit more knowledge – and a lot more confidence.  Practice makes perfect, it has been said.  This is especially true when talking about how to be a day trader.  This is not Monolopy, it is real money; money that you have worked hard to earn.  Investing into risky stocks is something you want to do with confidence.   And with the volatile nature of day trading, should you decide to jump in; you need to be prepared to win big, but also to lose big.  If you’re not set up financially to possibly lose all you have invested, then maybe sticking to traditional trading may be a better choice to begin with.

There are a few things to take into consideration if you feel you are ready to figure out how to be a day trader.  While you don’t have to be technically savvy to work at day trading, it does help to be adequately connected.  This means that you need a high-speed internet connection wherever you plan to do your online trading.  Day trading is a task that requires constant attention throughout the day.  A matter of mere seconds can affect your stocks for the day; and hence, your money.   Be sure your internet connection is good and works at the fastest speed possible.  This goes for your actual computer as well.

To be a successful day trader, you will want to know how to read stock charts.  You will also need to be up to speed with the language of trading.   To make sure you are well versed in trading; subscribe to RSS feeds from sites containing the most up to date stock market information.  CNN is one good place to start.  Reading the daily stock report as well as stories in the financial section of your favorite newspaper is also a way to brush up (or learn) on your investment lingo.

Learning how to be a day trader is not extremely difficult; it is just something that requires time and commitment.  Investing in yourself to learn what it takes could pay huge in the long run.

Shane is a financial advisor, stock broker, and professional consultant. He enjoys reporting on the latest stock market happenings and offering advice to both fledgling investors and experienced day traders. Visit his site to learn more aboutDay Trader and How to Buy Stocks

Article Source:http://www.articlesbase.com/day-trading-articles/is-day-trading-for-you-1730249.html

I think the most important fact, yes I said fact, regarding pivots points is they are a prediction of future support and resistance levels.  The key word in the previous sentence is “prediction” and traders should keep that in mind when trading pivot point systems.  I have always been conflicted as to why pivot points (PP) become important throughout the course of the day.  Most traders begin their day by plotting pivot points onto their chart.  With so many people using similar formulas to plot PP it is little surprise that the market stops at the calculated support and resistance levels.  Do the support levels and resistance levels occur because everyone is using a similar system or are they part of the natural function of the market?

It doesn’t matter.

As a trader I am only interested in what the market does, not why it exhibits certain tendencies.  I realize that is a bit of an obtuse answer, but it is one I have learned to live with comfortably.  Of course, it is often discussed among traders and each day trader has his opinion, but to trade the markets it is not necessarily important why this phenomena occurs.

On the other hand, some days the market pays absolutely no attention to pivot points and goes along its merry way without stopping at any particular point on the chart.  More often than not, though, the market will stop at the pivot points, or pause , or reverse right at the plotted lines.  My point is a simple one; pivots are very useful, except when they are not useful.  Whether the market will adhere to the predicted support and resistance is something that you must glean from watching the price action for a bit.  I typically don’t initiate my first trade of the day based on pivot points.

The formula for calculating the days support, resistance, and pivot point is as follows:

R2 = P + (H – L) = P + (R1 – S1)R1 = (P x 2) – LP = (H + L + C) / 3S1 = (P x 2) – HS2 = P – (H – L) = P – (R1 – S1)

S=support levelsR=resistance levelsH=hiL=lowC=close

As you might have surmised, the formula plots five lines on your trading chart.  These lines are commonly referred to as S1, S2, PP, R1, and R2.  S1 and R1 are the first lines of potential support/resistance on your chart.  The pivot point is the primary line of support and/or resistance.

Most traders have their own set-up to trade pivots, and I have three that are favorites of mine.  One is a break out through a resistance/support level.

Break outs often time occur when the market is in a consolidating mode and forms a horizontal channel, with the price banging off the top and bottom of the channel, especially if the channel is on a support/resistance line, as is often the case..  After this price action continues for two, maybe three cycles, I will set a sell a point below the channel and a buy a point above the channel. (I am referring to the ES contract here)  Generally the price action will break out of the channel and continue in the direction of the break out and you pick up the trade as it blasts through the channel parameters.  This is a pretty good strategy and can be very profitable.

Breakdowns are also a great way to use your pivots.  This trade is especially good if the market has been hitting a support/resistance line and stopping.  As the price action approaches the support/resistance line, I will set a buy one point below the line in hopes of picking up the trade as it pierces the line.  This trade can be a bit dodgy, especially if the market has been bouncing off the lines all day because the earlier bounces were usually followed a move in the other direction.  Your hope is that the move does not go through the line a bit (as it often does), pick up your trade and change directions.  Again, here you can set your order lower, maybe 1.5 points below the line if you are uncomfortable.

Finally, you trade the pullbacks from R and S.  Let’s say the market pierces S1 and heads straight to S2 and stops and reverses.  Often times the change in direction will go straight to S1 again, retracing it’s move down in the opposite direction.  Once it reaches S1 I will set a trade 1 point below S1.  More often than not, the trade will hit S1 and reverse field to the short side, and if it continues upward you stayed out of the trade by virtue of setting your sell 1 point below S1.  This probably my favorite pivot point trade, and comes with a higher degree of safety than most.  Of course, no specific trade works every time.  If I am stopped out twice on a pivot point trade, I forget pivot points for the rest of the day.

In summary, we learned that pivot points are predictors of future activity.  Further, as predictors they may or may not be effective on a given day of trading.  Your power of observation is key to understanding the effectiveness of a pivot point every trading day.  We reviewed three basic trades that I use; the breakout, breakdown and pullback.  If you learn to combine your trades with an oscillator or a tick chart, you will develop and even higher degree of activity in your trading.  Remember to check yourself when trading pivot points, never trade without stop-loss orders in place.

I endorse a state of the art trading program for beginners at Trading Concepts, Inc It’s an awesome product that will have you well on your way to success. Plus, it has a money back guarantee…you have nothing to lose and thousands to gain.

Article Source:http://www.articlesbase.com/day-trading-articles/how-to-trade-pivot-points-1710591.html