Day Trading Advice From Tiger Woods

What advice could Tiger Woods possibly have for you as a trader? What could he possibly know about hitting a bid or getting out of a bad trade? When has Tiger ever felt the pressure to pay the bills with his next trade?

I would hope it is safe to assume that anyone reading this is savvy enough to know who Tiger Woods is. He is the worlds #1 golfer by a mile and he is projected by Forbes to become the first billionaire athlete by 2010.

If you ever hope to be successful, and hopefully enormously successful you absolutely positively need to take the advice I am about to give you. Study successful people. Not just successful traders. It doesn't matter if it is a grand master at chess, a violinist, a professional athlete, a dancer or a cook or a single mom raising 6 kids.

I am not talking about learning what they do; I am talking about listen to what they say about how they got there, what kind of effort it takes to get there, and what it takes to stay as one of the best. I am sure you want to succeed as a trader. I am sure you want to earn more money than you ever thought possible. I am sure you "want" it. Well I am here to tell you that wanting it is not enough, sorry to throw cold water on your face but it's the truth.

You need a burning desire. How do you know if you have burning desire? Are you willing to get a part time job while you are learning to pay your bills? Do you go to the office every day early and stay late every day to ask questions of those who are succeeding? Do you faithfully keep a journal every day?

When you were a kid did you practice because you wanted to or because you had to? Winners never have to be told to try a little harder next time. Winners never have to be asked to stay late to practice.

Do you go to the bookstore in your spare time or do you watch 6 hours of TV? Let me tell you a universal truth, how you spend your spare time is how you will spend your future.

One of the best places to read about success on a daily basis is Investor Business Daily, the "leaders and success" page in the front section. I have a shoe box full of these articles that I go back to once in a while to get re energized.

So what does all this have to do with Tiger Woods? In case you aren't a golf fan, last week he won the US OPEN (one of the 4 major events in golf) with a torn ACL ligament in his knees and two stress fractures in his other leg.

Although that was impressive, that's not the point I wanted to make. I was watching the interviews with him on the Golf Channel after the match and here is the quote that struck me. "I basically spend the entire tournament trying to minimize mistakes until a few good opportunities present themselves." To the casual observer this probably didn't mean that much, to me, well I almost fell off my chair.

Tiger Woods just explained how to be a successful trader. Tiger Woods says the secret to his success is minimizing mistakes. Spend your day following your plan, and a few trades will end up presenting an opportunity for a better score (profits). In the mean time as the day unfolds just minimize mistakes and stay in the game. Pay attention to those who are successful, if you are aware you will get clues.

One last quote to leave you with, one of my favorites. It was to Maria Callas, the most renowned opera singer of the 1950's. A young aspiring singer walked up to her and said "I would give my life to be as good as you." Callas casually looked at her and responded "I already have." Think about it that is pretty profound.

Until next time

Pete

The Sad Picture of Day Trading

There are people who are remarkably successful in day trading but there are a lot more who have to leave the trade with a debt in their accounts. It is a take-it-at-your-own-risk playing field. Thus you should have an idea of the risks you are taking and should know your way out. If not, the only way you could go out of this trade is when you have nothing more to trade.

While it is true that trading appeals to many people, it has its share of sad sides that would-be investors should be aware of:

It is an expensive job

Day trading is a full-time job, it won't allow you two hold two jobs at a time. This is because you have to be always on the look out for any changes in the market that could severely affect your portfolio or bring you the income. This is an extremely complicated job that requires you to acquire technical understanding of how the trade works. You need to invest on a number of things like your risk capital (which you could lose at the end of the day), your professional training, your technical support and for larger day traders, the payments of the firms they are commissioning.

It is not a sure investment

Nothing in this trade comes with a guarantee. Traders will have to wait for the rise and fall of some stocks, ride in the momentum, and hope that they profit from their decisions. But even the rise or the fall of a specific stock is not an assurance that your investment is lucrative, everything changes in this kind of trade and a trader should be able to understand that reality. Every decision is a risk and each risk leads to other risks. If you are not sure if you can handle the uncertainty of this investment, it is in your best interest to first- learn more and second- look for other trades that work for you and invest your money.

It makes you suffer financial losses.

Like all other businesses, this trade may make you deal with severe financial losses. If you open a restaurant, for example, and the restaurant doesn't click in your intended market, you will have to wrap up and accept the deficit in your investment. Or you could be a bit more patient and make some adjustments in your business. The same is true with day trading, only everything is fast forwarded. Anything and everything could happen in a nick of time. You can lose hefty amounts now but you may profit a lot within the next few hours or vice versa.

Selecting the Best Day Trading Broker

Day trading brokers are essential to new traders. They do the transactions for you and even give suggestions as to which transactions to make, whether you should sell now or later. Your choice of broker is therefore crucial to your success. But other than this criterion, what other qualities must your broker have and how do you choose the best one in your trading company?

The first thing to consider is the cost. Some really good brokers can charge high rates for every transaction that he does. While this may give you more profit, still you may not earn much because a big chunk of the money goes to the broker. You should therefore be able to weigh the transaction costs and commissions that you will give your broker against the profit that you are supposed to have.

It is also important that you require financial stability from your broker. He must have enough capital or assets. This will lessen the probability of him running away with your money. More importantly, transfer of funds between the two of you must also be relatively quick and easy. See also if he accepts online payments.

He must likewise be reliable and with a proven track record in this field. To know this, you must do your own research. Ask the company for details on the broker's record, such as the number of clients that he had, how many of them lost their money and how many of them actually made profit. Or you can ask fellow traders as to which ones are good and which ones are not. You can also search his name in the net. It is possible that his name may have been mentioned in forums or message boards, so you will have more information on how he works or operates.

Of course, there are other services that he can provide, such as technical support and chart analysis. See also if he uses a trading platform that you are comfortable with.

With the many day trading brokers available, choose one who can provide you with the best service at the least cost. Remember your goal as you ventured into this kind of business, and that is to gain profit. If a big part of your gain goes to commissions, then it is time to look for other brokers who can provide you with the same service at a lower price.

What Could You Get in Paper Day Trading?

Virtual stock trading or paper trading is a simulation of the actual trading process that lets people practice the trade without having to risk any money. Like the principle of computer games, the paper trading gives a good feel of the actual scenarios happening in the market. However, since it is a simulation not everything could be happening in reality. One's success rate, for example, is only an approximation of how well a person could handle his live trades.

Lack of realistic emotional risk level, The person using this type of "training" has no emotional involvement that is normally felt in actual trading. Once a person's emotional state is challenged, he will likely make decisions that are entirely different from situations where he does not feel any emotional stress. It is a common knowledge that trading is 15% skills and 85% emotions. Depending on a person's capacity to keep his emotions under control, he will either lose or win his trades. Obviously, it is very different in a simulated environment.

Zero risk, The most important component in trading is the risk capital and this is the very thing that paper trading lacks. Since it is basically a "game" and people "playing" in it use paper money or virtual money. They do not feel both the risks and the rewards present in the trade.

However paper trading has its primary advantage of practicing the trade. Since your shares are not actually registered to the market, they are not considered as parts of the exchange therefore you do not have to run the risk of losing your shares which comes in high probability when you are still in the familiarization stage. Some trading software includes simulation which allows the trader use the same software as he would in actual trading. This gives him a good environment for practicing his approach and skills.

To solve the problem of unrealistic paper trading, you can do the following:

Have someone to compete with. Competition will lead to two things: adrenaline rush which could heighten your emotionality while trading and the need to perfect your skills while earning higher profit in comparison with your paper trading partner. This will increase the educational experience.

Learn as much as you can. Don't stop training in paper trading as long as you are not comfortable with your trading skills. Many people think that simulation is still better than going into the live trade with no idea to back you up.

Valuable Pointers in Day Trading

You should understand that day trading is not a body of knowledge or a science for that matter. Rather, it is an art which requires your skills in maneuvering things and some carefully laid out strategies to keep things going for the better. Yes, there may be profound techniques on how to better handle day trading and which came earlier than the time that you have decided to participate in the same craft but of course, you should also set yourself apart from the common day traders.

There is the necessity for you to come up with your very own style. More so, there is no standardized strategy to pursue day trading so you may push through with whatever technique that you find suited to you.

Here are some of the most relevant questions that you need to ponder on which will surely help you define your original strategies in trading.

How much time do you devote to trading stocks?

How long have you been involved in trading? Are you a regular or an occasional trader? Which way do you prefer to push through with trading?

Honestly, the time which you are willing to spend for trading matters.

You surely know that the marketplace can be a real threat at times. The prices may untimely rise and fall. Thus, the quantity of time that you are willing to devote for this is one of the many crucial considerations that you must face. It is important that you decide on your availability. The more time you have, the better. This is for the reason that you need to watch out the conditions of the market when you intend to sell your stocks.

How can you pinpoint the rightful stocks to trade?

As mentioned above, trading is an art. Hence, you need to identify the most possible stocks that are worth to trade. Take time to research and analyze the technicalities of the task. You can take tutorials from live seminars, cd-rom packages, online forums, newsletters, and webinars.

What are the factors that you must look into as you plan your trade?

Whatever type of stock it is that you have decided to trade, what matters most is that you aim for three factors. They are an aimed-at entry price, an exit price, and the stop loss. You need to consider the current selling price of the stocks in the market. Likewise, you should not keep your stocks for too long or you are going to put your profit gains at a risk.

How should you face the possibility of losing in day trading?

Not all of the traders succeed in their craft. You must remember that.

Everyone can be on the losing end. Naturally, you will be downtrodden when you fail in your trading endeavor but instead of sulking, you better pick up the pieces of your lost confidence and think positively. Win back whatever it is that you have lost. Move on and try to do better.

After all, the business world makes it clear that not everyone ends up a winner.

It is time that you define your visions in day trading and come up with an effective strategy with which you will be most comfortable to work with.

The Must-Haves of Day Trading

Day trading used to be set in a day trading pit where only the large firms and brokers could participate. However, with the advent of the internet and advanced communication technology the trade was able to reach even those people who have not even seen the actual market. It has become a popular home-based business that people with enough money and interest can invest in. However, even if everyone has an equal chance of profiting in this trade the people with the right gears are in general more competitive than those who don't. Here are some trading tools that every trader should have:

High connection speed

You participate in real-time trading so you cannot afford any time lags. You will be buying or selling trades in a market that fluctuates at all times and you should be able to get a good timing in accordance to the market behavior. Bad timing is often a problem of most traders. They either don't have the right connection speed or they just take too much time in deciding on when to enter or re-enter and when to exit the trade. Thus, you cannot rely on a dial-up connection because this won't give you up-to-date feeds. To be more efficient, you can rely on the fastest speed available for DSL or cable connection.

Hardware

A reliable computer unit is an absolute requirement if you want to be a serious trader. You have to get the basic items offered by hardware plus additional applications you want to have. The computer must be efficient enough as for its speed, memory and processor. Remember that while trading, you will be handling a lot of figures and numbers and the computer you have should be able to do the computations efficiently for you. For better feeds you should also have an excellent video card. Since you would be dealing with a huge amount of data, you may need to use two monitors or split monitors.

Software

There are various types of software available on the market today, each offering different programs. Software could be divided in three different categories: charting, data and trade execution. The trading software makes the work easier for the trader. Apart from getting stock quotes, market prices, and market indices, software will also store, retrieve and present the bits of information in an organized manner. This way, the trader could readily understand the behavior of the market, making it easier for him to make his decisions.

These tools can be bought in several computer shops or on online vendors. Take note that a trader has to pay for each tool unless they come in a single package.

The Secrets of Good (& Bad) Spread Trading - When Time Really Means Money For Spread Betting!

Trade from Home

Whether it's trading in the evenings after work or a full-time occupation, there are certain websites, tools and tips which can make the whole thing easier.

The advantages of being your own boss in this environment are balanced by the costs of taking all the risks and liability yourself. Many day-traders have lost their shirts during/after the last dot com boom but for the skilled traders the work-life balance and the fiscal rewards are immense.

Large Screens, Fast Computers

This is something obvious which is often overlooked. If you miss even half a second when making a trading decision then the price could have changed, and you're costing yourself money. With the price of extremely quick PCs falling to very affordable levels it's advisable to get the fastest computer you can. Just boosting up the processor and RAM will improve performance, and widening your broadband connection is another good idea. See sites such as Dell (UK) for a range of products.

The amount of viewing area available is another crucial factor; if you're constantly swapping windows around then this is also a bad use of your time. Extra large flat screen monitors (19+) are now under $200/ $300, or if you have the space why not consider two monitors working side by side to create an authentic trading environment - the area of screen immediately available for you to see and use is the important factor.

Also, if possible dedicate the use of the pc to trading only, this will aid discipline and concentration. On this point, having a clear working space and a decent ergonomic set-up i.e. a chair that won't give you back problems and screens at the right height make a large difference. Taking regular breaks is essential to keep some balance in the day and to avoid diminishing returns from staring at a screen for too long. If distractions and random personal emails get in the way of your trading then your concentration has gone out of the window and disciplined plans will fall apart.

A Trading Mentality

Planning

Work out exactly your approach to the market and stick to your plans. This might need to be revised according to new information, but this would be a positive change. If you alter your trading plans on an ad-hoc basis then you've torn up the road map, and you'll be much more likely to make badly thought-out decisions. Research should occupy the significant part of your time, covering both the big picture and the minutiae.

Tracking

Keep a detailed account of all trades using Excel is ideal for this purpose. Be honest with yourself about recording the exact facts and figures, then analyse the content. After a while this information will be valuable as you learn where mistakes are being made and therefore how to streamline your trading strategy. Using this method, a loss-making trade has the benefit of also being a paid-for trading lesson. The level of itemization should be high for these records, down to time of day, news events that are occurring and your confidence for the trade.

Calendars

Knowing the dates of company results, or when the new inflation figures come out for example, is essential. These releases of information form the basis of many people's opinions about the state of the market, so this should be taken into account within a trading plan. A good resource is the financial directory at the link below. Individual stock details should be investigated on a variety of sites to keep in touch with developments.

Available Funds

Work out exactly the amount you'll need, and what you expect to make. Doing this will help you stick to these limits and avoid chasing losses, making last-minute transactions. Don't keep more than you need to in your trading accounts. It's easy to move money around online and you might as well keep the funds where they earn you interest. NB. Certain spread betting providers do pay interest on balances held with them.

Emini Trading - Too Much Self Confidence Trading Eminis?

Well, I don't think there is such a thing as too much self confidence. Most people would probably agree that if anything they need more self confidence rather than less. Especially when asking for a raise. Or asking out that hot chick you have run into a few times in your favorite bookstore.

And if you a trader, particularly a day trader, you would certainly take all self confidence the Universe could possible dump on you, or, to put it in a more sophisticated manner, endow you with.

Self confidence, as Martha Stewart would say, is a good thing. Everybody needs it and wants it. Sometimes even badly. The more of it you have, the better, for, as we said, one can hardly imagine a situation where being self confident could be seen as a problem. In fact, it's just the opposite: it's being timid that can negatively affect our success in life. Sometimes with disastrous results.

Self confidence is particularly important if you are an emini day trader or any other day trader, for that matter. Without it, it is much harder to make good decisions that often require guts. But in trading, just as in many other life situations, no guts equals no glory. In trading this is even more pronounced. You bottom line, your profits are ultimately tied up to your level of self confidence. Compare this to the occupation of a teacher, for instance, and you will see better what I mean.

As day traders, we would always like to be at least a bit more self confident. It is thus natural to ask: is there any way to enhance one's self confidence?

The answer to this question is surprisingly simple: yes, it is, and it's called "practice." Practice makes miracles when it comes to day trading. The more you practice, the higher your levels of self confidence, provided, of course, that you have a winning methodology too.

I suggest you practice in a real life environment, during an actual trading session and not on a session that is replayed 3-5 times faster. That's not the same. Of course, you want to use a simulator at first and you want to use a good realistic simulator. Fortunately, these days most of them are like that.

I recommend NinjaTrader for this purpose or Zeroline Trader and Bracket Trader if you trade with Interactive Brokers, a very popular broker that is also my broker of choice.

How long should you practice? Until you know that you are able to make money trading. Yes, you need to know this. It's not enough to believe that you will make money. That level of confidence may not suffice to make you a consistently profitable trader.

As a matter of fact, there is a world of difference between knowing that you will succeed and barely believing in it. But that's something I hope to address in another article.

Spread Betting - What is It, Why Traders Do it and How to Use it to Short the Markets

What is it?

The spread in question is the difference between the buy and sell prices. Spread betting dates back to the 1970s when it was created by IGIndex to trade Gold, without actually having to purchase large physical amounts of the metal. The number of markets grew slowly, and faster expansion began in the 90s when more competitors entered the arena. The internet has allowed the industry to flourish, although it could never go mass market because not everyone can understand the principles involved, nor wishes to play the markets by this higher risk-return method.

How does it work?

If you expect a price to increase, you buy into it, or go long on the market. Similarly, if you sell or short the market you expect the price to go down. The positions you buy from are at the upper or lower edges of the spread.

If you bought GBP10 a point on the FTSE at a spread of 4050-4055, then any movement of the FTSE above 4055 puts you in profit, GBP10 for every point moved. Alternatively, if the FTSE moved lower to 4040, then you'll be liable for 15 points. The Spread is effectively the margin that the company makes on your trade, so look for narrow spreads.

These bets can be placed for 1 day or over months, it depends on the type of market that you choose. Longer term markets are more likely to see big changes, so the spreads will be wider.

The main advantage of using financial spreads is the large scale profits that are possible. This is because the bet is per point, and the number of points moved can be very large in some cases. So for a low capital risk, you can return a large sum via this leveraging. Of course, the opposite is also true, and Spread-betting is not for the faint-hearted or those that can't manage their risk.

There are detailed guides on Spreads available with all of the companies featured on this page. For disciplined financial markets players, spread-betting accounts are recommended as an effective way to strike up a large position, or to hedge against other financial situations. Headline grabbing wins and losses typically come from spreads markets; there's no cap on the upside but the downside needs to be controlled.

Advantages:

Tax-free - Maybe the biggest benefit is that NO UK TAX is applied to financial spread-betting profits.

Range of Markets - There's a massive variety of bets available - besides the usual large stocks and induces, you can bet on commodities, currencies, interest rates and many more areas.

When Day Trading, Never Buy These Stocks - Never Sell Short These Stocks

I can guarantee if you follow my advice on this ONE topic your profitability and consistency will skyrocket immediately. I have a couple of relatively simple questions for you. Why do stocks move up or down during the day? What causes and uptrend or downtrend? Of course the answer is order flow.

How much do you actually pay attention while you are trading? How often do you make mental notes which sectors trade from positive to negative or vice versa during the day? There is big money in this information. As the ebb and flow of the market unfolds during the day, the indices will tell you where the institutions are allocating money. Make it your business to be following them. Don't fight the tape, don't have an opinion. You definitely should have trading ideas, but not an opinion.

What's the difference? When you have an opinion you will place trades and hope the market proves your brilliant analysis correct. You will get steamrolled if the market doesn't comply. If you have ideas you will have profit targets and stop loss parameters in place, you will simply place the trade let it unfold and then do what you planned to do.

Now back to the main subject of the article. As an intra day equity trader I am only concerned with today's order flow, the buying and selling pressure from today's open. When the bell rings to open the market I change my stock watch to sort my universe "change from the open." Think about it, unless you have an over night position why in the world would you care if the stock is positive or negative from yesterdays close?!

If the market is trading positive "from the open" I sort my list by stocks positive from the open. I reverse the sorting if the market is negative from the open. I want to be trading stocks trading with the market right now.

Now let's take it one step further, if the market reverses intra day I will immediately change the sort in my list from the open to the new direction of the market. In other words if the market was trading positive from the open all day and then suddenly reverses I want to be short selling the stocks that were weak, not the stocks that were strong all day! Remember pay attention.

Think about it, if those stocks were weak when the market was strong they will be the stocks to fall the hardest as the market comes down. Paying attention to intra day relative strength from the open will put your trading career miles ahead of where it is now.

So to wrap it up, never short sell strong stocks and never buy weak stocks. I know you will do it and lose money 9 times out of 10 but you will only remember the one time! LOL

To be a consistent money earner in the stock market you must be trading what is most likely to happen next. Stick with the intra day order flow and you will be one happy trader.

Until next time.

Volume is the Secret to Futures Trading

Volume is the indicator which technical analysts constantly look at to determine whether or not a move in the markets, a single stock or sector has conviction. It may also be the easiest of all indicators to understand. Add the number of shares/contracts traded in a given period, and you have the answer. It requires no weightings or exotic mathematical formulas. It simply indicates enthusiasm or lack thereof for a financial instrument and it has nothing to do with the price of the instrument. Mastering the volume indicators can be the 'keys to the city' that traders look for because volume precedes price.

To confirm a market turnaround or trend reversal, the technical analyst must determine whether or not the measurements of price and volume momentum agree with each other. If they do not, it is a sure indicator of weakness in the trend, and thus a trend reversal may be well on the horizon. If we look at volume from the standpoint of momentum we see a recognizable level of buying and selling activity. Because volume is paramount I use five different volume indicators in my charts, as follows;

• Up/Down Volume Indicator


• Volume Moving Average-VOLMA


• Volume Rate of Change-VROC


• Volume Oscillator-VO


• On Balance Volume Oscillator-OBV

Up/Down Volume Indicator

This indicator merely shows the total number of contracts traded, plotted in green or red indicating whether the up or down volume was greater on that particular bar.

Volume Moving Average

The VOLMA normally plots/overlays the Volume Indicator, showing the average volume over the last number of bars/periods. The default is typically 20 periods; however, you can adjust the input values depending upon the time frame in use.

Volume Rate of Change

This indicator shows whether or not a volume trend is developing in either an up or down direction. This indicator also provides insight into the strength or weakness of a Price trend. THE VOLMA plots the most recent bars volume and compares it to the average volume of the previous 14 bars on a 5-minute chart (35 bars on a 2 minute chart). The results are plotted as a value fluctuating above or below the zero line.

A positive value suggests enough market support to continue to drive prices actively in the direction of the trend (whether it be up or down). While a negative reading below the zero line suggests that there is lack of support to continue the existing trend and prices may begin to become stagnant or reverse.

Volume Oscillator

The VO uses the difference between two moving averages of volume to determine if the trend is increasing or decreasing. The fast volume moving average is usually over a period of 14 bars/periods. The slow volume moving average is usually 28 bars/periods. On a regular basis, analysts argue over whether or not the lengths of these time periods are appropriate. Some say that 14 and 28 are too conservative while others argue these numbers are not conservative enough. Many short-term traders use 5-10 (fast MA) and 20 (slow MA) as input values.

The histogram, like an oscillator, fluctuates above and below a zero line. Volume can provide insight into the strength or weakness of a price trend. This indicator plots positive values above the zero line and negative values below the line. A positive value suggests there is enough market support to continue driving price activity in the direction of the current trend (up or down). A negative value suggests there is a lack of support and that prices may begin to become stagnant or reverse.

A value above zero indicates that the shorter term volume moving average has risen above the longer term volume moving average. This indicates that the shorter term trend is higher than the longer term trend.

A rising Volume Oscillator usually suggests a strengthening of the Trend while a falling Volume Oscillator usually suggests a weakening of the trend. But that is not always true. Rising prices with increased short-term volume is bullish as is falling prices with decreased volume. Falling prices with increased volume or rising prices with decreased volume indicate market weakness.

The Volume Oscillator confirms price movement. When volume is low but gains and losses are big, the professionals are most likely getting overly excited about a possible turn in market direction. That's because many have been taught that without strong volume a market move is not valid. Here we look at how to interpret volume and the principles behind doing so.

Significance. If a market is rallying, the volume oscillator should rise. When the issue becomes overbought, the oscillator will reverse its direction. If the market is declining or moving in a horizontal direction, the volume should contract. Always keep in mind that we are measuring changes in volume, and volume expands during a sell-off. It is important to note that an increasing price together with declining volume is always, without exception, bearish. When the market is at the top, one would therefore see an oversold volume chart. Another important fact is that rising volume together with declining prices is also bearish.

On Balance Volume

The OBV plots as a running total of volume. It adds to the running total, the volume of each bar with a higher close than the previous bar and subtracts from the running total the volume of each bar with a lower close than the previous bar. It shows if volume is flowing into or out of a security. When the security closes higher than the previous close, all of the period's volume is considered up-volume. When the security closes lower than the previous close, all of the period's volume is considered down-volume.

The basic assumption, regarding OBV analysis, is that OBV changes precede price changes. The theory is that smart money can be seen flowing into the security by a rising OBV. When the public then moves into the security, both the security and the OBV will surge ahead.

If the security's price movement precedes OBV movement, a "non-confirmation" has occurred. Non-confirmations can occur at bull market tops (when the security rises without, or before, the OBV) or at bear market bottoms (when the security falls without, or before, the OBV).

The OBV is in a rising trend when each new peak is higher than the previous peak and each new trough is higher than the previous trough. Likewise, the OBV is in a falling trend when each successive peak is lower than the previous peak and each successive trough is lower than the previous trough. When the OBV is moving sideways and is not making successive highs and lows, it is in a doubtful trend.

The relative value or trend direction is more important than the numeric value. For example higher prices with light volume will cause the OBV to rise slowly indicating a lack of conviction. A rising OBV suggests a strengthening of the trend (up or down). A falling OBV suggests a weakening of the trend (up or down)

Once a trend is established, it remains in force until it is broken. There are two ways in which the OBV trend can be broken. The first occurs when the trend changes from a rising trend to a falling trend, or from a falling trend to a rising trend.

The second way the OBV trend can be broken is if the trend changes to a doubtful trend and remains doubtful for more than three days. Thus, if the security changes from a rising trend to a doubtful trend and remains doubtful for only two days before changing back to a rising trend, the OBV is considered to have always been in a rising trend.

When the OBV changes to a rising or falling trend, a "breakout" has occurred. Since OBV breakouts normally precede price breakouts, investors should buy long on OBV upside breakouts. Likewise, investors should sell short when the OBV makes a downside breakout. Positions should be held until the trend changes (as explained in the preceding paragraph). This method of analyzing On Balance Volume is designed for trading short-term cycles. Investors must act quickly and decisively if they wish to profit from short-term OBV analysis.

Emini Trading Systems - The Butterfly Effect in Emini Trading Systems

Emini futures, commonly referred to as simply eminis, are among most popular trading vehicles out there. Their popularity is particularly high among day traders, especially those on tighter budgets.

Because of their relatively low intraday margins, sometimes as low as $300-500 per contract, many a retail trader has taken his chances to make money day trading these instruments.

One of the best ways to approach trading eminis is through mechanical trading systems. A system like that consists of a set of objective rules that determine how to open a position in the emini market and then how to close it.

It is possible to make money trading eminis in a purely mechanical fashion. This author has designed several successful and relatively simple, robust emini systems so this opinion is grounded in his considerable experience.

Financial markets, futures markets included, are said to be nonlinear. This is, obviously, also true about emini markets. It is because of this nonlinearity that the markets are largely unpredictable. One of the classic hallmarks of nonlinear dynamical systems is their chaotic behavior, which can be described by the following analogy.

Every soccer game starts pretty much in the same way: one of the players kicks the ball from the center of the pitch to another player on his team who is nearby. There are not so many possible variations on how this can happen. Yet despite this, despite the relatively limited number of distinct ways of starting the game, there is virtually an unlimited number of ways the first goal is scored, which is, certainly, one of the reasons why soccer is such a hugely popular sport. Sports that produce predictable events are no fun to watch for they tend to be rather boring.

What we just said can also be put in mathematical parlance: in a nonlinear system, small variations of initial conditions (in this case, when the game starts) tend to produce large variations in the system evolution (in how the goals are scored, in our example). This kind of behavior is referred to as chaotic or exhibiting chaotic characteristics.

The chaotic behavior is often illustrated by the butterfly effect. Imagine that a butterfly somewhere in Texas flips its wings. However small this effect is, it does cause some air disturbance and since the weather system is highly nonlinear, even a small disturbance like that can, in principle, lead to a desert storm in the Middle East. Again, a tiny change in initial conditions (air disturbance) can cause dramatic changes in the weather pattern in another place on Earth.

What can all this have possibly in common with emini systems? The answer is: a lot.

Imagine that you are trading the S&P 500 emini market, often referred to as ES, its ticker symbol. You put on your position at 1363.75. At first, the market moves your way. At some point, you begin to trail your position with a stop-loss that it purposely wide so that you don't get shaken off of your position too easily. And yet the stop-loss gets triggered, for a loss of 1 pt. Soon after that the market takes off again and it closes for the day 15 pts from where you entered it. You check your entry and you see that had it been different by 1 tick only (no matter which way), you would have made 15 pts instead of losing 1 pt. Such a small difference of 1 tick only, the smallest you can have in this market, can cause the life or death difference in your bottom line.

Impossible? Too contrived? The reality is that something like that did happen to this author in actual trading. Yes, needless to say, things like that can be extremely annoying, no doubt about it. Unfortunately, there is precious little that we can do about it because this kind of behavior in trading systems is rather normal, though it does not have to be frequent. It is simply a reflection of the nonlinear nature of the markets such systems are applied to. It's because these markets are chaotic. And an annoying effect we mentioned that is nothing more than yet another example of the butterfly effect. The butterfly effect in emini systems.

Day Trading and the Pattern Day Trader Rule

Flipping in and out of stock may be a great way to scrape small profits off price dips and swells, but unless your stock portfolio account has an equity and cash position of at least $25,000, you will run afoul of the pattern day trader rule.

The pattern day trader rule limits your ability to buy and sell the same stock in the same trading day, unless your account portfolio has a cash and stock value of at least $25,000.

This is just one additional hurdle you need to jump before getting involved in penny stock day trading. This rule stipulates that you must have at least $25,000 in cash or stock value in your portfolio to move in and out of the same security on the same trading day.

Generally, an online broker will allow you to "get away" with one or two trades per week on what they call "both sides of the market," but they could theoretically reject your order requests at any time.

When I was first starting out in this business I had about $5,000 in my account. I came across a stock that was moving up and down in intraday trading and decided to try flipping the stock a few times.

After my third buy and sell transaction that day, I received an alert from my broker. It notified me of the pattern day trader rule, and suggested I deposit $20,000 into my account to meet SEC guidelines.

Right. I had $20,000 setting around looking for a home.

My subsequent attempts to trade on both sides of the market were met with "Cannot accept this order" type messages.

What Exactly Is This Rule?

According to the SEC, a day trader is any trader who buys and sells a particular security in the same trading day and does this four or more times in any five consecutive business day period.

Here's a more legal way of saying basically the same thing:

A pattern day trader is defined in Exchange Rule 431 as any customer who executes 4 or more round-trip day trades within any 5 successive business days. If, however, the number of trades is more than 3 but is 6% or less than the total number of trades that trader has made for that five business day period, the trader will not be considered a pattern day trader and will not be required to meet the $25,000 criteria for a pattern day trader.

More Legalese

According to http://www.patterndaytraderrule.com, this rule is, "this rule applies to anyone who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period. A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account." Please visit the site referenced above for a complete legal description.

Now that you know more about this rule, you could technically make a few day trades each week without violating SEC rules. However, some authority has been given to online brokers to judge your trading patterns, which could lead to being labeled as a day trader, despite your efforts to trade within the non-pattern day trading rules.

You should also be aware of the "five consecutive business day" comment above. Apparently, the clock does not reset on Monday morning. If you placed several day trades on the previous Friday, these may be a part of the same five day period on Monday.

Why Is There A Pattern Day Trader Rule?

In general terms, the investment community and the Security and Exchange Commission felt the popularity of day trading was causing beginning retail traders to lose too much money in the marketplace. In an effort to curb the day trading mania, they decided a trader should have a minimum account balance before being bale to practice this trading strategy. I guess they figure if you are worth $25,000, you have the knowledge and experience to flip stocks.

I have a different opinion on this. Yes, the SEC may have had your best interests in mind, but I believe (unfounded opinion here) that the institutional investors resented the range bound trading of stocks due to flippers constantly scraping tiny profits off a stock's movement. Imagine a stock is rallying on good news. As the stock rises in value the flippers come into the market. A flipper's mentality (us day traders, that is) is to sell quick, thus deflating the asking price in our hurry to sell out and move along with our small profits.

Flipping can frustrate a stock's move up, which drives the institutional guys wild. Due to their position sizes in a given stock, they cannot move in and out of the stock as quickly as retail traders. When you look at all the money invested in the stock market, keep in mind that about 80% of it is controlled by institutional investors. These are predominantly the mutual funds, pension funds, and insurance companies.

Remember the old saying, "he who has the gold, makes the rules?" Because of their sheer size, the institutional investors get to make the rules-the pattern day trader rule.

What Can I Do About This Rule?

I despise most rules, and see some of this governmental meddling as a slight on the capitalist system. But, I'll save those comments for my college term papers.

The pattern day trader rule may be helpful to some of you. As you build your account value to meet this requirement, learn how to trade and profit on swing trades. The experience you gain as a stock researcher and technical analyst will pay dividends later when you join the fast paced day trading community.

Is Your Blood Sugar Affecting Your Trading Without You Even Realizing?

This is a slightly different piece of trading advice than the usual! But don't say that we don't tell you everything you may need to be a successful trader!

A few years ago I started to have really bad migraine headaches during and after trading. You can have a profitable trading method and a great mindset, but if your mindset feels as though its being hit over the head with a sledge hammer, I can attest that its pretty hard to trade!

Initially I thought the headaches were caused by stress and staring at the screens all day. After seeing too many doctors and having too many brain scans, blood tests, heart and kidney tests, all of which showed me to be healthy as an ox, I eventually discovered that I had hypoglycemia - low blood sugar.

By changing my diet, not only did my headaches get better and I dropped 30 pounds, but I discovered that it had huge benefits for my trading. I was able to concentrate better, stay calmer, and think clearer.

You may be thinking, what the heck has this got to do with me? But did you know that an estimated 20 million%2B Americans suffer from low blood sugar. Sufferers get its associated side effects - increased irritability, difficulty concentrating, palpitations, light-headedness, fatigue, anxiety. Many don't know they have it. The American diet, and that of many developed countries, with its excess of sugar and refined carbs, makes it highly likely that many people reading this article are more or less affected. Maybe even you?

As if trading wasn't difficult enough already without having to counter problems with concentration, exacerbated emotions, and fatigue. Here's the pattern: you eat a meal - say breakfast. Your body kicks into hyperdrive to digest the food and your blood sugar shoots up - you feel good. Only problem for people with low blood sugar, is that when your blood sugar goes up, a little alarm goes off and the insulin bunny dumps a mother load of insulin into your system. After an hour or so, your blood sugar is lower than when you started - and you feel terrible.

If you are anything like me, an hour and a half after breakfast is market opening time - and the last thing you need as a trader is to start getting foggy when the bell rings.

Most people react to a feeling of low blood sugar by having a pick me up - a cup of coffee, a cookie, a pastry. Only problem is, the roller coaster begins over - blood sugar shoots up, insulin kicks in, blood sugar bombs. On top of this, the insulin released affects your adrenals, releasing adrenalin into your system. So there you are sitting in front of the screens trying to stay calm and collected - meanwhile inside your body there's a regular battlefield of chemical reactions going on, none of which are helping you stay calm - quite the opposite. In fact the natural adrenalin release of trading will itself help to lower your blood sugar.

What to do? You need to eat in a way that keeps your blood sugar stable - and avoids the rollercoaster. If you are feeling really bold, quit coffee, sugar, and refined carbohydrates. Eat more protein, veggies, and complex low glycemic carbs. At the very least eat small meals/low glycemic snacks every 1.5 to 2 hours.

Nowadays I always make sure that I have snacks on hand so that I don't have to leave the screens at a key moment. There are a couple of snack bars that work really well to keep your blood sugar stable - Extendbar (the best but only available online) and Luna bars (available at Walmarts and many supermarkets). If you are diabetic ignore this advice completely and if you have any concerns check with your doctor first before taking any guidance you read here. A good book to read about managing low blood sugar is 'The Low Blood Sugar Workbook- by Patricia Krimmel'.