Weekly Motivation - Time Tested Classic Trading Rules - Part 1

Time Tested Classic Trading Rules for the Modern Trader to Live (1 to 10 of 50)

This is a list of classic trading rules that was given to me while on the trading floor in 1984. A senior trader collected these rules from classic trading literature throughout the twentieth century. They obviously withstand the age-old test of time.

I'm sure most everybody knows these truisms in their hearts, but this list is nicely edited and makes a good read.

1. Plan your trades. Trade your plan.
2. Keep records of your trading results.
3. Keep a positive attitude, no matter how much you lose.
4. Don't take the market home.
5. Continually set higher trading goals.
6. Successful traders buy into bad news and sell into good news.
7. Successful traders are not afraid to buy high and sell low.
8. Successful traders have a well-scheduled planned time for studying the markets.
9. Successful traders isolate themselves from the opinions of others.
10. Continually strive for patience, perseverance, determination, and rational action.

By Linda Bradford Raschke

FKLI March 2006 – No Oops Trade as only March contract gaps

Trade Planning and Management

February 22, 2006

Date Contract Open High Low Close
Feb 21 06 Feb 06 921.5 926.5 920.0 926.5
Feb 21 06 Mar 06 919.0 923.5 916.5 923.5

My actual Entry strategy
a. I called Apex at 8:47am to check the Open. The price opened gapped up for March at 924.5 but Feb contract opened flat.
b. I do not put the sell stop order for March contract because:
i. The Feb. contract does not open gapped-up.
ii. There is a high possibility that the price may move up again since there are whipsaws in the last few days.

Trade executed according to plan? Yes.

What I have done best:
a. I follow Oops! rules.

What I need to improve:
Less monitoring of the price.

What I have learned:
The price is always right.

FKLI February 2006 – Trade 2 - Breakout and Oops Trade 3 - Oops – Closed with Net Loss of RM125

Trade Planning and Management

FKLI February 2006 Chart as at February 14 2005

February 15, 2006

“Don’t Miss” Trade:
Put a buy stop order at 934.5 when the market opens. 934.5 is one tick above the 934 (the high in Sept 28 05). It is more confirmed that 933.5.
If the price gaps up, follow the Oops trade management.
Entry Strategy for Oops! Buy stop order
a. Option 1: If the price opens gaps down from prior day’s low, put a buy stop order 1 tick above prior-day low after FKLI opens.
b. Option 2: If the price opens flat or higher than prior day’s low, do nothing.

Entry Strategy for Oops! Sell stop order
a. Option 1: If the price opens gaps up from prior day’s low, put a buy stop order 1 tick below prior-day low after FKLI opens.
b. Option 2: If the price opens flat or lower than prior day’s low, do nothing.

Entry Strategy for Oops! Buy stop order during Rollover period (starting 22nd of the month):
a. Option 1: If the price of both Spot and Next month contract opens gapped down from prior day’s low, put a buy stop order 1 tick above prior-day low after FKLI opens.
b. Option 2: If either the price of Spot and Next month contract opens gapped down, do nothing.
c. Option 3: If the price opens flat or higher than prior day’s low, do nothing.

Entry Strategy for Oops! Sell stop order during Rollover period (starting 22nd of the month):
a. Option 1: If the price opens gaps up from prior day’s low, put a buy stop order 1 tick below prior-day low after FKLI opens.
b. Option 2: If either the price of Spot and Next month contract opens gapped up, do nothing.
c. Option 3: If the price opens flat or lower than prior day’s low, do nothing.

Adding More Contracts and Re-entry Strategy
a. No adding more contracts and Re-entry Strategy

Trade Management
a. If the stop order is triggered, put a stop order:
i. 1 tick below the intra-day’s low for Buy stop order.
ii. 1 tick above the intra-day’s high for Sell stop order.
b. Exit Strategy
i. MOC – if the price hits extreme in your favor. The extreme is when a long outside-day is formed with Close near Low or High. Close at 5:14pm.
ii. Next day‘s Open – if the trade is profitable but the price is not extreme, leave it over-night. Exit next day’s Open if the price gaps in your favor.
iii. Next day’s Close – if the price hits extreme in your favor. The extreme is when a long candle is formed with Close near Low or High. Close at 5:14pm
iv. 10 to 16-point profit. – Exit immediately
v. If there is no ascending or descending triangle target, use Fibonacci 161.8% as a possible target for trend-following Oops!.

c. Trailing Stop for Exit on Next day Close or subsequent days
i. The protective stop cannot increase your risk (loss) and reduce your profit unless No 6 and 7 below.
ii. The protective stop cannot give back more than 6 points of unrealized profit.
iii. When the trade is profitable, move your protective stop to he breakeven point. Trail your stop.
iv. When the trade is profitable, move your protective stop. Short Position: Move your stop to 1 tick above the open or high, whichever is lower, for sell stop but must be lower than your previous stop. Long Position: Move your stop to 1 tick below the open or low, whichever is higher, for buy stop but must be higher than your previous stop.
v. If the price moves in your favor, the trade is profitable and the prior day bar is a long bar (more than 8 points), move your stop 1 tick above or below the middle of the bar.
vi. Short Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is higher than prior day’s close but below the middle range of prior-day’s range, put your stop at 1 tick above the middle of prior-day’s range. Long Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is lower than prior day’s close but above the middle of prior-day’s range, put your stop 1 tick below the middle of prior day’s range.
vii. Short Position: If prior day bar is a long bar (8 points or more) and the today’s open is lower than prior day’s low, put your stop at 1 tick above the prior day’s low. Long Position: If prior day bar is a long bar (8 points or more) and the today’s open is higher than prior day’s high, put your stop 1 tick below the prior day’s high.
viii. Short Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is higher than both prior day’s close and middle range of prior-day’s range, put your stop at 1 tick above the prior-day’s high. Long Position: If prior-day’s bar is a long bar (8 points or more) and the today’s open is lower than both prior day’s close and middle of prior-day’s range, put your stop 1 tick below the prior day’s low.
ix. The maximum loss is 10 points or high/low of the next bar if the price gaps

Today’s Entry strategy:
a. Call Apex at 8:45am to check the opening price. Ask Apex for the following before entering a trade:
i. Open
ii. High and Low
iii. Last Done
iv. Prior day high / low (if not remembered or need confirmation)
b. If the price opens gaps up or down, put a stop order
c. Ask them to inform you when any trade is done. If the stop order is triggered, put a protective stop order based on intra-day High or Low.
d. Exit on MOC, next day‘s Open, next day’s Close or 10-point profit.
e. Let the trailing buy stop follow the price until it is taken out.

My actual Entry strategy
a. I called Apex at 8:46am to check the Open. The price opened gapped up. I automatically put in my sell buy stop order at 929 and buy stop order at 934.5.
b. My sell stop order was not triggered at 9:30. I called Apex. The price was between 932 and 932. Ci was up 3 something points.
c. At 10:20am, I buy stop order was triggered at 934.5. It really cannot predict the market. I put my buy stop at 929.5, 2 tick below the open. I cancelled my sell stop order at 929.
d. The price then moved down and moved up. It then formed a head and shoulder top. The price actually broke down as regional markets were all down with Nikkei down 150 points.
e. I got nervous. But I stayed at the position because I am following my trade management
f. AT 2:40pm, my sell stop order was triggered at 929.5. But CI is up 3 points.
g. I pondered for a while. The price hit 929, my original Oops trade entry.
h. I decided to follow my original Oops! trade paln to sell at 929. It did sold at 929. It is the hardest thing to do to take a lost and goes with the opposite trade.
i. The price the moved up to 930 before moving down to 929.
j. AT 4:15, the CI moved to negative zone after moving up the whoe day. Somebody are selling banking stocks like Maybank, Public Bank and BCB.
k. The price moved down to 925.5 before moving up to 927 after Ci closed 1.66 points higher.

Trade executed according to plan? Yes.

February 16, 2006
Today’s Trade Management:
a. Call Apex at 8:45am to check the opening price.
b. Initial Trailing Stop:
i. If the price opens gaps up, do nothing initially. Close your position after 10:30am if the price stays gapped down.
ii. If the price opens gapped down, move your stop to 930.5, 1 tick above the mid-point of previous day’s bar, or close the position immediately. Oops! is most powerful this time when there is a price-extreme
iii. If the price opens higher, flat or lower, put your sell stop order at 935, 1 tick above the previous day’s high.
c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. If there is 10-point profit.
iv. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
v. Use Fibonacci 161.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 930.5, 1 tick above the mid-point of previous day’s bar, after the price breaks 925, previous second day’s low.
ii. 928, the breakeven point, if the price breaks 923.
iii. 926, if the price breaks 919.

My actual trade management:

Trade executed according to plan? Yes

February 17, 2006
Today’s Trade Management:
a. Call Apex at 8:45am to check the opening price.
b. Initial Trailing Stop:
i. If the price opens gaps up, do nothing initially. Close your position after 10:30am if the price stays gapped down.
ii. If the price opens gapped down, move your stop to 929.5, 1 tick above the high of previous day’s bar, or close the position immediately. Oops! is most powerful this time when there is a price-extreme
iii. If the price opens higher, flat or lower, put your sell stop order at 935, 1 tick above the previous day’s high.
c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. If there is 10-point profit.
iv. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
v. Use Fibonacci 161.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop:
i. 930.5, 1 tick above the mid-point of previous day’s bar, after the price breaks 925, previous second day’s low.
ii. 928, the breakeven point, if the price breaks 923.
iii. 926, if the price breaks 919.

My actual trade management:
a. I called Apex at 8:47am to put in my stop. The price opened higher at 929 and moved to 930.5
b. I put my stop at 935, 1 tick above recent high. It is a bit high but is far from early morning market movement. If I had put at 930.5, 1 tick above the 2nd pervious day’s mid point, I would have stopped out.
c. The price then hit 931 before CI opened.
d. After CI opened, the price started to fall as well as the CI.
e. It then broke the open price and moved down to 926. It then stayed there until 11:15am when there were a large volume to sell. It then hit low of 924 and rebounded to 925
f. I lowered my stop to 931.5, 1 tick above the intra-day’s high.
g. The price closed at 924.for the morning session
h. I monitored the price too much as I was worried that the price may rebound.
i. The price then move between 924 and 925.5.
j. It closed at 924.5

Trade executed according to plan? No. But according to the market movement for the day.

February 20, 2006
Today’s Trade Management:
a. Call Apex at 8:45am to check the opening price.
b. Initial Trailing Stop for February contract:
i. If the price opens gaps up, do nothing initially. Close your position after 10:30am if the price stays gapped down.
ii. If the price opens gapped down, move your stop to 928, 1 tick above the mid-point of previous day’s bar (the break-even point as well) , or close the position immediately. Oops! is most powerful this time when there is a price-extreme
iii. If the price opens higher, flat or lower, put your sell stop order at 931.5, 1 tick above the previous day’s high.
c. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. If there is 10-point profit.
iv. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
v. Use Fibonacci 161.8% as a target if it is trend-following Oops!
d. Subsequent Trailing Stop for February contract:
i. 928, the breakeven point, if the price breaks 923.
ii. 924.5, if the price breaks 919.

My actual trade management:
a. I called Apex at 8:47am to put in my stop. The price opened flat at 924.5
b. I put my stop at 931.5, 1 tick above the high of previous day.
c. The price then moved down and to hit 922 and moved higher to hit 925.
d. It then moved down with low volume and there is some volume in the March contract, which suggests roll-over may has started.
e. After some consideration, I put a sell stop order of 919 for March contract as the price is moving down
f. I then cancelled the march 919 sell stop because of low volume
g. I then monitored the price for March so that I will get in at 919 or 919,5 or better.
h. I finally got in at 919. I put a buy stop order at 923.5, 1 tick above the intra-day high.
i. I lower my stop of Feb contract to 928, my break-even point.
j. I kept both trades. March closed 920.

Trade executed according to plan? Yes

February 21, 2006
Today’s Trade Management:
a. Call Apex at 8:45am to check the opening price.
b. Initial Trailing Stop for February contract:
i. If the price opens gaps up, do nothing initially. Close your position after 10:30am if the price stays gapped down.
ii. If the price opens gapped down, move your stop to 928, 1 tick above the mid-point of previous day’s bar (the break-even point as well) , or close the position immediately. Oops! is most powerful this time when there is a price-extreme
iii. If the price opens higher, flat or lower, put your sell stop order at 931.5, 1 tick above the previous day’s high.
c. Initial Trailing Stop for March contract:
i. If the price opens gaps up, do nothing initially. Close your position after 10:30am if the price stays gapped down.
ii. If the price opens gapped down, move your stop to 923.5, 1 tick above the high of previous day’s bar or close the position immediately. Oops! is most powerful this time when there is a price-extreme
iii. If the price opens higher, flat or lower, put your sell stop order at 923.5, 1 tick above the previous day’s high.

d. Possible Exits:
i. MOC
ii. There is a price extreme – a long white candle with close near the high or a long black candle with the close near the low with blow-off volume.
iii. If there is 10-point profit.
iv. Let the trailing buy or sell stop follow the price until it is taken out (if there is a down-trend)
v. Use Fibonacci 161.8% as a target if it is trend-following Oops!
e. Subsequent Trailing Stop for February contract:
i. 928, the breakeven point, if the price breaks 923.
ii. 924.5, if the price breaks 919.
f. Subsequent Trailing Stop for March contract:
i. 918, the breakeven point, if the price breaks 914.
ii. 915, if the price breaks 910.

My actual trade management:
a. I called Apex at 8:50am to put in my stop. The price of Feb and Mar opened lower at 921.5 and 919 respectively.
b. I put my stop at 928 and 923.5 for Feb and Mar respectively
c. The price then moved lower and hit 920 and 916.5 for Feb and Mar respectively.
d. The price then moved up as CI moved up. There is a higher high and higher low on CI.
e. I told my self to get out Mar at 919.5 when it is hit.
f. The price hit 919.5 at 10:55am. I decided to close Mar contract at 919.5. At the same time, Feb contract was at 923. It the open. I decided to closed the position as well at 923 to queue.
g. I do not know what I did were right. The price then moved in the tight range of 918.5 and 919.5 for March contract and 922 and 923 for February contract.
h. The price then moved up on short covering as CI is moving side-way.
i. I am glad that I was right. It is a whipsaw day.

Trade executed according to plan? Yes


What I have done best:
a. I follow Oops! entry.
b. I exited when something not right according to the tape.
c. The subsequent contracts have to have closer stops

What I need to improve:
Less monitoring of the price.

What I have learned:
The price is always right.

Weekly Motivation

Why Most Traders Lost Most of the Time?

It really gets down to this. The market can spin on a dime and most traders cannot.

We want to be right so badly that once our mind establishes a viewpoint (the market will rally), it takes hell and high water (that translates to margin call) to get us to force up to reality.

The last signal, or indication in your work, is what you should be following, not the one before last that you are still hoping will work. Hope does not work in this business. Following the market does, that’s reality. The instant you learn to trade reality, not wishes, you will break through the wall of fire to become a successful trader.

Weekly Motivation

System Development and Testing

Developing a trading strategy or system is typically a process of fits and starts. The deeper you investigate an idea, the more challenges you find it faces — especially when the idealooks really good from the outset.Things are never as simple in real trading as they are on paper, and the more rigorously you test something, themore apparent its limitations usually become. Progress can be slow, but the process itself is often the ultimate reward because through testing you often stumble upon new ideasor explore concepts you hadn’t even thought of before.

Weekly Motivation

The story was about Dietrich Mateschitz

The story was about Dietrich Mateschitz. I didn't recognize his name either, but reading further I recognized what he'd built.

Have you seen the energy drink 'Red Bull' that's been a huge hit in the U.S. and worldwide over the last 5 or so years? That's' what he started and now he's worth a whopping 2 BILLIION dollars.

But here's what important:

I want to share with you 3 success insights that I isolated in his remarkable success story that YOU can use in your life and business starting today. You ready?

1) Taking the Long-Term View - So many people act on an idea, do it for a month, it doesn't 'work', so they go on to another idea, it doesn't 'work' and they repeat this vicious cycle for most of their adult lives.

Immediate gratification is the desire of too many people. I know this as much as anyone because I'd been very guilty of this myself years go. Let me quote from the article:

"For the next 3 years Mateschitz tinkered with the drink formula and developed a marketing strategy."

Mateschitz and all GREAT entrepreneurs take a LONG-TERM VIEW, not a week- or month-long view. They realize great things take time to evolve, to build. They realize they need to make a ton of mistakes in order to discover what works.

So many of us have had million dollar ideas and we gave up on them MUCH too soon. Look at your idea over a 1-year view, 3-year view, or even more. It will give you the 'room' you need to grow yourself and your business.

We all need to earn the right to be rich and that takes place through persistence, patience, and action.

2) Ignore the Naysayers - There are times to listen to 'focus groups' and times not to; and Mateschitz is really glad he didn't listen. From the article:

"Before launching, Mateschitz hired a market research firm to test Red Bull's acceptance. The result was a catastrophe. People didn't believe the taste, the logo, the brand name...I never experienced such a disaster."

Did Mateschitz believe in his idea 100%? You bet he did.

There's a time to 'hear' your market and there's a time to go for it. Mateschitz was 100% correct in his heart and his decision.

3) Singles and Doubles - I used to go for 'homeruns' and millions before I ever made hundreds and thousands; most people fall into this trap also.

One of the big things that changed my life was making my goals smaller and celebrating those small steps and victories. We all know you need to make $500 and $5,000 before you can make $50,000 and $1,000,000, but sometimes people forget this.

Mateschitz sells 2 billion cans of Red Bull now a year. But look how he got that. It was with singles and doubles.

First year can sales: 1 million. Second year can sales: 2 million. Singles and then more singles.

Step by step. Can by can.

This is how ALL success happens. Ask yourself:

What is the next simple step I could take TODAY to move my life and/or business forward?

Mateschitz took the long-term view and UNDERSTOOD that you sell a billion cans ONE can at a time. There are many simple lessons to be learned from billionaire Dietrich Mateschitz.

Pick ONE of the 3 above and start using it TODAY.

You see, there's always a CONSTANT, there's always something that must happen before you can move to the next level.