Is it ok to leave a trade open more than one day and I ask that question with 100% confirmation with my broker.  Once a week, they upload in-depth analysis on a specific pair example:   GBP/ USD.  Does that make an intraday trader or swing trader.  Most of the time, I try to close an order the same day.

The short, simple answer to the base question about whether it’s OK to hold a trade for longer than a day is, of course, “Yes”. There may be implications in terms of roll-over and/or carry interest to holding a forex position overnight, but there is nothing to stop someone from doing so if that’s what makes sense for the trade(s) in question.

Now, whether holding beyond a day makes sense for the types of trades being made is something I cannot determine based on the information provided. However, if the trading is done based on the weekly in-depth analysis mentioned, I would think the trades suggested would be intended to be something longer than day trades.

To clarify definitions, a day trader is one who opens and closes trades within the same trading day. The definition of swing trading is a bit more variable. I generally think of it as trades intended to be open in the a couple of days to a couple of weeks timeframe.Similar Posts:

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Is it ok to leave a trade open more than one day?

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I have been trading(training) for one year now, hard work does pay off…I took a 15 hour in class forex course a year ago and since then I have been practicing, doing homework every single day, trying to understand everything and I am at the level where I know what I am doing, (99.99%)  I am taking forex very seriously and it is my long term career.  I have all of my strategies worked out and just started to trade last month along with my own trading system which I am implementing B4 placing an order.

The first question this intrepid new(ish) trader had for me was whether I would recommend using charting software, and if so which one would I suggest.

To answer the first part of the inquiry I’m going to say it depends. There are a great many free charting resources out there. Most brokers (forex and otherwise) these days have one through their platforms. Some are certainly better than others. My recommendation is that if your broker has what you need in terms of functionality and timeframe, then I see no reason why you need to spend money on some other charting software, and the price data to feed it.

For my part, I’m a bit mixed. Some of what I do is readily available through most broker charting packages. There are things, however, which are not. That’s stuff like custom indicators (I do some studies on volatility) and system testing. Also, some forex brokers in particular don’t offer charts in longer timeframes, like weekly and monthly. For that reason, I do use paid charting.

In terms of a good general charting package my preferred one is MetaStock. I’ve been using it for over a decade now. The charts are nice. I can do all sorts of things with custom indicators. I can also do loads of systems testing. It’s very handy. (Full Disclosure: I currently am employed by Thomson Reuters, of which MetaStock is part. I, however, came from the Thomson side into the merger and had been a paid user of the charting package since the 90s.)

The other package I use regularly is Sierra Chart. In particular, I do my price distribution analysis with this package (employing the TPO charts). There’s also a really nice play-back feature that I’ve used a couple of times in the videos I have produced. The one thing I would say is that when looking for a source of price distribution charts I found other packages which had what I thought were nicer presentations, but since I was only using that one feature I didn’t see a justification of the much higher price tags.Similar Posts:

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Should I use charting software, and if so which one?

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How have you handled these markets? Or have they handled you?

I can imagine the sorts of things individual traders have been going through, but because I’ve been so involved through my work in the more institutional sides of things I haven’t been able to spend as much time talking with the retail set as otherwise might have been the case. So I’m asking you to help me out. In return, your comments may provide me with ways I can help you out.

So leave a comment to this post and tell me what impact the volatility has had on your trading, whether you’ve found techniques working better or worse, how you’ve adjusted your risk management, and anything like that. I don’t care if you’re a new trader or someone who’s been at it for a while. My desire is to see how the markets of the last year or so have effected the way you approach the markets - if they have at all.Similar Posts:

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How have these markets impacted your trading?

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This style of chart is known my a number of different terms. Market Profile is one. TPO charting is another. Volume at price is a third. Although they are becoming more prevalent, I’d venture to say that most traders haven’t looked at charts like these before.

The idea of these charts is to identify where the market is spending the most (and least) amount of time. Think of it like taking a bar chart and squeezing all the bars together. That gives you a distribution of prices over the course of a day or week or whatever. (The chart above shows two seperate days).

Two very good books on the subject of what I often refer to as “price distribution charting” are Mind Over Markets and Markets in Profile, both by Jim Dalton.

This charting methodology is the basis for a great deal of what I do in my work as a market analyst, and I went over the methology in the Following the Quest for Value course I developed earlier this year. I definitely encourage you to give a look. It could very well change the whole way you think about the markets and the way prices move.Similar Posts:

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Taking a Look at Price Distribution Charts

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My personal tendency in all aspects of life is to be very analytic. That has some nice advantages, but it also as some nasty drawbacks at times as well. I’ve been told on more than one occasion that I think too much, and while it was not normally meant to be a deragatory thing, it is indicative. I do think alot, and probably would be considered by many an intellectual - for better or worse.

The “worse” part is something I became aware of many years ago, early in my professional career as an analyst. My job required me to product commentary quite frequently. It was actually too frequently in many respects because I found that by being forced to revisit the price action I wasn’t able to allow the market moves I had previously outlined to properly develop. I was instead coming up with new analysis at each point, often to the detriment of producing quality trading ideas.

This is something which has from time to time carried over into my trading as well. There have been spells where I have allowed myself to get sucked way into the fine details of things. Sometimes I catch myself before much damage is done, but often it ends up becoming a hindsight sort of thing. Basically, the more I think about trading, the less well I tend to do, which is definitely part of why I’ve tended to perform better taking longer-term positions where the decision-making is more spread out and less at risk of turning into over-thinking.

The funny aspect to this whole situation is a bit of a paradox. I find that my gut generally gives me the right read, but if I consciously check my gut it nullifies things. In other words, I can’t think about what my gut is telling me. I just have to accept it’s influence when it chooses to speak up.

And by the way, the gut thing is something I definitely believe to be reflective of experience. It’s not something people are just born with. It’s a question of having seen the patterns of how the markets move many, many times such that your waking mind doesn’t even have to register them at all. This tends to go along the lines with what Brett Steenbarger has been writing about in his blog of late - how expertise comes from frequency of repetition, not time.

My point in sharing these things is to encourage you to look at your own work in the market to see whether you might be over-thinking things to your detriment at times. I’d love to have you share your own experiences through a comment.Similar Posts:

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Improving your trading by thinking less

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The idea I have in mind is to try to build a sizable position over time by regularly adding to a winning trade. Can it be done or should I be thinking differently? Would it be done by buying the pullbacks (uptrend) / selling the rallies (downtrend)? In terms of controlling risk, what should be the limit to the size of such a position, as a percentage of account size? Should the initials stops be moved and the size of the stop order adjusted as the trend progresses, or does one place new stops for each additional trade?

In order to really properly answer this particular set of questions, on first needs to answer the high level question of whether we’re talking about trading here or about the long-term accumulation of wealth via the stock market. The former suggests moving in and out of the market, while the latter is more inclined toward staying in and progressively adding to the position over time.

The reason one needs to make that differentiation is because each approach implies a different type of strategy. There are those strategies which would be employed in the case of a trading mindset and others which would be used in the accumulation one. Since the focus of this blog is to discuss trading concepts, I’ll approach these questions from that perspective.

The idea of adding to winning positions is one which gets discussed quite frequently. Some folks take the view that if a position is worth taking at all, it’s worth going in at full size, not scaling in (so to speak). Others take the view that adding to winners is a great way to really make big gains when you have a move with the potential to work very nicely in your favor.

Really, I think a lot of whether you go with the all in vs. the scale in approach depends on how you manage the risks and whether you can tolerate the potentially wide swings in equity. The risk side of things has been talked about at length, but I think few folks really consider the implication of drawdowns and large movements in the profitability of their trades (or portfolio). When you start adding to a position you increase the size of the swings both in currency terms and in terms of the percentage of the total account value. Trending markets can move widely. Make sure you can handle what that’s going to mean to your positions as you sit through it.

As for the specific strategies of adding on retracements of the base trend, that’s a very good one. There are two requirements, though. First, you need to have something in place which tells you when it’s no longer a retracement, but an trend cessation. Second, you should have a clear set of criteria or strategy for doing those retracement additions, both in terms of timing and size. If at all possible, running some backtests with different position sizing and exit (stop) strategies to help do that could help considerably.Similar Posts:

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Then there’s the choice of timeframe. Is it possible to have a very long term view of things and concentrate only on the monthly charts? That means following a major trend probably for several years. Is it workable, or would I be better off going for the weekly charts? I know about drawdowns and it’s ok with me.

It is aboslutely possible to trade the long-term using monthly charts. I have done it myself on occassion. The problem, of course, is that you can wait a long, long time for the right situation to develop. At the monthly chart timeframe you’re probably talking about making one or fewer trades per year - and sometimes none at all for a long period.

Personally, I tend to make weekly charts the longest ones I will actually trade from. They provide many more opportunities and the moves they catch tend to be very meaningful. It also makes it easier to get in on the big trends relatively early. A market can move a huge amount in a month.  Also, weekly timeframe price moves often fit better in with the expiration cycles of futures contracts, where you have to deal with rolling forward if you plan on holding a position beyond contract expiration.

That said, however, I often look to the monthly chart for a few on the longer-term underlying trend. It helps me frame the potential for a weekly timeframe trade.

Clearly, if you’re playing in the longer-term you have to account for the in-trade volatility - the stuff that produces open equity drawdowns. This is an especially important consideration for futures traders where the leverage amplifies things. That means capitalization is hugely important.Similar Posts:

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Is it possible to trade only on the monthly charts?

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I am trying to build my trading plan, and I feel I would be comfortable trading index mini futures. I would have to choose among ES, YM and NQ. Which would be more advisable, with an initial account size of $50,000?

With an account of this size, really any of the mini futures are perfectly reasonable. The S&Ps (ES) are by far the most actively traded and liquid. There’s somewhere around 3 million contracts worth of open interest in the mini S&Ps, whereas the mini NASDAQ is more like 400,000.

Liquidity and such aside, it’s important to understand the difference between what the three contracts represent. The YM is the Dow, which is a 30 stocks index of so-called industrial companies. That’s going to generally be a pretty cyclical group. The ES obviously is for the S&P 500, which is meant to be the 500 highest market cap value companies. That is going to be a group which is generally going to do a pretty good job of tracking general economic conditions. Meanwhile, the NASDAQ futures are focused on the often more volatile tech sector.

The point is that each index has a different characteristic. You may find one suits your particular trading style better than the others. It’s worth experimenting.Similar Posts:

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Which mini equity futures contract is best?

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Take what you hear/see in the media about the markets with a MASSIVE grain of salt.

This week has really brought that point back home to me. It seems like just about every day I’ve heard a reason provided on CNBC or elsewhere for why the market is doing what it’s doing, or has done what it’s done. Most of it had very little to do with reality.

The idea that stocks rallied last week and into the start of this week on assumption of an Obama win was a joke. And by extension, the idea of a buy the rumor sell the fact situation explaining Wednesday’s turn lower is a farce as well.

Do yourself a favor. Just watch the market action. It will tell you want you need to know. Very often, the supposed news drivers which people think are creating the short-term moves in the market are mostly coincidental.

If you’re saying right now “Yeah, but when X happened the market reacted by doing Y” then you’re missing part of my point. Data and news events and such mostly have just a short-term impact, which is often just an expectation play. The unemployment rate was better than expected, so traders bought in anticipation of other traders (longer-term ones) developing a bullish view on the market and buying.

That’s not real.

Unless the data or news or what have you actually creates a change massive of market opinion about the future, it’s just noise. The markets don’t make meaningful moves on any single bit of information. They move based on the actions of market participants as they continue to develop their overall view of things.

That said, the reaction of the market to a bit of data can tell you a great deal. There are to major scenarios here. One is the market ignores contrary indications (stock continues to rally despite soft earnings, for example). The other is when the market doesn’t follow through on confirming indication (stock fails to rally on strong earnings). Those sorts of things highlight the underlying view the market holds and can tip you off to what the future will probably bring.

But to return to and reinforce my initial point, use the media for information, but ignore the reasons they provide to explain market action. More often than not they will be useless.Similar Posts:

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The media won’t help you trade or understand the markets

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Can someone please tell me what “the forex” is? Anyone? I’m dying to know where the heck that phrase comes from. It certainly isn’t industry parlance.

FOREX is the abbreviation for “foreign exchange”. Thus, when someone says “the forex” they are saying “the foreign exchange”. When that article is put in there it changes the whole meaning.

The phrase “the forex” is either the first part of “the foreign exchange market” or means the exchange which is foreign. I’m guessing very few who use the phrase “the forex” are referring to the latter, implying that they are leaving out “market” in what they’re talking about.

When one talks about trading markets it’s “I trade stocks”, “I trade oil”, “I trade commodities”. People might say “I trade the stock market” or “I trade the commodity market”, but no one says “I trade the stocks” or “I trade the oil”. A forex trader will say “I trade forex” or “I trade the forex market”.

Do your credibility a favor and drop the “the” when you talk about forex, especially if it’s with a professional or long experienced market participant. Otherwise, they’re going probably to either look at you strangely or think your some know-nothing hack.Similar Posts:

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Please, please stop saying “the forex”!

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