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things running inside a single application, not only do they tend to be subpar, but they also take up a large amount of resources. The more resources that are consumed by security software, the less that are available for your trading applications. There are two antivirus solutions I recommend, Microsoft Security Essen...
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Essentials is a totally free solution provided directly from Microsoft. This program sports a clean user interface that’s easy to understand and provides automatic updates. The other solution is NOD32. NOD32 is what I recommend for users who like to have more hands-on control of their security. This program offers a go...
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can be purchased at www.eset.com for $60. Another way to keep your PC free of badware is to stop using Internet Explorer, or at least make sure you’re running the latest version. All spyware programs are written for this browser, since this is what comes with Windows. In 1997, Internet Explorer made up more than 50 pe...
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used on the web. This number has dropped significantly and now is about 25 percent of browsers used, as Firefox and Chrome have snuck into the market, taking 42 percent and 30 percent of traffic, respectively. There are a few other browsers that make up the remaining percentage, but most users should stick to the big t...
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and, if I truly have no other choice, I’ll use Internet Explorer. It’s now the clunky old dinosaur. What’s the Best Way to Keep a Machine Running Like New? Once traders have their antivirus software configured and happily scanning, they need to make sure the everyday junk is cleared out
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of their PC. Just like a car, PCs need to have basic maintenance if they’re expected to perform. This used to be as simple as making a quick trip over to Internet Explorer’s preferences and clearing out your cache and cookies. Now traders can have two or three browsers storing these files, not to mention temporary file...
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Fortunately there’s a program called CCleaner that handles all this in one fell swoop. This program is 100 percent free with an option to donate and does a good job of cleaning out cookies, temporary files, and all the other miscellaneous junk that sits on a trader’s PC. Defragmenting is quickly becoming a thing of the...
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market (where defragmenting is not needed), and for users running hard disk drives, Windows 7 schedules this task automatically. By the way, Windows 7 is the best choice for traders. Vista is horrible, and XP is old and outdated. Why Are Cookies and Spam Bad News for Trading Computers, and How Can I Prevent Them?
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Another device that companies use to track information on the trader’s PC is called a cookie. This is a small text file that can be good or bad. It’s good when you’re visiting a favorite website, such as Amazon.com . With a cookie installed, Amazon will remember who the users are, so they don’t have to always log in wh...
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bad cookies placed by companies such as Double- Click that track site usage, coordinate pop-up ads, and generally invade the trader’s privacy. The best thing to do here is to start from scratch and delete all the cookies on your computer. This can be accomplished by using the previously mentioned CCleaner or by going t...
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Temporary Internet Files, there is a button that says, “Delete Cookies.” Click this. After the cookies are deleted, go to Privacy, Advanced. Once you are there, check the box that says “Override automatic cookie handling.” Below that I check “Prompt” for First-Party Cookies and “Block” for Third-Party Cookies. This way...
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whether the trader wants to accept the cookie. I say yes because that is a site I visit often. Any third-party cookies like DoubleClick will automatically be blocked. This will prevent pop-up ads and keep the trader’s computer running in top form. If I am asked to accept a cookie from a site I rarely visit, I will say...
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will not be planted on my computer. Spam is a big problem for everyone, and I owe my eternal gratitude to Gmail (Google’s e-mail service) for solving this problem. Gmail has the most powerful spam filters on the planet. I’ve been using the service since it was in its invite only stage, and I’m still a diehard fan. Gmai...
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solution, meaning that you don’t have to have any software installed on your PC to receive e-mail like you do with Outlook. Gmail supports POP3 and SMTP, so you can still use a Gmail address in conjunction with your personal domain. It also supports Google Labs, a user community that creates plug- ins for your e-mail a...
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standard that allows users to read a message on their phone, reply to it, and have these changes immediately reflected anywhere they log on to the account. If you’re still struggling with syncing your e-mail between multiple devices or find yourself buried under a pile of spam, it’s time to give Gmail a try. Yahoo! and...
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a diehard Microsoft Outlook fan for about 10 years. Henry showed me the light in terms of making the transition to Gmail and Google Calendar. It took me a few months to get used to it, but once I embraced it, I never looked back. With Outlook, I was tied to one computer, and it was clunky. With Google Calendar and Gmai...
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everything automatically with my phone, and easily share my calendar and key documents with other people via Google Documents. No more e-mailing documents back and forth, wondering which one is the current version. Welcome to the future. the trend used to be attackingShould I Be Using a 32-or 64-Bit Operating
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System? We’ve been able to keep the tech jargon to a bare minimum thus far, but it’s worth taking a moment to explain the difference between 32-and 64-bit operating systems. The amount of information traders need to know on the topic is fairly basic, and we’ll keep it that way. Everything with
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computers is just 1s and 0s. A bit is either populated or not, on or off. So for a 32-bit operating system, we have 2 to the 32nd power, giving us 4,294,967,295, or 4 GB of RAM. Any 32-bit operating system is limited by definition to this 32-bit virtual address space, and if you install more RAM than the operating syst...
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this additional storage. You’ll remember that toward the beginning of the chapter, we mentioned RAM and how the more of it you had, the faster your system would be. So how do we get past the 4- GB limit? The easy answer is moving to a 64-bit machine. We now have hardware and software that can take advantage of these ad...
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take it to the 64th power, we’re given enough address space to have several terabytes of RAM. If you’re looking to really max out your PC, you’ll want to be aware of the amount of memory that each version of Windows supports, and I’ve listed a few here. Windows Starter and Home Basic editions support a maximum of 8 GB,...
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Professional and above support 192 GB. Obviously some of these numbers aren’t yet practical in a normal computer, but I have no doubt they will be in the near future. This same 32- vs. 64-bit theory applies to applications you install. Once an application can access more than 4 GB of RAM, you can have much more going o...
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within that application. While trading platforms now are limited in the amount of data that can be accessed at one time, 64-bit platforms are emerging and will be able to handle much more data efficiently. What this means for traders is the ability to run more charts and more platforms and have fewer platform snags tha...
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The 32/64-bit issue will eventually be a thing of the past, just like 8- and 16-bit computing. Until this transition is complete, just remember that 64 bits equals more memory and more performance. What Are the Best Solutions for Protecting Data? Anyone who’s been around computers long enough will
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tell you that the most expensive part of a PC is the data. Anything like a hard drive crash, a power surge that fries internal components, or this morning’s espresso that didn’t play nice with your laptop keyboard can destroy data. Once data are lost, data recovery procedures can be tedious and expensive, and do not gu...
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includes everything from pictures and music to platform workspaces, indicators, and portfolio spreadsheets. Fortunately, data backup procedures have advanced with technology, and in this day and age, there’s no excuse to ever lose a single document. Services like Carbonite will back up your data automatically to the cl...
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you need them. In discussing the preservation of your digital life, it’s important to understand the two main types of backup. The first, and my preferred method for backing up critical data, is the easiest and entails simply dragging the files from your local drive to an external drive. This keeps your data in their e...
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should you experience a crash, you can plug the drive into another PC and quickly have access to your files. This method can also be used in conjunction with services like Dropbox. Dropbox creates a new folder on your PC. Anything that is placed inside that folder is uploaded to its storage service and is accessible fr...
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of backing up data, but it makes it easy to make changes to a file at the office and have the exact same changes reflected on the document when you return home. For example, when working on this book, I had a Dropbox folder on five different computers. I could access this folder from any of the five computers, open up ...
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automatically updated across all five computers. This is way easier than e-mailing files back and forth to different computers. I also keep my TradeStation workspaces in this Dropbox folder, so that I can access them from any PC. The second type of data backup is known as imaging. Think of an image backup as just that:...
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image, of your PC. While the backup methods discussed up to this point back up only user data, imaged backups literally back up everything: user data, temporary files, the operating system with updates—literally everything. This is taken and stored in such a way that if your hard drive were to crash, you could replace ...
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Trading platforms, indicators, pictures, and documents, along with every personal setting and application on your machine, are preserved with an imaged backup. I do both methods of backup on anything that’s important to me. I then take those backups and make sure they’re available in three different forms. Backups shou...
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for protection against natural disasters and theft, and then having a copy in the cloud completes the trifecta. While I do love cloud storage, I typically do not upload image backups to online data storage simply because of their size. I do keep physical copies in multiple remote locations, however. Data aren’t the on...
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backups of. Power outages can and will happen, and battery backups are a must. These are available at any major office supply shop. In the event of a loss of electricity, these will give the trader around 30 minutes of power, which is plenty of time to close out positions or reset parameters in case the power is going ...
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down the computer manually, which is much safer than having it go out suddenly because of a power loss. The third thing a trader needs to be prepared for is a loss of Internet. Cable and DSL connections can go out even when the electricity is still on, and this will undoubtedly happen at the absolute worst time.
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Broadband saturation has grown in the United States, and it’s now affordable for a trader to have not only a cable connection, but also a fiber or DSL line as backup. These connections can be run into a single device called a dual-WAN (wide-area network) router, and should one go out, no action is necessary on the part...
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where the first left off, and ideally the end user never sees this hiccup. If this fails, the next step is direct contact with your broker. The trend in the industry is for brokers to let computers do all the work. Although this provides for efficiencies and cuts costs, the bottom line is that if I have a problem, I ha...
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brokers right away. If I call my brokers and can’t get hold of them, I start foaming at the mouth—a signal that it is time for me to switch brokers. If I want to be put on hold, I will call the airlines, not my brokers. My suggestion here is to take advantage of technology and get your broker or brokers hooked up on an...
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stay in touch throughout the day. If my data feed goes down, I can IM (instant message) my broker for a quote. My expectations for my brokers are that I can contact them via phone or instant message right away. If they are not available, then I have the number and instant message as a backup. In trading, there is no ex...
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order or question right away. What else are we paying them all the commissions for? Of course, another option now is having a broker who is wired into your mobile phone. I use my iPhone to check quotes on my thinkorswim platform all the time. And, if need be, I can place a trade over my iPhone or iPad as well. If the t...
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goes down, much of what already has been discussed will help. Being able to contact a broker to get a quote or place a trade in this situation is imperative. Yahoo! Finance is also a great site to get free quotes on stocks, options, and futures. Trading successfully requires an edge. Traders who choose to remain in
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ignorance about what is really going on with their computer, or who are “outta luck” when the power goes out, are leaving themselves at a decided disadvantage compared with traders who are prepared. By staying up to date on the technological front, the trader has an advantage over those who don’t. And having an advanta...
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make the trader a winner in this business. Technology can, of course, get outdated quickly. Henry has put together a free video and list of specs at www.tradethemarkets.com/hardware to keep everyone up to date. Why Aren’t All Quotes Created Equal? Now that we’ve beaten the nontrading technical issues to
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death, let’s look at issues geared specifically to trading. This typically comes down to three areas: 1. Quote software 2. Trade execution software 3. Market-related subscriptions and services Let’s look at quote
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software first. Much of the decision to use a specific charting software package typically comes down to “whatever a person stumbled across” as he began the trading journey, typically as the result of a commercial he saw during the Super Bowl. For most traders, this is not a good thing. I remember when I first started ...
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needed a new quote. I was charged a fee each time I hit “refresh” if I didn’t trade enough. I stayed with that brokerage for about three weeks, and that was three weeks too long. It is important for the trader to have a quote system that is robust, is in real time, and has the flexibility to easily add a variety of ind...
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trading style that best fits their own personality. A flexible quote system gives people the ability to try different markets until they find the setups and techniques that work best for them. There are only a few quote vendors that fit this bill, and there are many that do not. The bottom line is that good quotes are...
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Skimp on the desk, not on the quotes. Since this book was first published, thinkorswim ( www.thinkorswim.com ) has developed a quote system and trading platform that is not only is robust but free. Tom Sosnoff had a great idea when he decided to give the client everything for free. It was such a great idea that clients...
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platform, and it grew so fast that it attracted the attention of TD Ameritrade, which recently purchased thinkorswim (TOS) and is incorporating this platform under its umbrella. This is a platform that I started using shortly after this book was first published in 2006. It has continued to deliver the goods, and I cont...
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and stocks. It is also in the process of moving into futures—the first powerhouse broker to do so. It is going to change the playing field by bringing futures trading within reach of anyone (see Figure 3.1 ). I also utilize TradeStation ( www.tradestation.com ). TradeStation makes it possible for me to easily add my o...
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studies, and I like its chart functionality and its ability to back-test specific setups and data. I also love its Radar Screen tool, which allows me to look at signals on multiple markets and time frames (see Figure 3.2 ). TradeStation is also in the process of coming out with a lot of awesome new trade analysis tools...
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TradeStation to trade options and futures. I like eSignal because it has fast reloading time and is robust and easy to use. Recently I also started using the charts at Infinity Futures ( www.infinityfutures.com ), as this company has also come out with a robust free quote platform for futures. I primarily use its platf...
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Infinity provide free quotes, while TradeStation and eSignal charge monthly fees for data.
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Figure 3.1
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Figure 3.2 Another good source that I use for futures quotes is the market data available at the Chicago Mercantile Exchange (CME Group). Its website is www.cmegroup.com . For futures traders, information on quotes, open interest, front month, option activity, trading hours—it’s all there,
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especially now, since the CME Group owns the Chicago Board of Trade and the New York Mercantile Exchange. There are, of course, other good quote systems available. The key is to utilize a robust and flexible version that best fits a trader’s needs. For the most part, traders will get what they pay for in this area. The...
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to ignore any marketing material that is put out by the company itself. Looking at that is like believing that a can of soda is good for you because it says “diet” on the label. One of the biggest marketing gimmicks in trading is “free level II data.” Level II data are worthless and shouldn’t be watched in the first p...
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fake size and using every method at their disposal to hide what they are really doing. They also cause traders to overtrade, which is the number one way to get out of this business in a hurry. Traders will save themselves a lot of frustration simply by turning this off. In sum, ignore the marketing and ask other trader...
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futures for at least five years. How Can a Bad Execution Platform Ruin My Account? In the late 1990s and early 2000s, it was all about faster executions. A trader who had an execution platform that was faster than the others had an edge. Online web-based brokers caught on and started offering “60-second
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guarantees” on fills. Those of us who were using direct access laughed in their faces. Sixty seconds might as well have been a week. Today, nearly every broker has adapted, and everybody has lightning-fast executions. So what platforms have the edge? Think back to what I said about trader psychology in Chapter 2 . Most...
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mistakes that traders make are emotional. I’ve watched traders get flustered, especially in futures trading, and make mistakes with their orders. They go long five contracts of the euro FX and then make an error in trying to place the stop that ends up liquidating their position. Other times, they put a target in place...
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worse, they don’t feel like going through the entire process of placing a stop, then placing a target, and then remembering to cancel the remaining open order once either the stop or the target is hit—so they don’t place a stop or a target. These are the traders who “rely on their judgment while they’re in a trade” and...
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inevitably freak out. Manual order submission and trade management is a tedious, error-prone process. Coupled with heightened emotions, it is a recipe for trader blowout. Maybe it won’t happen today, and maybe not tomorrow, but that day is always lurking on the horizon. In addition, some traders simply are not computer
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savvy. They are not comfortable on computers, and it is easy for them to fumble an order. The best computer users are kids (people in their twenties—I now refer to them as kids), and it’s because they have grown up playing video games on their PCs. Some traders I know have deliberately learned to play “one-person shoot...
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improve their speed on the keyboard. The most popular of these is called Call of Duty. This game places you in various battles during World War II, and it is literally act fast or die—kind of like trading. By the time people get through this adventure, their eye-hand- mouse-keyboard coordination will have improved expo...
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all gone through the game, and it improved our hand-eye coordination considerably. This game is available at stores like Best Buy for $30. Since this book was first published, multiple editions have come out—just be careful you don’t get so hooked on the games that you stop trading! Trading execution software today has...
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to help traders protect themselves from themselves. Think of a typical trade. Let’s say I go long 10 contracts of the E-mini S&P 500 futures (ES) at 1204.25. I place a 2-point (8-tick) stop, and I want to exit half my position on a 1-point (4- tick) move to 1205.25. For the rest of my position, I will trail my stop—ev...
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point. This requires active trade management, with the pressing of a lot of keys and many mouse clicks. One mistake and I can turn this winning trade into a loser. What if, each time I bought the ES, my trading execution platform knew that I would be using a 2-point stop and a 1-point target on the first half of my pos...
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place the orders for me automatically, and I wouldn’t have to do a thing. What if it also knew that when my first target was hit, I wanted to bring my stop up to breakeven? And what if it also knew to change the number of contracts in my stop from 10 to 5 when the first target was hit? What if it also knew to then trai...
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stop order once my target was hit? And what if it did all this automatically, so that all I had to do was get into the trade, and after that I could essentially walk away because the software was managing the trade for me according to my specifications? The purpose of my day would be to sit back, relax, and focus on fi...
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scramble around once I was in the trade and actively manage it—a process that can be mentally straining and cause many emotional fluctuations. That is the kind of software that is available today. All traders have to do is wait and be patient for an appropriate entry level, take the entry, and then the software can man...
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trade for them according to their own specifications. This process removes a lot of the mental stress involved in trading and helps to prevent traders from making the common mistakes that ruin many of them. This type of functionality was not readily available with many brokers even in 2005, but as I’m updating this tod...
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continue to catch on. I’ve tried many of the platforms that are available today, and there are a few standouts from the crowd. However, it doesn’t take long for a new version to emerge and triumph over all its rivals. There are some that are great but add too many fees. Others work fine but are memory intensive and rea...
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perfect one is fast, doesn’t take up much memory, and doesn’t tag on a lot of extra fees. If you are interested in the list of platforms I am currently using, send an e- mail to support@tradethemarkets.com or call our office. Let’s take a look at a more or less generic example of what I’m talking about. Figure 3.3 ill...
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shot of a “Strategy Manager” window, where traders can enter their predetermined trade entry and exit points. The Strategy Manager is open, and the Position Strategies tab is selected. The strategy that is highlighted is called TradeTheMarkets, which is a strategy that I created. In the position type box (Pos Type), I ...
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this strategy will have three profit targets and one stop order. In other words, I can buy six lots of the E-mini S&Ps and scale out of my position two lots at a time, at predetermined exit points. The details are entered in the middle of the screen. For this trade, when I get in long or short, the software will automa...
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that I can scale out of two contracts when I’m up 1 point, scale out of another two contracts when I’m up 2 points, and scale out of the final two contracts when I’m up 3 points. In addition, once I am out of my trade, the open stop order is automatically canceled. This screen focuses on my “target exit strategy.” My “...
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different, and you can see that a stop strategy called “JohnCarter” is selected. (See Figure 3.4 .)
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Figure 3.3
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Figure 3.4 The “Stop Strategies” tab allows the trader to create a single stop or a trailing stop. The trailing stop will automatically move based on the parameters put into this screen. As the various profit targets are hit, the stop loss will move up a specified amount, ensuring that an increasing portion of any
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profits is protected. Traders may have just one setup that they use, or they may have half a dozen or more that they have created over the years. Each setup that a trader uses should have a different set of rules for exiting the trade. Some of the setups may utilize a 3:1 risk/reward ratio (risking 1 point to make 3), ...
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risk/reward ratio (risking 2 points to make 1). Some of the setups may use trailing stops and multiple targets, and some may have stationary stops and single targets. All the various exit and stop strategies can be created for each setup on each market in which it is going to be utilized and matched together. Once thes...
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which setup they are about to take, on which market, and then focus on the entry level. Once they enter the trade, the software does the rest of the often very tedious and error- prone work. What is also nice is that a trader can have a couple of plays running simultaneously in different markets and not get frazzled wa...
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discipline and focus into the trader’s life and generally makes the trading day smoother and more deliberate, leaving a trader refreshed at the end of the day instead of worn out.
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Figure 3.5 What is also nice is that, once the trade is placed, all these orders are easy to follow and are marked visually on a screen of the market being traded. In Figure 3.5 , the screen shows that an order was filled for six contracts on the E-mini S&Ps at 1188.00. That is also where the market is currently tradi...
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P&L at the bottom of the screen says 0.00, as there isn’t a profit or a loss at the moment. The total number of contracts being traded is displayed on the middle left side, showing +6, since the position is long. If I were short here, it would have said –6. At point 1, this is where I can choose my initial stop (in thi...
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this case, if the first target is hit at 1189.00, my stop will automatically move from my entry –10 ticks (see point 2) to entry –4 ticks. In addition, the stop quantity will automatically change from 6 contracts to 4 contracts. If the second target is hit at point 3, at 1190.00, then my stop will automatically move fr...
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This just means that while I have booked gains on the first two-thirds of my trade, the worst I can do on the last third is break even. Of course, if my second target is hit, my stop quantity also changes automatically from 4 contracts to 2 contracts. The “Flatten” button in the middle left of the screen is also very ...
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click of a mouse. There are other things that these platforms can do, but this should give you an idea of what your software, at the very least, should be capable of doing for you. Why Do Most Financial Newsletters Suck? This section isn’t about recommending good financial market subscription
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services that are available. It’s about how to treat them. There are many market- related services, newsletters, and Internet chat rooms that are operating today. These services typically offer opinions on the markets, and they usually charge a fee for accessing their information. They offer thoughts on market directio...
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newsletter junkie, and I still am to some extent. However, these days I’m much less interested in individual opinions and more interested in websites that offer a quick synopsis of the current state of the markets through a variety of technical data. To that end, one of the best sites on the Internet is Decision Point,...
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a quick feel for the markets and offers an endless amount of drilldown detail, which I like to peruse on Sundays. In addition to getting quick readings on key numbers such as NYSE (New York Stock Exchange) Member Net Buy/Sells, Investor Sentiment, and key put/call readings, traders can sort sectors and markets by relat...
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declines will emerge. I find this tool priceless for gauging market direction and for seeing firsthand where the big money is flowing. It’s the best $20 a month ever spent. I also like to read comments by John Mauldin in his weekly newsletter, Thoughts from the Frontline ( www.2000wave.com ). His writing is lucid, far...
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I also find it useful to read and balance the views of the people who think the Dow is going to 3000 with the views of the people who think the Dow is going to 30,000. There are both rational and ridiculous arguments for both cases. I personally don’t have an opinion on where the stock market is going to be by March 27...
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is going to be. Also, it is important to take these views with a grain of salt. With Wall Street, if everyone is expecting the same thing to happen, then it’s not going to happen. It is certainly important to stay on top of the major trends affecting the world today, namely, an aging population, the great deleveraging ...
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explosive economic growth of China and India. These are real trends that affect nearly everything in our lives. Where there are trends, there are opportunities to make money. The main thing to keep in mind is that everyone is offering an opinion, especially if it’s regarding a specific trade recommendation. The writer
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may sound absolutely convinced that this is the best trade on the planet, and this conviction can easily pass into the brain of the reader. The bottom line is this: first, great conviction is in no way correlated with a greater chance of said recommendation actually happening. (Remember, even newsletter writers would r...
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take a recommendation from a subscription service, they still have to set appropriate risk parameters and decide how much they are willing to lose on the pick. They also must realize that it is just an opinion—it doesn’t mean that things are going to unfold the way the writer says. Just because a guru thinks the marke...
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more stories about people blowing out their accounts because “they put it all on a newsletter recommendation.” There is a tendency for traders to feel more confident in a trade because it is being recommended by somebody else. A tip! In reality, it’s just a trade setup like any other, and it is important that a trader ...
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to work out exactly as planned. Whether traders found a setup for themselves or whether they are following a trade setup recommended in a newsletter, the ultimate responsibility is the traders’. Don’t get overconfident just because you read about something online. How to Establish Priorities: If You Are Getting Interru...
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