Stock picking strategies are obviously a function of the analytical techniques and objectives of each individual investor. Stock investment strategies are diverse and you needn’t look any further than the hedge fund industry for verification of this fact. The stock trading techniques employed by hedge fund managers for example, are not only diverse, but innovative.
As the individual investor grapples with the issues of technique, strategy and choice, he may, through frustration, lack of confidence or simple lethargy, choose to follow another’s success. An entire industry has grown up around the concept of following the trades of so-called gurus. These gurus include the likes of Warren Buffett, George Soros, Carl Icahn and others who have enjoyed success in equities investment.
While each of these successful captains of the investment world deserve some measure of respect and admiration, to emulate their trades does little in the way of preparing a novice investor to understand the equities markets. More importantly, how can you know that these “gurus” are pursuing goals similar to your own? The short answer is; you can’t.
Many, who follow gurus, fail to recognize the intricate interplay of the many investments these gurus make. A guru that takes a position in XYZ Company may be using a trade for reasons that will only benefit his unique portfolio mix; a mix the average investor cannot hope to emulate. This is decidedly the case when following a guru that manages a hedge fund. Another factor that followers frequently fail to take into consideration is the timing issue. Most of the guru trades are not reported for up to 90 days from the date they actually occurred. Ninety-days are a lifetime in the stock market.
Therefore, individual investors must develop their own techniques, strategies and investment choices. Following a guru is no guarantee of success. In my view, blindly following the gurus will deprive you of the opportunity to learn the necessary skills to invest intelligently in the stock market. If you have not developed the skills necessary to make your own investment choices, I suggest you stay on the sidelines until such time as you have developed them.
The Indicator Warehouse Profit Run starts March 25th and is open to everyone. You will have the opportunity to trade alongside with Erich Senft as he takes full advantage of DTS Systems created by the team at Indicator Warehouse.
Some of you know that I use part of this system in my own futures day trading work the NinjaTrader and I can tell you that this in no gimmick.
Stock investment strategies fall into one of two categories:
1. Technical Analysis 2. Fundamental Analysis
Regardless of which mechanism you use, it is important to understand, both stock picking strategies have their true believers.
Fundamental analysis relies on a corporation’s performance measures. Many of these measurements are also compared to the stock’s market price. The most common fundamentals include:
• Earnings • Profit margins • Return on Equity • Price to earnings • Price to book
There are many others measures of a company’s potential and the fundamentals of all publicly traded corporations are readily available on the Internet. Those listed above are not to be construed as comprehensive. A fundamental analysis also considers the quality of the management team, brand recognition, public perception, length of time the company has been in business, competition and sundry other factors. Warren Buffett, often referred to as the “Sage of Omaha’ takes a fundamentalist approach to selecting his investment opportunities.
On the other hand, technical analysis is rooted in trends and the analysis of those trends in concert with historical patterns that, in the best of worlds, will repeat in a predictable manner.
The technical analyst will rely on such indicators as:
• 200 day moving average • Golden Cross • Relative strength index • Bolinger bands • Money flow index
Charts play a major role in technical analysis and as with fundamentals; technical analysis data is widely available on the Internet. Real time trading technologies are of particular importance to technical traders because they tend to drop in and out of trades in response to the trend, while investors following a fundamentalist strategy are more likely to retain a stock in their portfolio for the long haul.
Perhaps the simplest way to explain the difference between these two methods is this. Fundamental analysis seeks to determine what a company is worth, how that worth relates to the current stock price and if the company is undervalued by the market, buying its stock, in theory, will be profitable because the stock will see gains as the stock price rises to reach at least parity with the true value of the company.
Technical analysis is all about what the market perceives the value of the stock to be, with little or no regard to the value of the company as measured by its earnings, balance sheet or profit and loss statements.
Since last 10 years the gold price has climbed up considerably. This is definitely a disappointing fact for millions of gold investors. Investing in gold is definitely considered as a smart move for strong financial future but the continuous price rise is hindering the investment. Neglecting the price factor may drag an investor into serious debt problems. So, careful investment is important even for proper debt management plans.
Now, a new year is here, and the speculations regarding gold price are on again. There are various assumptions regarding the price of gold. Lots of market experts point out that the gold price will only follow the trend of previous years and will keep on growing. Some experts are hopeful too. According to them 2013 may herald a positive change in the situation.
The gold price has increased again by the end of 2012. Due to this, the price has been increased almost 8% more than the price of early 2012. As a result, 2012 was closed with gold price touching the $1675 per ounce mark. The gold price is expected to be influenced again in 2013. Various proceedings and reports like, U.S. retail sales report, U.S. housing starts and China’s GDP may affect the gold price scale.
Market experts forecast that gold price may face moderation and slip down a bit. A few reasons have also been pointed out behind this assumption. The price of gold is inversely correlated to the status of U.S. dollar. Due to this correlation, the gold price may be affected and this is definitely a positive sign. The fundamental laws of demand and supply may also have an effect on the gold price. There are four sectors of demand for gold – personal investment, official sector, dental and industrial sectors. The high price scale has dampened the demand for gold in all sectors. So, there are chances that the demand and supply factors may affect the gold price too.
However, there are fair chances of gold price to hike up again in the fourth quarter of 2013. According to the market research, there are chances that the gold price may touch the $1925 per ounce mark in the fourth quarter of 2013. Even many CEOs of distinguished gold mining companies in U.S. are also positive about this price hike. So, investors are expected to be careful about the actual market condition before investing in gold.
The forthcoming round of Fiscal Cliff is also assumed to have a deep impact on gold price. The worth of U.S. dollar and gold price, both are expected to be influenced intensely. According to the financial experts, the vital decisions regarding the awaiting Debt Ceiling verdict, Federal Reserve actions for interest rates and spending cuts will surely affect the gold price.
The interesting fact about gold investment is that, this works well even in the situations like deflation. Gold is popular because it can save individuals from financial uncertainties. Eager investors may have to wait for the perfect time as the global financial problems may take time to get sorted out. The moment the situation will come under control, it will become more lucrative for gold investors. If the market takes a positive turn, then investors are surely going to get the optimum benefits. Obviously there is hope for betterment of the market. In the coming years, the economic difficulties are expected to quiet down and this may have a positive effect on the gold market too.
It’s quite apparent that predicting the market trends accurately is not possible at all. Assumptions can be made but the situation can’t be described perfectly from beforehand. The market trends are changing rapidly. There is no assurance that the gold market will remain same for the whole year. So, it’s better to check the market well before thinking of investing in gold. Gold investment at the perfect time is helpful in many ways. This helps in improving personal finances and you can easily consolidate your unsecured debt consolidation loan. One can even also take help from a credit counsellor. It's better, not to investment when finances are unstable.
For any newbie or skilled day trader, making the decision when to get in or out of a trade is based on technical analysis or fundamental analysis. Both types typically involve gathering information and making an informed decision about the price of a market at a future point in time. However, the information that each use is very different from one another on one level, but very similar on another. It is quite possible that a day trader will use both technical analysis and fundamental analysis together although it is a far more common practice that a day trader will be a technical analyst.
The importance of fundamental analysis cannot be overstated. Traders that use fundamental analysis constantly gather information about national and global economies and/or the current & historical financial status of the companies or commodities involved. They also take in consideration current weather information and political certainties.
A trader that relies on fundamental analysis as one of their effective day trading tools will tend to believe that the markets that concern him or her will react to specific events in a predictable way. The information allows them to understand future market prices that are based solely on the outcomes of these events.
As part of their day trading strategy, fundamental traders must have complete access to a huge variety of available information as quickly as possible. Many times, their day trading systems rely on large support teams to gather and analyze the information rather than a single individual. Once left to the minds and hands of individuals, most fundamental analysis traders choose to garner computing power to help produce fundamental information as a way to process all the data automatically. Most traders relying mostly on fundamentals tend to hold longer term positions.
Day traders that use technical analysis garner historical information including trading volume and previous pricing, along with the best technical analysis indicators to make their decisions. The data they gather is typically displayed on a graphical chart with real-time updating all throughout their trading day.
Part of their day trading strategy is built on the foundation that specific data about a market will already be included in the movement of its price. This means there is no need to input any fundamental information such as news or market reports. With a large variety of the best technical indicator information, mathematical indicators and charts, the day trader quickly understands that some of the best technical indicators are better suited to produce better results for longstanding trend-following day trading.
At some point, every individual that wants to learn trading must decide whether to rely on technical analysis or fundamental analysis, or both.
There are two opposing ways to become an effective day trader that has the potential to generate more profits than losses. The first one involves extensive trading instruction, training and that priceless commodity “time”, that might also involve books, webinars, seminars, mentoring and online courses.
The alternative method is to trade without learning any specific day trading strategy or using a day trading system and that is by relying on a professional analysis and trading service instead. While both methods can prove to be highly effective, preference of one over the other is strictly an option chosen by the investor.
Day Trading Instruction
The following list outlines the popular ways of learning how to day trade effectively and profitably. Each type of trading instruction has its own strengths and weaknesses. From the list below, there is some type of day trading system that will work well for every kind of student. They include:
Trading Books – Learning trading through quality trading books is by far the most popular way to understand day trading strategy and day trading systems. Generally considered a low-cost method to learn trading, a novice, or intermediate trader can easily spend the same amount of money on trading books as the total cost of an expensive seminar.
Online Trading Courses – As a convenient way to learn trading, online courses can be taken anytime of the day or night, at your own pace. They are ideal for any individual that suffers from time constraints.
Day Trading Seminars – Usually considered a very expensive way to learn trading instruction, many are certainly worth their cost. It is best to seek out quality seminars and webinars that are taught by professional traders, and not just a professional teacher.
Day Trading Instruction and Mentoring – This path to learning is without a doubt the most expensive way to comprehend day trading techniques. However, following the guidance of the competent mentor can help to quickly develop confidence in making solid day trades, and building your own unique day trading strategy.
Day Trading System
An alternative path for trading for profit does not involve learning any day trading strategy or developing any type of day trading system. Following Professional Analysis and Trading Services, a less experienced trader can benefit greatly by using all of the trading and analysis suggestions of a proven, profitable trader. An effective professional trading service will also include extensive money management were an investor (non-trader) can have their investment funds traded for them, by a professional.
This type of analysis and trading service will offer live trading suggestions, professional training and daily market analysis.
It is important to develop the skills to manage your risk when day trading futures. This often requires effective techniques that many investors typically do not have. Most traditional stock traders tend to buy mutual funds or stocks and hold them for lengthy periods of time, with only an occasional glance at current quotes. Day trading futures, however, rarely allows a trader to follow any buy and hold strategies since the price of commodities tend to fall and rise over time without the normal trending line that a traditional stock tends to follow.
The number one reason for managing risk is to manage your open positions to safeguard against potential loss. If you feel stressed as an trader, it may be that you are holding too many open positions. Most successful individuals only invest 1 to 2% of their monies in any given trade. However, a smaller trader typically is not provided the luxury of having such a large margin account. Instead, they must rely on savvy money management skills to reduce their risk and stress.
The worst kind of developed strategy for day trading futures is an all or nothing approach. Developing a profitable online trading system requires strict discipline and a well-thought-out, proven plan that uses technical analysis indicators and other day trading tools. Even a small account needs to be traded with great self-restraint and control to allow it time to grow in size, from the profits generated on well-informed decisions to buy or sell.
That ideal place to begin developing a system or strategy, especially for those that are new to trading and investing, is to follow a trend. Many profitable futures trading strategies are executed using commodity trading software programs that have the ability to follow trend lines. With enough time in front of the charts, a day trader will be able to easily identify an uptrend or downtrend in the market and evaluate the trading signal the indicator provides to make a buy or sell.
Many newbie and experienced commodity traders using technical analysis often incorporate extensive day trading indicators into their trading plan. Researching technical analysis will differ from fundamental analysis in that it will utilize historical price action as a way to predict the moving price of the commodity in the future. Alternatively, fundamental analysis usually focuses mainly on the expectations of supply and demand of a specific commodity, as a way to predict the action of a future price.
Managing risks when day trading futures is essential to increasing your portfolio. By understanding the best technical indicators and relying on proven commodity trading software that you have gone to the trouble of learning well, any trader can maximize their profits and minimize their risk.
The day trading indicators based on seasonality typically play an essential part in determining or setting a price for a commodity during the regular cycles of every season throughout the year. Traditional decreases and increases in a commodity’s supply and demand tend to occur throughout the year on a fairly consistent basis. The tendencies for a commodity to develop seasonal patterns that might appear to be day trading indicators on the surface are often thought to be a predictable gauge of a future movement. However, tendencies that happened through the season are usually just that – a tendency and not a predictable occurrence.
A few typical commodity seasonal patterns tend to develop on specific futures including soybeans, lean hogs and unleaded gas. There is a tendency for soybeans to move significantly higher during their peak season beginning in February and ending in June. The farmer and investor’s anxiety & stress levels over the potential for crop loss usually diminish when the crops begin to grow until the season is wrapped up, usually in the early days of June.
The fluctuation of soybeans is often used as one of the best technical indicators of a price drop during the summer months, if no major weather problems have been experienced. Additionally, investors use a variety of day trading indicators to analyze price changes if there is a major flood or prolonged drought in the area. Moreover, the prices of grains tend to drop or bottom out during the months of harvest which generally occur in the middle of autumn.
An effective commodity trading software program can continually monitor the price of unleaded gas that tends to move higher at the beginning of the year until late May. This is often due to the tendency of commercial purchases in the months that precede the summer driving season which usually starts at the end of May, on Memorial Day.
The tendency for lean hogs to move higher in price usually happens near the beginning of March until late May. This is often a result of the summer grilling season when packers are readying for the summer pork demand. Used as technical analysis indicators, the price of pork can at times be extremely predictable throughout the year.
Trading commodities on seasonality requires other day trading indicators and day trading strategies to determine the best times to enter and exit a market. However, seasonality can be used as a filter for trading specific commodities as they help determine whether a day trader should make the buy/sell or simply pass on it.
Although investors use effective day trading software programs to assist them in trading futures contracts, there is always the potential for significant risk. However, historical trends in trading commodities have shown it to be a more attractive instrument than trading stocks and offers greater rewards.
Many traders use a combination of a day trading software, a dedicated trading computer and a fast Internet connection to trade the markets online. This process is significantly better than just diving right into futures trading without any forethought, knowledge or experience. Many newbie traders spend little time researching the markets they trade and generally end up losing their margin accounts in the process.
Alternatively, tech savvy day traders and investors take the time necessary to learn how to use an effective day trading software platform to quickly move their money around to generate profits. They learn day trading to gain a comprehensive understanding of how the market works before making their first buy.
Once investors get the hang of day trading stocks, they often venture out into other markets to trade including the futures markets. Using the best technical day trading indicators and an effective futures trading strategy, they can generate profits by buying and selling commodities. Many commodities are available for trading including grains, softs, meats, metals, currencies, index futures and energies.
Unlike buying and selling shares of stock backed by a company that produces materials, goods or services, commodities offer a unique experience to the investor. The continuing fluctuation in the price of commodities is always determined by the ever-changing laws of supply and demand.
When natural disasters strike they can destroy huge amounts of any commodity, making the demand rise quickly. As the demand escalates, so does the price of the commodity. Once the supply has been fulfilled the price of the commodity will fall again. Understanding this scenario helps day traders make huge profits to the benefit of their investment portfolio.
Savvy day traders in the futures markets use the best day trading software programs that have the best technical indicators either hard coded in or available as add ons. Effective day trading systems that work well at predicting market direction can minimize the risk in every contracted buy or sell scenario.
The commodities market works well for day traders that have developed an effective day trading strategy. Using indicators for day trading combined with futures trading strategies can greatly assist the trader at times when the futures markets are more stable. Traders who want to learn trading in the futures markets do well by gaining full knowledge of all the market indicators. This can be accomplished by studying technical analysis signals in real time, generated by the software program.
Books on day trading are available everywhere that help individuals learn trading and how to make money through the various trading instruments. However, they are often one of the least effective ways to comprehend the process. There are better day trading tools including commodity trading software and online trading software that have been proven effective for many traders in their quest to learn trading.
Trading seminars taught by professionals are also available for the beginner and intermediate trader in either a live format, or an online webinar. This type of learning process is its most effective when there is interactivity between the trainer and the student. Alternatively, individualized mentoring instruction proves to be a highly effective method for one to learn day trading that can lead to a long, successful trading career.
Learn Trading One on One
There are numerous individualized trading instruction & mentoring programs where newbie traders learn trading strategies directly from experienced professionals. Having the ability to learn effective and profitable trading techniques from a professional in a one-on-one student environment seems to provide the best results. This type of learning is often flexible and an extremely efficient way of learning trading strategies and has far reaching benefits over other traditional methods.
Using a one-on-one approach of a teaching style allows the student to learn every aspect of the training. It helps the professional trainer fine tune their teaching style based on the capacity of the student.
Learn Trading through Mentoring
Trading mentoring can be a very powerful and highly effective way of producing quality results of a student day trader. Having the assistance and oversight of a qualified and competent instructor, the student can easily develop confidence by making their own trading decisions, with full monitoring from their mentor.
The Ideal Student Trader
The ideal student trader is one that has never been involved in any day trading system with no bad habits to break. Additionally, a highly experienced trader will find significant advantages from quality trading instruction and mentoring. However, they must be willing to abandon all their previous knowledge on trading to gain full insight from the process.
The student must understand that a mentor or webinar are simply ways to learn trading and not about learning a unique trading system design. However, to be highly successful, the novice trader must already understand many of the basics of trading, including order types and markets. Any individual that has yet to choose a trading system is likely a suitable candidate for individualized mentoring and instruction.
When day trading futures there are varying factors that need to be considered in choosing the ideal day trading market for you. You will need to consider your initial trading deposit, your profit level requirements, your personality, the level of risk you can bear and the potential to lose everything in your margin account. Additionally your geographical location will play a significant part in which type of market works best for you.
The futures markets are usually the most suitable trading platforms for day trading. These include all of the futures markets involving currencies, commodities, agriculture and the stock index futures.
Your Day Trading Margin Account
When you first open your trading account at any brokerage that handles day traders, your initial deposit will be used as a way to calculate your account’s available trading margin. A day trading margin is defined as the amount of funds that will be available for you to trade. The amount cannot exceed any margin requirement that has been set by your brokerage or the exchange. Depending on the amount of your initial deposit, there may be futures markets that are not available to you simply because the margin requirements are too high for your account.
Your Day Trading Style
Every day trader has a different trading style. Some trading styles fit better with one type of futures market and may be a wrong fit for another. Some markets move extremely fast and others very slowly. Some are unpredictable. When day trading futures the trader will likely choose a market that has a steady pace to allow them the ability to make methodical, decisive movements.
Winning and Losing
The potential for profit and loss is a very real part of day trading futures markets. Without a complete understanding of how the market moves, a small adjustment in the tick size can create huge profits or drastic loss quickly.
Your Geographical Location
Where you live often plays a key role in your day trading style. Many markets are open 24 hours a day, while some have business hours set to Asia, Europe, and the US. Unless you choose to trade through the night, you will need to select the most ideal markets that trades while you are wide awake.
The best futures market for you as a beginning day trader is the one that meets the simple criteria of a low maintenance margin, and a low tick value. Additionally, it should be easily accessible to every day trader in varying locations. Some of these might include the Dow Jones futures market and the CAC40 futures market in Europe.
Many successful day traders use day trading indicators because they provide a mathematical formula for charting trades. Some of the best technical analysis indicators are proven highly effective in any good day trading strategy. Some of them include:
Many of these day trading indicators are detailed on a graphical chart that show all past and current market information including volume and price. The information is usually updated in real-time. Many highly successful day traders continually watch the graphical charts waiting for the ideal patterns to begin to form, which will signal the entry or exit point for their trade.
The different indicators to select from often vary in their mathematical computations. However, they are mostly configured using identical settings. Effective charting software and other day trading software might use different vernacular for each setting such as calling a moving average line a signal line. However, no matter what it is called, all of the mathematics will be similar, and affect the indicators in an identical way.
Length of the Day Trading Indicator
One of the major indicator settings is its length which is used in almost every indicator. The length will usually specify an amount of market information that is used in its calculations. As an example, a moving average that runs for a length of 20 will be calculated as an average of the most recently displayed 20 bars.
The Indicator Signal Line
Not usually considered an indicator, the signal line is used to generate a slower version of the indicator. Its length usually determines the amount of indicator information that is included in the calculation of the signal line. As an example, a RSI (relative strength index) that has a signal length of 10 usually includes a signaling line that is displayed as the last 10 RSI values used in the calculation.
The Indicator Input Information
Input information settings will detail the foundation of the indicator by providing a variety of choices that are dependent upon which chart is being used. Input indicators might include the open, close, high & low. Some day trading indicators will also have an OHLC (Open, High, Low, and Close) average indicator.
Numerous charting software programs that use indicators for day trading rely on the indicator length, the signal length, and the input information, to formulate a detailed description of the trader.
Unlike day trading the futures markets, traditionally the stock market trades a variety of shares owned by individual companies like Coca-Cola, Wal-Mart and others that are all available for buying and selling. Many publicly held companies use a stock exchange such as the NYSE (New York Stock Exchange) in the United States and the LSE (London Stock Exchange) in Great Britain. Sometimes identical stock is traded in a variety of exchanges all at the same time.
With a wide variety of choices in the stock market from numerous companies, many of the shares can be traded short (selling first) or long (buying first). Overall, most of the stock markets serve as an ideal choice for a day trader. However, it may be challenging for those just beginning to day trade.
Over the years, the United States Security Exchange Commission has placed heavy restrictions on day trading of all US stocks. Based on specific criteria most traders might need to deposit at least $25,000 in cash or securities that include futures contracts, options and stocks at their brokerage. This means that anyone who is just starting out as a day trader will need to deposit some form of $25,000 into their day trading account.
While the restrictions apply to the US stock markets they do not apply to the Asian or European markets, making them available for beginner day traders. Many of the popular futures markets from around the world are based on foreign currency including the Swiss franc, British pound and the euro. Additionally, company shares that are bought and sold on the stock indexes including NASDAQ and DAX are extremely popular as are those based on commodities that include wheat, gold and oil.
Many traders day trading the futures markets choose to use effective day trading systems to generate profits through buying and selling options. Many of them trade in specific markets because of a variety of factors including their futures trading systems, their geographical location, their trading style and their access to day trading indicators.
Many investors who use a futures trading system enjoy the process because technically, there is no day trading futures contract that is held overnight. The open contract is maintained only while the market is open, and technically all positions are closed at the end of the business day.
Investors who use an effective day trading software with technical analysis indicators and futures trading strategies do not have to be full-time day traders. There are many options to trade part-time whether it is in the morning, evening, or midday. Due to the ease of online trading, day trading the futures market has never been simpler.
Every individual that would like to make money trading commodities can find great assistance in using a day trading system to generate profits for their portfolio. Savvy traders who have developed an effective day trading strategy watch their portfolios increase, while those that simply attempt to trade in the market get back little more than heart ache.
While there are effective day trading software programs available, nothing for sale works by simply pushing a button. It requires forethought, knowledge and dedication for generating your own day trading system with parameters and stop losses, along with the basic understanding of day trading indicators.
Smart investors know that to comprehend the probability of their futures returns, it is necessary to test their day trading system. They perform this by doing back testing along with paper trades. A back test simply refers to using trading signals from historical trading information over the actual trading price harvested from the previous period.
Typically, a commodity trader will use the last five years of history as a common back test period, although there are long-term systems that need to be tested for much lengthier periods of time. Only by performing extensive back testing systems, based on a proven day trading strategy, can an investor know if their logic works.
It is important to use your own back testing system based on indications from your day trading software program. Performing your own back testing will ensure that the system’s trading parameters are accurate. This will ensure that any trade made in real time, for actual money, will have a greater chance at producing similar results. To make sure the strategy works it is typically a good idea to perform paper trades for a specific period of time, as a way to monitor exactly how well the strategy performs in the real world.
The other way to ensure that your day trading strategy is performing as expected is to remove emotion from your trades. Many investors that develop a competent and successful commodity trading system that works profitably well tend to mess it up by not following the rules. Only through hard discipline and sticking closely to the entry and exit signals can the investor be sure to gain a profit when expected.
In the end, it makes no sense to develop a consistently profitable system only to lose money by changing the rules along the way. Every individual can make money trading commodities using a commodity trading software program through discipline, knowledge and the best day trading system.
The first time I bought a day trading “system” I was pretty excited. After getting everyone out the door and off to school, I configured the settings, watched the instructional videos, and then waited for the “big moment.”
It came, sort of, a few times, kinda like they said it would, but not really.
I was hoping for a lot more.
So I looked for another system and bought it. And then another. I did that for a year.
Was I being a naive sucker? My brother in-law says YES! Maybe I was, just a little bit. I certainly gave the vendors the benefit of my doubts.
But what I say to my brother in law is a fact:
===> All successful day traders look for patterns in price action and trading momentum to predict where the market will go next. Most often, they use a combination of indicators with specific settings and follow a back and forward tested set of rules of when to buy and sell.
What do we call that? It’s a day trading system. Period.
And that means every day trader is either building and honing a system or buying a “ready to trade” one. There’s no grey area here.
When I was in the “jungle” of buying day trading education and “holy grail system” offers, I spent a lot of time learning about trading methods and trading software / indicators.
By default I became not only an “indicator expert” but also an expert on the programmers who built the indicators.
This led to the creation of Indicator Warehouse where the best, most innovative indicators and systems could be found under one roof.
Now I was a vendor – egad, I was on the other side! – but the real benefit of that was getting to know traders and hearing their requests for indicators and added functionality.
This feedback is what made our indicators and tools so valuable to traders and ultimately gave rise to The Diversified Trading System.
Here’s a video that stuffs that story into 90 seconds:
So what exactly did traders want in a system?
1. Clear “trade now” signals.
Take a look at this actual chart from a trader that was sent to Erich Senft prior to a private coaching session. Erich asked the gentleman to show him a BUY signal. The poor man was unable to give an answer.
Unfortunately, this scenario is very common with struggling traders. In an effort to gain ever greater market intelligence, they load up their chart with more and more indicators to the point where they can’t make a solid decision. Having the skill to interpret this data does not mean you will make more money. For one thing, it will take too long. When you have pondered all the data, the trade opportunity will have passed.
Now look at this chart from the Hawk Micro Scalper.
A “Friendly Warning” dot appears, accompanied by an audible alert. This alerts you to a possible trade setting up. The audible alert enables you to monitor multiple markets without having to keep your eyes on each chart. When you hear the Friendly Warning alert, you go have a look and see if the parameters for a good trade are forthcoming. If so, you will see an “entry triangle” print on the chart, followed by a “suggested entry” hash mark (horizontal line).
Here’s a 30 second video showing that process on the Hawk Micro-Scalper.
If you’ve tried a few systems and were less than enthused by the accuracy you’ll have experienced the most common “problem” with day trading software.
Regardless of the vendor, the software will fire a “trade now” signal when the programmed parameters for a trade are satisfied. This is often a combination of historical data as well as price and momentum shifts.
The parameters might be set “loosely” so that the signal fires often … but this will decrease overall accuracy. Conversely, the parameters can be set very tight …but then you’ll have to wait for a long time for the system to recommend a trade.
Our solution was to build three systems, each of which looks for something very specific: The Hawk Micro-Scalper picks up only short term scalping signals. The Falcon Swing Trader has been fine tuned to identify mid-range swing trades, and the Eagle Trend Trader which is programmed to find emerging trends. In short and for example, the Eagle Trend Trader will not fire a “trade now” signal when it’s a short term shift in support and resistance; a scalp move.
This results in the maximum number of accurate “trade now” signals on the given system you are using. And if you are using all three systems simultaneously (Diversified Trading), you avail yourself to the maximum of accurate “trade now” signals the market can offer.
If you’re day trading, you’ll want to have the option of trading futures, forex, and stocks. Most systems are designed and will work with only one asset class. Even if a system like that is successful, you’re missing out on a vast array of market opportunities.
Most traders will look for yet another system to trade an additional asset class. That’s fine too but it does take time to learn a new system and most often it’s impossible to trade them simultaneously.
With the DTS Systems, you can trade futures, forex, and stocks. You do NOT need different software to trade different asset classes. So once you learn a DTS System, you’re good to go with all three asset classes.
What’s more, this flexibility allows you to trade different asset classes simultaneously. This sounds overwhelming to most, but if you’re using the same software for each, and the signals are clear and unambiguous, it’s a very straightforward method.
4. Money Management
To be honest, not a lot traders asked for money management software. In fact, we’ve had to drag quite a number of them into it, kicking and screaming. Nearly every successful (rich) trader will tell you that it’s ALL about money management. In other words, “protecting your account (ass)” by putting the odds constantly in your favor thereby reducing your risk to the minimum as well as ensuring you trade the right number of contracts for the size of your account. This is crucial. It’s nearly impossible to grow your account by only trading one contract at a time.
Trading is fun. Gambling is fun. But trading is not gambling. Money management is the “gambling killer.” If you’re not interested in money management, you’re essentially a gambler having fun…and probably losing. Hopefully you do find it fun.
So, if you’re going to be a successful trader, you must follow the established money management practices. To make this a no-brainer, we put it all into a piece ofmoney management software that works with ANY system or collection of indicators on the NinjaTrader platform.
5. Trade Management
Now, this WAS something we did get a lot requests for. It was the number one subject during coaching sessions. Basically, “How do I know when to get out of the trade?” This is where traders sweat the most!
Accurate signals are not enough to make money. Every trader knows that good trade management like money management is key to success. It’s a balancing act. You need to give your trade “wiggle room” but at the same time, not leaving more money at risk than you need to. Simply put, traders wanted something that would prevent them from getting stopped out early.
[Update: We have now combined the tools Risk Manager and Profit Manager into one tool called Trade Manager]
6. Custom Spec Mean Renko Bars
Getting a clear picture on price action is critical to trading success. Again, better bar charts is not something our customers screamed out for, however, now that they have them, they’re certainly screaming their praises.
With Mean Renko Bars you get the look and feel of a traditional candlestick chart combined with the noise reducing, range condensing power of a renko based bar. But that’s just the start.
Our renkos have “wicks.” The lack of wicks is a major weakness in a traditional renko style bar. Wicks allow you to see the full price action on each bar. For example, long wicks can alert you to market indecision while short (or no) wicks might show a strong trend. Wicks also show you the true high or low of the bar or recent move. None of this is available with a regular renko style bar.
7. Easy rules and methodology to follow.
There are many systems out there that take no time to master. Trouble is, they don’t work. And there are wonderful yet complex systems out there that take literally years to learn.
As I’m sure you can guess, we had LOT of requests for a reliable system that could be learned within a few weeks. The first time Erich taught DTS System Training, it was a live training, Monday to Friday for 8 weeks. After three weeks, a third of the traders stopped showing up and after the fourth week, less than half.
Naturally concerned, we emailed the participants and asked them why. In all cases of those who were not showing up, they reported they had no trouble trading with DTS after just two weeks of instruction, together with the DTS Manual.
We were surprised and very happy – the system had performed even beyond our own expectation.
Hopefully it's clear to you that our passion at New Level Traders is building a social network for traders and great partners. Many of our members ask us what platform we use in our everyday trading. Without hesitation we tell them that NinjaTrader is our #1 recommended trading platform and you can start using it FREE!
New Level Traders uses Kinetick
Active traders demand reliability, speed, accuracy and cost-effectiveness from their financial market data provider and Kinetick delivers it to them every day! Kinetick provides fast, unfiltered, real time quotes for stocks, futures and forex that exceed the expectations of demanding traders like the members of New Level Traders.
Trading successfully is more than just a quality platform. This is where Indicator Warehouse comes in. They are a premiere partner for essential trading systems, training, and expert help for traders. Be sure to check out their new DTS Eagle, DTS Hawk and DTS Falcon tradign system,