Netpicks Informer q1 2012

8/2/2019 Netpicks Informer q1 2012

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Savvy strategies or proftable traders.

INFORMER

LETTER FROM THE DEVELOPER

Hello and Happy New Year!

Tis is my frst opportunity

to wish you well in 2012 and

I must say, I’m ready to get

things going!

What can I say; I alwayslook orward to the start o a new year. o

be perectly honest, while the holidays are

great personally, as a trader, it can be a very

dierent story. During the holidays, you

fnd yoursel asking questions like, “Should

I trade on this day… should I stand aside…

what about tomorrow?” So much doubt

goes into it that sometimes I think I should

just take the second hal o December OFF

and say, “See ya next year!”.

What really surprised me so early in this2012 are the extremely LOW trading ranges

and volatility. See, everyone expects that

come January 2nd the markets will snap

right back to their crazy selves but what I’ve

ound in recent years is that the frst hal o

January is actually the opposite. However,

I am expecting that by February we’ll start

to see the volatility we all know and love

(hopeully).

During this time, it is a good reminder why

I preer DYNAMIC trading systems. We

make certain all NetPicks trading systems

can adapt to changing market conditions

because truly, you really never know what

lies ahead in the next month. So you better

have a trading system that can account or it!

Which brings me to one o my New Year’sResolutions or this year.

Tis year, I resolve to fgure out and then

SOLVE why so many traders have trouble

reconciling what is happening on their

trading chart vs. the success they see in their

trading account. We talk to countless traders

that seem to ‘have it down’: the system, the

rules, the set-ups – but or some reason, their

live account doesn’t come close to reecting

what’s happening on the chart.

Te good news is we have actually already

identifed several hurdles and proft-blockers

to help solve this epidemic (one o the many

benefts o having a ull staf o actual live

in-the-market traders that started out just

like you). And my goals is to ocus on

overcoming these hurdles and distill them

down to usable tips and techniques to help

you take your ‘screen success’ to real success.

First step? ake the time to read this quarter’sNetPicks Inormer. rading takes work and

it takes time… and sadly there isn’t an EASY

button you can push - even i it seems like

EVERYONE is trying to sell you otherwise.

But you can take advantage o their quest or

the EASY button and their laziness and get

the edge with discipline and perseverance.

Tat’s the edge we try to give you at NetPicks

and an edge that will never cease.

o your great success in 2012!

Mark Soberman

CONTENTS

Letter from theDeveloper ..............

What’s New At NetP.............................

Another Tool in theToolbox ..................

Calendar ................

When It’s OK to QuitYour Trading ............

Why Should I Care ABonds?...................

What Should I Be DWhen I Hit a LosingStreak?..................

Interview with SSTMember, Brad Niska.............................

Emotional Sabotage

The Open and ItsImportance ............

Increase Your Odds oWinning Trade ........

NetPicks AuthorInterview Series: ‘Tr

Like a Casino’ ........Mysteries of Trader TStatus ....................

Kagi Charts ............

FREE Episodes: TheDay Trading AuthoritPodcast ..................

My Grandma Knew .............................

Pulling the Trigger .

Quarter 1 x 201

A $29.95 Value

(800) [email protected]


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WHAT’S NEW AT NETPICKS

Seven Summits Trader Pro Mastermind

For the frst time ever (by invitation only) we’re hosting ourvery frst Seven Summits rader Pro MASERMIND. Whatis a Mastermind?

Simply put, a Mastermind is a small, yet mighty group withone goal in common: taking your trading above and beyond.

In a Mastermind Group, the agenda belongs to the group andeach person’s participation is key. Peers give eedback, helpbrainstorm new possibilities, and set up accountability thatkeeps members ocused and on track. Participants in the group will create a community o supportive traders who will work together to move each o the individual’s trading careers to new heights!

Best o all, as members continue to build their skills tradingin ‘sim’ mode, they also have the chance to trade a live unded

account, eventually earning their way toward being PAID totrade an actual und, proessionally!

Right now, the Mastermind application process is invitation-only. You must be a current good-standing member o theSeven Summits rader (ull version) and this opportunity isnot or newbies. We’ve just accepted our frst batch o studentsand Mastermind meetings have already begun. We’ll keep youupdated as we progress. And i you’re interested in joining thenext Mastermind group, please get on our Updates list:

http://www.netpicks.com/mastermind-updates

Keltner Bells Upgrades

For all you Keltner Bellsans (or traders lookingor any excuse to join us!), we just completed our frstround o big upgrades to

the system, trade plansand training. Specifcally, we did the ollowing:

• Introduced advancedtrade flter or

INCREASED WINRATE

• Added new orex markets, creating MOREopportunities every day

• Even easier learning techniques - get up and running

even FASTER

• Updated tradeplans or better speed , ease andoverall wins in the market

In addition to the above improvements, we also added brand new trade plans or all new markets includingEURAUD, AUDJPY, EURCAD and GBPCAD. So inevent you’re ready to step up and vary your trading a bit mthese new options are available to you!

I you know NetPicks, you know we are always looking or ways to improve your (and our) trading. We like cutting-edge charting and tools that can give us a read on the market.Tat is one reason we use Renko and Range bars in our swingtrading and even day trading. We have many customers and we encourage everyone to share their ideas and experiences sothat we can share with others. Tis is what leads me to ourdiscussion today…

In December we released our latest Seven Summits rader Automation and Strategy Back-est sotware. Tose SS Promembers could take their ideas and run some tradeplan tests.Tat is exactly what inspired Benjamin Gerard Sanchez. Hetook an idea on Wheat and tested it with Kase Bars. It hadantastic results, which we will share in this article.

But frst, we need to educate you on Kase Bars and how they dier rom Range bars. Basically, Kase Bars are very similarto Range bars, except they have a true range that is based only upon real price data. It takes into account gaps between the barclose and the current high or low o the bar. So, not all bars will be equal.

Te rue Range is Equal to the Maximum o the:

• High minus the low

• High minus the previous close

• Previous Close minus the low

One o the Benefts o a true range bar is that you cabreakaways, measuring or midpoint or exhaustion gaps,other candlestick ormations like island reversals. I yorunning automation or strategies you will have greater reliaand accuracy since the orders generated come rom actual action and orders that actually happened in the markets.

Also, since you are charting rue Range, you can u AR (Average rue Range) on a regular time based char

determine the best rue Range or Kase bar value to use.think o it like this, i you know a good AR o a marketnow know the very best Kase bar to trade o o and get thepicture o market or trading.

ake a look at these pictures o the F on a Kase Bar .6 Range and a .6 Range bar chart. Notice that some o theare longer or shorter than each other on the Kase bar. is because it takes real price action and does not fll gapsthere is less volatility in the charting and thereore smoocharts.

ANOTHER TOOL IN THE TOOLBOX By Ron Weiland


http://slidepdf.com/reader/full/netpicks-informer-q1-2012 3/16uarter 1 • 2012

Tere is no chop zone up/down in the middle o the chartbove like the one below. Instead you see a smoother chart andt picked up the overbought market that the Range bar chart

missed… giving a double win!

Now or the Strategy Perormance Report - that was done withour Auto rade Back esting Sotware. It can help you test new ideas or maybe even a slightly dierent Kase size (the sky’s thelimit!).

Look or more trade tips and plans athttp://www.netpicks.com/learning-center/training-webinars/and http://netpicks.com/trading-tips/

Good rading, Ron

Now for the Power of Kase Bars in Action

Here is Benjamin’s Research and Plan (we all owe him at heartelt thanks and appreciation or sharing this with others)…

Here is a Wheat Kase Bar trade plan. I you are not amiliarwith Kase bars, they are very similar to range except they printwith a tick dierence rom close to open. Tey tend to stay with the trend more and not get knocked around in chop asmuch, and they defnitely take some getting used to as to theiradence. Tis is a very simple plan that calls or a max 1 losser day or 1 winner as long as it totals 8 ticks or more otherwiset will take another trade until it reaches its tick goal or getstopped. It has 3 targets, 2 money management and a fxedarget, no trailers. Here are the results.

CALENDAR January: Keltner Bells, Seven Summits Trader Mastermind

February: Seven Summits Trader Basic & Pro

March: Mastery Series Training, Big Announcement



WHEN IT’S OK TO QUIT YOUR TRADING By Mark Soberman

Despite the amount o inormation there is on tradingtechniques and strategies, it’s generally recognized that themental aspect o trading, the psychology o trading, is adominant determinant o how well you can trade. With thebest systems in the world, i you cannot implement them you will inevitably lose your account.

Tis is not oten understood by those new to trading. It isexpected, not to say a sign o maturity, that we can exercise our will power and do what is needed, subject to it being physically possible. Yet i you gave the same trading plan to 100 dierenttraders, every one o them will give you a dierent outcomebecause o hesitation in execution, or second-guessing the plan,or some other deviation.

Te business o trading or a living puts you under a kind o stress that you will have seldom experienced in other aspects o lie, and requires a level o ftness even when you are basically sitting still. Physical exercise greatly improves both mental andphysical health, lowers blood pressure, helps you combat stressand think more clearly especially in adversity.

rading is counter intuitive. No matter how good your tradeselection, inevitably you will have a share o losers, and it isnatural to beat yoursel up about them, wondering what youdid wrong. Te answer to this is that you may have doneeverything perectly, but that is not what your mind will betelling you. It is easy to conjure up scenarios where you will behard-pressed to exercise your will power, concentrate, and do

the right thing, purely because o the oreign nature o tra

It assists tremendously to keep a trading log that records your trades and your emotional condition. Some woulthat it is essential. Tis can provide you with an early warthat things are not working out emotionally, provided yoscrupulously honest in flling it out. But even this maysave you i you are eeling under the weather, or you are trading requires you to be on top o your game in every asas you are dealing with the potential or large fnancial losa short period o time.

Sometimes the markets will not seem to cooperate. Tiarouse all sorts o other emotions, particularly i you haveseveral losses and eel that you “deserve” to win this timemarket is bigger than any individual trader, and doesn’t cyou eel you are “owed” a win because o past history. Ifnd that you are becoming emotionally involved with trades in this way, then it is time to step back and get sperspective on the situation.

It’s okay to stop trading, close your open trades, and calday. I you miss an opportunity or proft, there is no proas there will be other opportunities tomorrow. It is much o a problem i you insist on keeping going despite the acyou are not trading your strategies eciently, and consequblow your account. I you recognize trading or the eortit is, then you will appreciate that sometimes you need toa break.

WHY SHOULD I CARE ABOUT BONDS? By Bob Malinowski

As active traders, we tend to pay close attention to the markets we trade, whether day trading or swing trading, and or most o us that tends to be the stock, Forex, or utures markets. Tesemarkets provide ample opportunities to diversiy into a greatnumber o instruments, which provide lots o price action. Inrecent years, trading the U.S. bond market has not been very exciting because interest rates have been at record lows, interestrates have not moved, and the Federal Reserve has signaledits intention to keep rates at these low levels or many moremonths (or even years) to come. Although bond trading hasnot been very exciting lately, there are a number o reasons ortraders and investors to pay close attention to the bond market.

First, let’s examine the similarities and dierences betweenstocks and bonds. Both stocks and bonds are traded securitiesthat have value that can go up or down. Te primary dierenceis that stocks represent equity or ownership in a corporation, andbonds represent debt to the issuer, which can be a corporation,a local municipality, or a national government. Bonds areissued to attract capital, in the case o corporations, or tofnance spending, in the case o governments. Bonds are issued with a defned ace value known as the par value or principal.Bondholders receive a fxed return on their investment as aninterest rate called the “coupon rate” which is a percentage o the bond’s original price. Bonds are issued or defned periods

o time, and expire with the original principle returnethe investor. All bonds carry the risk that the issuer wilmake all promised payments in ull or on time. o accounvarious levels o assumed risk, bond investors demand hinterest payments or bonds that they deem to have greateor greater time to maturity.

U.S. ederal government fnanced debt, known as resecurities, are considered to be the saest bond investmbecause they are backed by the “ull aith and credit” oU.S. government. o fnance the national debt, the



overnment issues debt with maturity periods o 3 months, 6months, and 12 months, also known as reasury bills; 2 years,

years, 5 years, 7 years, and 10 years, also known as reasury otes, and 30 years, known as reasury bonds or long bonds.

Generally speaking, the longer the maturity period, the greaterhe coupon rate because investors demand higher returns orying up their capital or longer periods o time. Te graph o he relationship between interest rate and maturity length isnown as the yield curve. Currently, interest paid on very shorterm treasuries is near 0 (about 4/100 o 1 percent or 3 month

-bills), about 2% on 10-year t-bills, and just over 3% or 30-ear bonds which carry the highest rate. All o these rates areurrently at historical lows.

Te remainder o this article will ocus on reasury bonds sincehey carry greatest risk due to the longer time to maturity,nd thereore provide the greatest opportunity or the trader.

reasury bonds are issued with a term o 30 years and areered in multiples o $100 with interest payments made every months until they mature. Te initial price is determined at

uction, and may be greater than the ace value (purchased at aremium), equal to the ace value (purchased at par), or lowerhan the ace value (purchased at a discount). Once purchased,

he value o the bond will uctuate depending on a number o actors, but ultimately it is supply and demand. Tere is annverse relationship between bond price and yield: when therice o the bond goes up, its yield goes down and vice versa.

Tis is due to the act that the periodic interest paid by the bonds fxed. I the level o prevailing interest rates in the economy oes up, the value o bonds goes down because the interest thathey pay is locked in. Tis act oten conuses investors becausehey believe that bonds are very sae investments, but unlessou hold them or 30 years, you can lose money on bonds i ou sell them beore maturity.

o why should I care about bonds i I don’t currently tradehem? Te short answer is that the bond market is watched by he whole world, and arguably has the most signifcant impactn the general economy. All else being equal, i bond pricesise, interest rates all (impacting credit card rates, mortgageates, and business loans) and economic activity increasesesulting in lower unemployment. Te bond market is also very quid with tight bid/ask spreads and trades around the clock.

Approximately $100 billion is traded daily in U.S. equities,ut more than $500 billion reasury securities are traded daily.

Tereore, the bond market oers signifcant competition withther markets or investment capital.

Te current state o the global economy has led to a ight touality, and U.S. treasuries continue to provide the market or

hat ight to quality. Te conventional wisdom last summerorecasted a drop in bond prices ater the downgrade o U.S.ebt by Standard & Poor’s, but U.S. treasuries continued tottract capital. Tis was probably due to the perception thatven though the U.S. national debt issues remained unresolved,

U.S. treasuries were still saer than other sovereign debt suchs European bonds. As a result, U.S. bonds were the besterorming asset class o 2011, and we now have we have seenond prices at historic levels, (and interest rates at historicows), as shown below by the 5-year chart o U.S. bond utures.

How do we as traders make use o this inormation? Well,ven though it looks like the Fed is going to continue to

attempt to hold interest rates down, we know that there is alimit to how ar down interest rates can go. (Short term ratesare near zero now.) How much higher can the bond marketgo? I bond investors don’t believe that they can continue toproft rom bonds, they may start to look or other places toinvest. As traders, we should be looking or signs o this shit. As companies have become more ecient in recent years as aresult o layos and other cost-cutting measures (resulting inlower stock P/E ratios), and with the economy starting to comeout o a recession, we can expect money to start to ow out o

bonds and into equities. I you are an equity market trader,you can proft rom looking at signs in the bond market oropportunities to proft rom equities. I you are interestedin trading the bond market, there are a number o ways toparticipate.

One way to participate in the bond market is by tradingutures. Although the utures market has been a little slow lately, particularly or day traders, it might be a good time tostart watching or signs o lie. A number o analysts believe thebond utures market is at a top, and could correct signifcantly.Te Fed is trying to keep short term interest rates low, andthey will probably remain low or the oreseeable uture, butlong term interest rates are harder to control, so look or bondutures to start to start moving again. Bond utures have a acevalue o $100,000, with a point value o $1000, and still tradein 1/32 o a point ($31.25/tick), so they may be a bit out o the reach or smaller accounts. Te advantage o utures is thatthey are very liquid and trade around the clock. Another way toparticipate in the bond market is to look at EFs. Bond EFshave a number o advantages over bond utures. In addition tobeing very liquid, they also provide an opportunity to trade thebond market in both cash and IRA accounts, take advantage o both rising and alling bond markets, and allow you risk smalleramounts o capital. wo o the most popular ones are L andB. L is the 20+ year reasury bond und that seeks tomimic the perormance o U.S. reasury securities that have

a remaining maturity o at least 20 years. B is the Inverse20+ year reasury bond und that seeks to mimic twice theinverse o the perormance o U.S. reasury securities that havea remaining maturity o at least 20 years. Tere are a numbero ways to trade these two EFs. I you are bullish on bonds,you can buy shares o L, or you can employ options strategiessuch as buying L calls or call spreads, and selling L puts orput spreads. I you are bearish on bonds, you can buy shares o B, or you can employ options strategies such as buying Bcalls or call spreads, and selling B puts or put spreads. Justremember that B moves at twice the rate as bonds, and inthe opposite direction.

continued on next page



In summary, whether you plan to trade bonds or not, it isimportant to be aware o the bond market. Many investorsbelieve that it is only a matter o time beore the debt situationo the United States is adequately addressed, and at that timeU.S. reasury bonds may be sold heavily. In addition, many analysts believe that that global ination may soon becomea problem which would also lead to bond selling. China or

instance has already seen unexpectedly high rates o inaand last year began to sell U.S. bonds. Other nations, suthose in the Euro zone are starting to see ination sparketheir government’s printing excess money to pay debt servcosts. So the bottom line to all traders is to keep an eye obond market, watch or signs o capital redistribution, andor trading opportunities.

I you have traded the markets or any length o time you know that markets can and will change every so oten. Te problem with most trading systems is that they are designed or onetype o market condition and that is it. As soon as conditionschange, you are let with a system that under-perorms. Tegreat part about the NetPicks systems is that they are very exible and can be adjusted to ft dierent market conditions.

Te Seven Summitsrader indicatorsgive us access to somany dierent inputsthat we can fne-tuneour system shouldmarkets change. Tisgives us an incredibleamount o power withour trading.

However, even with adynamic system likethe SS there will be

times when we do need to make adjustments. For example,equity markets made a big change during the 4th quarter o 2011. We went rom seeing nice movement to wild swings back

and orth in both directions. Tis made it very dicult or my swing trading over the last ew months o 2011. Te good newsis that I’m using the SS system, which gives me an edge overtime. It is very important to trust this edge and to not over reactto dips in perormance over the short term.

Te key to using such a dynamic system like the SS is to bevery patient with change. Once you hit that frst losing streak,it is going to be very tempting to want to throw everything outthe window and start resh with new settings or a new systemall together. However, you need to make sure you are lettingthe edge that the system gives you play out over time. Even i you are winning 65% o the time that means the system is stilllosing 35% o the time. I you quit ater a ew losers you aregoing to miss out on tremendous profts in the end.

Tis is exactly why I like to track my perormance on a daily basis. I take time everyday to log my trades and to take notesabout that days perormance. Tat way I know over time how my system is doing. Once you hit those ew losing trades youcan go and see that even with those losers the system is still very proftable over a larger sample o trades. Tis can help withthe emotional aspect o trading. We have all been in that place where you get rustrated with the lack o profts. By having atrade journal you can go back and review the big picture.

When you do reach that point when it is time to make cha what steps do you need to ollow? Here are a ew thoughkeep in mind:

• Make sure you are ollowing all the rules o your syand trade plan correctly. I you are in a losing streak is system breaking down? Or is it just you making mistI’ve been on both sides o this one mysel over the yea

• Review your trade journal to see an extended perormreport. I you don’t document your trades on a daily go back and record a ew months worth. Tis waycan determine i it is a market change or just a pullbaperormance.

• Are there any small changes to your trade plan thacould make to help perormance? For example, a chanstart/end time or trading a dierent time o day. Tibe much easier than starting over with a new markeven a new system.

• Be slow to change. Your system won’t be proftable day, week, or even month. I it is a proven system thenit time to get through a slow down. Many retail tr

spend years and thousands o dollars going romsystem to the next when all they need to do is mastesystem or the long haul.

• I you do make changes to your system and trade make sure they are backed up by results and not jhunch. We all tend to think we are smarter than we are. Let the numbers speak or themselves. I you havidea o a change that might improve perormance,better be able to back that up with test results.

Finally, make sure you are a consistent trader. Tis meanare taking the time to test your system beore jumping inboth eet. Once you are trading live, make sure you keep

daily trade journal. I know it is not un stu to do but ipay o in a big way once you hit that frst slowdown. Ino beating your head against a wall trying to fgure out to do you will be able to calmly react accordingly basenumbers and a real perormance report. Te best traders I kare the ones that stay disciplined and committed to tratheir system correctly over time. Always looking or thebest market or system will only lead to rustration and a lothousands o dollars.

WHAT SHOULD I BE DOING WHEN I HIT A LOSING STREAK? By Mike Ry



NTERVIEW WITH SST MEMBER, BRAD NISKANEN By Troy “TJ” Noonan

Not too long ago, I had the pleasure o nteracting with new SS Member, Brad

Niskanen, regarding the new SS Prond some interesting tradeplans that head been working on. Brad came intohe old via the live traderoom and beoreoo long, he was requesting a way to get

is hands on the SS Pro. While itwas not on the market at the time, weo make it available rom time to time to members o the liveraderoom when they ask about it. Te squeaky wheel gets therease.

What struck me about Brad was how quickly he immersedimsel into learning the method and in a very short amount time, probably less than a ew weeks, he was already workingn his own unique way o using the SS Pro, researching and

working out his own tradeplans. He began interacting withme and actually submitted some very interesting ideas, which

have since (with his permission) published on the Owner’sClub in the SS Pro radeplan Section o the site. Most

otably is his unique style o daytrading the S & P. Ratherhan the usual means o slugging it out with the big guns inhe market trading the ES, Brad is actually using the SS Pro

with Renko bars to daytrade the SPY. It’s a great approach andworth consideration. It also opens up a whole world o new ossibilities and ways to trade with the SS Pro.

Moreover Brad is currently beta testing the new chart tradingunctionality that will be orthcoming in a new radeStationelease very soon. Watch out Ninjarader!!

He was also kind enough to share some personal experiences

with us which we oer to you here.

ackground

roy Noonan: Where are you from / where do you live?Brad Niskanen: Currently live in Boston, MA

What did you do before you got into trading?echnology Consulting

What got you into trading?ve always had an interest in trading, ever since I watched my randather trade commodities.

What markets/timeframes did you start trading?

Equities / long-term trends

What were some of the biggest obstacles you encountered?Te biggest obstacles I aced starting out were the inormationnd indicator overload. It is surprisingly easy to make tradingery complicated.

ow’d you solve them?By going back to basics and creating a written tradeplan, itorced me to justiy each component o my strategy (when Iouldn’t justiy the rule/reason/indicator I removed rom thetrategy)

How’d you find NetPicks? Ater quite a bit o research, talking with other traders, tryingthe NetPicks Live Signal Service, I knew I ound a goodcompany with solid products.

How many systems did you try before you found NetPicks?I’ve tried quite a ew dierent ‘systems’ though many o them

were missing critical components (ranging rom lack o real- world testing, lack o money management integration toinadequate sotware support). NetPicks has a more ‘holistic’trading approach encouraging both new and experiencedtraders to approach trading as an athlete or musician wouldapproach their training regime (hard work, dedication, lots o practice and requent reviews o perormance). By using soundtrading strategies coupled with great sotware odds move intothe trader’s avor.

Current Plans

What are you currently trading?SPY/intraday; Equity options/intermediate trends; Forex/

intraday; CL/intraday

What trading system are you using?NetPicks SS pro or most markets; a separate algorithm orSPY.

Are you trading part-time? Full-time? Is that your goal?Part-time right now; I’d like to move ull-time this year.

What broker? Are you happy with them?radeStation - I just recently moved my account there and I’vebeen very happy with the experience.

Any obstacles you currently face?

Narrowing down the number o markets I currently trade.

What are you doing to work on them?Following some great advice on minimalist trading (tradingone market at a time; each or a shorter period o time; selectinga ew avorite markets and concentrating eorts there).

What would you say is your biggest trading achievement?I would say steadily improving my trading consistency anddetaching my emotions rom the trades.

What has trading allowed you to do that you might never

have done otherwise?

Te biggest reward o trading is the extra time I get to spend with amily and riends (instead o working 70,80,90+ hours a week to meet project milestones).

The Future

Trade plans are always changing - what are you looking to

try out in the future?I’ll likely continue to expand my scalping and intraday tradeplans in US equities. Also tweaking my existing tradeplansto include Renko style charts.




EMOTIONAL SABOTAGE by James Kessick

It’s a unny thing really. We spend our entire childhood andadolescence learning to control and develop suitable responsesto our emotions, especially strong emotions. We learn romour parents, our teachers, our peer group and our idols by observation and comparison. I would think that most people when they enter into trading would believe that they have somesort o handle on themselves in this respect. So why is it that when we enter the trading arena, so many o us struggle withour emotions getting out o control? Tere are clearly going tobe a plethora o reasons which may vary rom trader to trader.I’ll suggest three or you to deliberate.

Unresolved Personal Issues

Tis is a big thing. It’s one o the main reasons or why I alwayssay that trading is a path o sel-discovery and not just learningthe markets. Any issues which you have either suppressedrom your past or even are unaware o due to situations neverpersistently arising previously, you can guarantee trading willchurn them up. What’s more, until you identiy and ace them,they’ll crop up time and time again. A airly common scenariois o a trader consistently profting over a period and then givingit all back in a raction o the time.

Self-Deprecation

Simple but dangerous. It’s a vicious circle which oten starts with ailure to properly prepare or trading each day and prepareor trading generally. You don’t prepare-you do somethingdumb and avoidable-you’re angry in the moment o the trade-you beat yoursel up about it aterwards-you lose confdencein your ability-you ail to prepare or next time. rading isabout cumulative eort and results, not just one trade or oneday. Negative emotions can not only be demoralizing anddemotivating, they can be mentally and physically draining.

Immediacy Effect

When you are trading and are required to take some sort o action, oten it’s the strongest emotions which come to bear

right beore the execution o a trade (entry or exit). Tis isperhaps the most dicult aspect to overcome without eectivestrategies to deal with it. When we suddenly have a rush o emotion o any kind, we are hardwired to act based on it. Tetrouble is, markets don’t care and in act trade in a way whichoten compounds the issue. Emotions will distort the reality o what is going on and urge us to act in a way which is otencounter-productive.

Tere are three routes which you can ollow in your attemptsto deal with your emotions. However, you must think careully beore deciding which might suit you best.

Emotion Harnessing

Tis one is a struggle or me personally, yet I do know o p who are good at it. Anger and ear and greed make them so well that they come out on top. Actually, they tend toperorm well until they become emotional. Kind o like thesome fghters psych themselves up beore entering the rinyou are really good at reading the market, it can also be a stindication that something’s amiss. Like the adage says thoyou don’t need to be right to make money.

Emotion Moderation

For many people, perhaps this is the one that they will to try. When emotions appear, you recognize them and byoursel back to balance. All people will have some emoat some point is the argument. Ideally, the emotion shbe recognized beore it is a problem, in the building up snegative or positive emotions. Failure to do so means tha will only be likely to ‘see’ the emotion ully, when you areposition which requires action. Bringing yoursel back to ao emotional balance can take time and this is increased the level o which the emotion is exhibited.

Emotionless Trading

When I frst heard o this idea it was early on in my ca“rade like a robot” was the suggestion. I ound that at tit was easy and other times it was not. Tere are some pe who are brilliant at it and some who are not so great. I dis with the notion that emotions are always useul to a traderin trading in an automaton-like way a discretionary traderan edge. Tere are some people who can only unction in way and they do a very good job when doing so.

Te key to your choice is really about what you are likeperson. I eel this requires a high degree o sel-honestyreally important idea is to be aware o the type o emotion will oten exhibit and have awareness o when and whyprecipitate.

What works for me

For my own trading, like so many other things in tradiuse a hybrid o methods. Emotion moderation is certainl way or me when things aren’t going well. Without it, trcan easily degenerate into something which isn’t pretty! Apoint, it’s imperative to ask why I am getting emotionit the market, is it my own execution or perhaps have ully prepared beore starting to trade? Te answers to and other questions will increase my chances o ‘pulliback’. When I’m really trading superbly and in “the zone”defnitely doing things almost without thinking about t

What words of wisdom can you offer traders that are just

starting out?First thing I would suggest is to treat trading as a business (andall successul businesses have plans). Creating a written businessplan (trade plan) orces you to thoroughly evaluate the requiredcapital, market, timerame, and trading strategy. In addition, it

gives you the opportunity to measure your uture perormagainst the goals you’ve set. Second, whatever strategy you with make sure you have manually back-tested it. Tird, brisking real money make sure you eel comortable with strategy and start trading it in a simulation account (nevery broker provides these). Finally, make sure you money management strategy in place!



t’s a seamless integration o preparation and method, wheremotions just don’t come into it. It’s not like this is the case allhe time though!!

What can you do to improve things?

irstly, you have to understand yoursel to some degree. Know he kind o emotions you have when things tend to get out control and write them down. Note the sorts o marketonditions when they appear and look or patterns. Tis is a

reat reason to keep a journal i not or anything else.

A really useul exercise is visualization. Proessional athletesten use this technique and it can be quite powerul i used inhe right manner. Practice can be or both positive and negativecenarios which are likely to get your heart pumping!

A more and more common idea not just in trading but also inbroader circles o society, is the practice o mindulness. Simply put, it is the practice o awareness o the now. Sel-observationis a particularly useul aspect o this in controlling waywardemotions. It takes time and eort but is also well worth it.

Anyone who has ever had issues with controlling emotions while trading, not necessarily on a day-to-day basis, I wouldurge to think careully about this subject. As skilled a technicianas the trader may be and as quick they are to spot opportunities

to exploit, raw human emotion can overwhelm anyone giventhe chance. It’s up to us as traders to prepare ourselves to deal with these emotions as eectively as we possibly can in order tostay in the game in the long run.

rade well.

THE OPEN AND ITS IMPORTANCE By James Kessick

Te open is simply the frst moments o trading during a

roduct’s main session. When a market opens, its position

elative to previous trading areas and the type o trading activity which ollows, is potentially a great early indication o possiblemovements during the rest o the session. Many will overlook he open, yet or me it is just another piece o the day-tradinguzzle.

OSITION

osition o open relative to the prior primary session is the mostelevant nearby reerence. A market opening inside yesterday’sange is showing that at least or now it is initially acceptingrices which were traded. Tis indicates a level o balance andhows less potential or a strong directional move. However,market opening signifcantly out o the prior day’s range is

more likely to show a change in perception rom traders andreate imbalanced directional moves. Tis can be in the orm o urther price exploration or rejection o change and competitionor price, pulling price back quickly.

n addition to the prior day, position can apply to any longererm structural reerence. An example o this is an open outside

trading bracket which covers several days or even weeks/months. Tis kind o activity can orce even bigger players intoction and move the markets drastically.

ession gaps are certainly worth mentioning as they can alsoe important early reerence. It’s true that many gaps between

he close o the previous primary session and the ollowingay’s opening price are oten flled. I the size o the gap isignifcant, the inormation it holds may be useul. A gap onpen completely out o the previous day’s range might show ome conviction that value has changed and price needs toollow. However, a smaller gap size on open, still within therior day’s range could more than anything act as a potent orcen pulling the market back.

YPE

Te way the market trades in the context o its opening positionan depict the confdence and conviction o traders right rom

the open. It can also highlight the sorts o traders involved. A strong directional move or example is more likely to involve

longer term players who are less concerned by specifc price. A back and orth non-directional open is more likely to beparticipated in by short term and day traders.

Immediately strong directional – Pretty much right o thebat, the market powers o in one direction. A move like this isa strong gauge o movement

Check then strong directional – Beore entering strongly,some traders might want to see what the action is like whenthe market moves in one direction. I they think the move isn’ttoo convincing, they then pile into the market at it moves theopposite way.

Directional fail – Te market moves one way only to encounterstrong counter action which makes it reverse back to where itcame rom.

Non or low directional – Not much conviction initially. Tere’sno strong consensus on a dierent value rom current pricesand so the market moves up and down. Sometimes you noticeit might drit one way in an up and down manner. Tis to meis similar. Longer term players may not want to enter and somuch o the trading is by day traders. Te reason or the dritis that many day traders now have been orced to trade witha directional view. I there is a consensus, the market can stilldrit one way without having strong conviction.

POSSIBLE SUBSEQUENT BEHAVIOUR

O course the action o the market needs to be subsequently monitored with price objectives set and trading observed. But with the context o location, the vigor o the market rom theopen can give a strong indication o how much participantsare likely to push the market and in which direction. A strongopen is likely to be ollow through with additional trading inthat direction later on in the day, whereas with a weak open themarket oten has the chance o moves one way and then theother throughout the day.




INCREASE YOUR ODDS OF A WINNING TRADE By Shane Daly

As traders, one thing we love to do is trade. I am not trying tobe glib but the thing that we love to do can also be a curse. Letme explain.

rading is nothing like any other job out there. I someone that works in an oce shows up or work and just sits at their deskssurfng Facebook, they still get paid. Maybe not or long, butthey get paid. Other jobs are no dierent. You punch in, do what you do, go home and at the end o the pay period, youget paid. rading is nothing like that. Tere can be days whereyou sit at your desk and perhaps due to mega news releases orbig money waiting on news, you don’t trade. No trading equalsno money lost or won. Tis simple act can lead traders to dosome things that do nothing but drain your account. In thequest to lay down a trade, some traders get tunnel vision andonly look at the charts they are trading, and that can be a hugemistake.

Tere is a very simple action you can take that will not only increase the chance o taking winning trades, but can also keepyou out o a loser. Check out the higher time rame chartsespecially the daily/weekly to see i there is something in the way.

Tis chart shows a pretty common trading strategy. We are inan uptrend as shown by the green line. Te red line shows aresistance level that is broken and this strategy goes long on aretest o the resistance level, which we are thinking, will turninto support. In this case, the level holds and we are o to theraces. Price rallies and puts us up about 15 pips!

Tere is a problem though. Higher timerame charts hton o weight. A daily chart, or example, will give traderso time to notice a rejection o the highs. Keeping to techtrading theory, these same trades will place pending ordeshort the market when price reaches that level. Above they will place their stops. As sure as the sun will rise imorning, this is a given. A ew things can happen at this when price comes back. Price can be rejected right at the can pierce through to take the stops and then all or blow

through it. You never know what will happen so the conservative approach is to think that the price will be rejat that level and you will never buy into these higher timelevels.

Check the Higher Timeframe Levels for RoadbloHere is the daily chart o the same instrument.

In your excitement to get into a trade, you bought right iresistance level as noted by the red square. Price then droover 70 pips! I you would have checked the higher chart would have been able to flter even the best trade signal bec

at these levels, price usually has a reaction in the oppdirection as the orders at the level get absorbed.

Using a basic technical analysis tool, the horizontal linsupport/resistance on higher timerame charts, you increasodds that you are getting into a trade with potential. Isimple strategy that can keep your account rom churninga downward spiral.

A System in Itself

Te practice o checking higher timerames is not sireserved or fnding roadblocks. One great thing about h

Te caveat is to say that i the participants o the market youare trading are waiting or a highly anticipated fgure release ora rate announcement or example, the open may hold little clearsignifcance due to traders not being willing to commit to aposition early on. Ater the release has taken place, it’s then themarket really starts to move.

Te open type can give you an idea o later movements. Whatmust always be taken into account however, is that anything

can happen during the day and unexpected news can quchange the picture.

o see the video example as I go through the open 11/23/11 in ES, check out: http://www.netpicks.com/tratips/the-importance-o-the-open-in-day-trading/

rade well.



NETPICKS AUTHOR INTERVIEW SERIES: ‘TRADE LIKE A CASINO’

While trading is a dicult endeavor, it’s still possible to makemoney doing so in today’s markets. Te real question is: how an you achieve this goal?

What is required is adapting a successul existing businessmodel to this speculative arena. Te model that makes mostense is the “casino paradigm” and nobody understands it better

han author Richard Weissman - a proessional trader withver fteen years o experience consulting and training tradersnd risk managers.

n this NetPicks Author Webinar, we sat down with Richard toiscuss how successul traders tend to operate like a casino inhat they develop a method that gives them “positive expectancy”

nd then unappably implement their approach in the ace changing, and otentimes volatile, market conditions.

pecifcally, we also…

Reveal the best-kept secret in trading, the cyclical nature

o volatility, and oers insights on the tools needed tomeasure it

• Discuss the importance o timerame analysis and one o the most important tools associated with it—time ramedivergence

• Cover common trading pitalls and how to transcend

them as well as a wide variety o techniques or analyzingand improving trader perormance

• Examine the psychological mindset required to succeed with a positive expectancy model

Successul traders don’t need luck, since they consistently play the probabilities and manage risk. Tat’s how casinos win, and with this interview as your guide, that’s how you’ll learn to winin today’s dynamic markets.

To listen in and see more NetPicks Author Interviews,please visit this link: http://www.netpicks.com/authorseries

imerame levels is that many people can see them. When weook at a daily chart, it is a 100% probability that other tradersan see the same levels. What does that mean or you? I wereak it down into dierent outcomes, this is what we canssume:

raders will be looking or breakouts

raders will be looking to ade the initial move

rades will be looking to trade the frst pullback ater level

break

Te longer timerame charts hold a lot o weight or theimple act that unlike a fve minute chart, these levels are “inhe public eye” or a length o time that is long enough to beoticed and acted upon.

Let’s dissect the ollowing chart or a great example o theoints I mentioned.

tem “one” is a previous day high that stood out. You want theevels that are obvious because i you have to hunt or them, the

odds decrease on the number o other traders that see them.Tis level was a high that rejected a move up and sent thecurrency down 753 pips. It was HA obvious.

Item “two” are the aders. Tese traders are the ones that look to ade these big levels. In this case, price dropped over 260pips. A breakout trader may/may not have been taken intothis trade as that depends on how much the price breaks out.I they look to trade breakouts one pip beyond the key level,oten times they are victims o stop hunts by the bigger players.

A pullback trader would have not been in that trade. Te moveinto this level is another tactic you can use at these levels thatis beyond the scope o this article but does provide some highprobability trades.

Item “three” is the breakout traders that caught the explosionout that went 226 pips. Many breakout traders have a strategy to know which ones have a higher probability o succeeding.Tat is an option you can explore i breakout trading is to yourliking.

Item “our” are the pullback traders. Tey love to wait i/untilprice returns to the level or a resumption o the move. Many times, when price returns to the level, pullback traders willdrop down to a lower timerame or a lower risk area to enter.Price moved over 200 pips rom the previous level however by dropping down to a lower timerame, many pullback tradersgot a better price with lower risk.

Trading is personal

Tere are many ways to trade and anybody that tries to sell youthe grail, is dishonest. Tis article shows that whatever strategy you use, there are ways to increase your odds by simply usinghigher timerames to check roadblocks. Tat leads to a strategy that uses only price structure and tactics that can advance yourtrading career and is based on sound market principles. ake

some time this weekend to go over some historical charts to seei this is something that fts you as a trader.



Just because you call yoursel a securities trader doesn’t makeyou one in the eyes o the Internal Revenue Service.

In act, Uncle Sam is predisposed to consider you merely a hyperactive investor—and thus deny you more avorabletax status—unless you meet a number o criteria that arerustratingly open to interpretation.

You read that right: the tax code contains no actual defnitiono trader tax status.

Instead, the IRS has issued guidelines that the tax courts haveexpanded upon with case law, most o which denied tax appealsby traders.

What we’re let with is a blurred image, like a photograph o atrader taken rom a speeding car.

According to the IRS, to qualiy as a trader:

• You must seek to proft rom daily market movements inthe prices o securities and not rom dividends, interest or

capital appreciation;• Your activity must be substantial, and

• You must carry on the activity with continuity andregularity.

o help determine i you meet these three tests, the IRSconsiders these qualifers:

• ypical holding periods or securities bought and sold;

• Frequency and dollar amount o trades during the year;

• Extent to which you pursue trading to produce income ora livelihood, and

• Amount o time you devote to the activity.

Swoosh, right? What is “substantial” activity? “Continuity andregularity?” And what’s an acceptable holding period? Is a week too long? A month?

We know who investors are: Tey’re our hardworking neighbors who buy securities and hold them or such long-term goals as acollege und or retirement.

raders, on the other hand, buy and sell securities solely to takeadvantage o short-term market changes. Your profts comerom price swings, not dividends and interests. Since yourholding period is brie, oten a day at most—hence the term“day trader”—there’s no need to perorm due diligence on thecompanies you trade.

Who cares how the IRS classifes you? You do!

Investors are subject to the 2% threshold or deductibleinvestment expenses—and hence cannot write o most o theirexpenses—and are limited to a $3,000 capital loss deduction.

But as a trader, you write o 100% o your expenses, and i youelect the mark-to-market accounting option, you can oset allo your losses against your earned income.

Three Steps to Claim and Protect Your Trader

Tax Status

Step 1: Prove beyond doubt that you are a bona fde tradthat is, you “seek to proft rom daily market movements.”

Te best way to accomplish this is by showing a pattern o

trading volume and short holding periods. Keep your perinvestments well separated rom your trading business.IRS is looking or “earnest intent;” that is, you work diligto manage transactions, conduct strategy sessions and mrequent trades.

Step 2: Clear the “substantial activity” hurdle.

Te hallmarks the eds are looking or here are “reqregular and continuous” trading. Tat means volume. court case ruled that 330 trades a year was sucient to watrader status. Te eds need to know that you approach thibusiness, not a hobby. Fail to convince them o that and yback in investor-land.

Step 3: rade with “continuity and regularity.”

I you want trader tax treatment, it only stands to reasonyou must actually be in—and remain in—the businetrading.

Here’s where the IRS is looking or a healthy ow o trsignifcant dollar amounts, short holding periods—all the that you are at least attempting to make a living as a trade

I you take the summer o or show other gaps in your trathe IRS will be disinclined to grant you trader status. I yonewbie and ame out ater nine months, while it seems uthe IRS has made it clear: no trader status or you.

Once you obtain trader tax status, you’re not entirely inclear. Owing to the capricious nature o appellate rulingsthe ever-evolving tax code, there are no guarantees thatrader status you enjoy today might not be gone tomorrow

One good way to secure your trader status is to trade undeumbrella o a business. Tat’s not only where the most lucrtax advantages reside, but a legal entity such as a gepartnership, Limited Liability Company or C corporsends a strong message to the IRS that yours is an earnestlegitimate business enterprise worthy o trader tax status.

My recommendation is or you to maintain a daytimer devcompletely to tracking the amount o time you spend eachon your trading activities. I you are audited by the IRS chare it will be two or three years ater you have fled your tTe daytimer will service as proo o how many hoursspend each week on your trading activities.

About Jim Crimmins: Jim has become a nationally knspeaker on tax strategies, entity structuring, and liechange. He delivers over 30 talks a year throughout Amas well as speaking in several chat rooms each month. Youlearn more at radersAccounting.com.

MYSTERIES OF TRADER TAX STATUS By Jim Crimmins




KAGI CHARTS By Will Feibel

ntroduction

everal years ago we started using range and Renko charts withur systems here at NetPicks. Tis has piqued people’s interestn some o the other more esoteric chart types. In this article

we’ll introduce you to Kagi charts.

Kagi (rhymes with touchy) charts were developed in the 1870’s

n Japan, and many o us in the US frst learned about themrom Steve Nison in his book Beyond Candlesticks. Like

Renko charts, Kagi charts are independent o time and havehe virtue o fltering out much o the market noise, thereby iving a clear indication o price trend.

asics

Looking at a Kagi charts you might think you’re seeing a very ong snake gradually weaving its way to the right. Tere appearo be no distinct price bars as you’d see in time based, Renko orther charts, but that’s simply due to the presentation method.

We do in act have a series o price bars, the vertical bars,onnected by the short horizontal bars. Every horizontal bar

epresents a high or a low. A bar that moves rom a low to aigh is an up bar, one that moves rom a high to a low, a downar. Note also that an up bar can be either thick (green onome platorms) or thin (red on some platorms), so color orne thickness does not reect the direction o price movement

nside the bar.

igure 1 – Kagi Chart

Te style or color o the Kagi line tells us what the dominantmarket trend is. A thick (green) line tells us the market is in a

ally and the dominant trend is up; a thin (red) line says thathe market is in decline and the dominant trend is down.

Each o the elements o a Kagi chart also has a unique name.Te thick line is called the yang line while the thin line is called

yin line, and a high is reerred to as a shoulder and a low as awaist. We won’t use these names in this article however, we’llkeep reerring to them as thick or thin or high or low.

Reversals

Consider an up bar, one that started drawing rom a price low.As long as price continues moving up, the bar grows longer and

the high o the bar extends urther. Minor price uctuations will not aect the direction o the bar. However, once priceretraces a predetermined amount we have a reversal, and yourcharting platorm will draw a short horizontal line at the barhigh and commence drawing a down bar. As long as pricecontinues to move down, the new bar will extend lower. I price however moves back up by the same predetermined

amount, we establish a new low, draw a horizontal line at thatlow and begin drawing an up bar.

Figure 2 - Reversals

On most charting platorms, including radestation andNinjarader, the reversal can be specifed as either a fxedamount or a percentage o the price o the instrument. Tetraditional approach uses 4% o price as the reversal amount.Note that you can have a series o reversal but the line style –

thick or thin – will not necessarily change. In eect what you’llsee is essentially a series o swing highs and swing longs.

Dominant Trend Reversals

As stated earlier, a thick line indicates a dominant trend to theupside. As long as price does not move below the previous low

Figure 3 – Dominant Trend Changes



on the Kagi chart, that dominant trend will remain in eect andthe line will remain thick. Once the previous low is broken, thestyle immediately changes to a thin line, indicating that thedominant trend is changing to a downtrend. Conversely, whena thin line has price breaking a previous high, it becomes thick again indicating a shit out o the dominant downtrend.

In practice you’d need to see a couple o reversals where theline remains thin beore accepting that the dominant trendhas changed, since as you know prices usually go through a

consolidation period beore defnitively changing direction.Tese consolidations show up clearly on a Kagi bar as asuccession o short thick and thin lines.

Application

Te traditional approach to trading Kagi charts says that youbuy whenever the line changes rom thin to thick, and you sell when it changes rom thick to thin. Because the Kagi chartsflter out a lot o the market noise, this can keep you in somevery nice trends. O course it’s not perect either, as you’ll stillbe susceptible to chop whenever price consolidates.

You can also use Kagi charts as a directional flter or your

current trading system. Open a chart with your trading systemand a separate Kagi chart or the same instrument. Only takelong setups rom your system while the Kagi line is thick, andonly take short setups rom your trading system while the Kagichart is thin.

Finally, you can use all o the usual technical analysis techniques with Kagi charts, including support/resistance levels, priceormations, and all o the technical indicators available in your

charting package. Give it a try: pull up a chart o your avtrading system and simply change the chart type to Kagi. system will continue to work as beore, except that now asignals will be based on the Kagi chart. A word o cautionorder here: i you day trade using a Kagi chart be sure to seprecision on the chart to 1 tic intervals.

Figure 4 – NetPicks SST with Kagi Chart

Conclusion

Kagi charts are another tool we can use in trading the marTey do a great job o fltering out noise and indicating mtrends and can be used either on their own or in conjun with other charts and systems. Open up Kagi charts oavorite instruments, experiment with the reversal size anhow you can incorporate them into your own trading.

FREE EPISODES: THE DAY TRADING AUTHORITY PODCAST

Introducing NetPicks’ brand new podcast series, Te Day rading Authority!

Every ew weeks, we produce an exciting MP3 radio show covering the hottest day trading topics that you’ll be able to listen

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commute, in the car, at the gym, or wherever you can take a ew minutes to tune in.

In this podcast, Mark and Brian will tackle topics that you, active, real traders are experiencing and discussing the struggles

you’re dealing with every day. From trading success stories, to our biggest obstacles, what the market is doing (and hey, what the

market ISN’ doing) – nothing’s of limits here. It’s unny, it’s inormative – and it’s all educational. We use real-lie examplesinterview proessional traders, and answer your question so be sure to tune in and let us know what you think!

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Questions? opic Suggestions? EMAIL US [email protected]



MY GRANDMA KNEW BEST By TJ Noonan

was ortunate growing up because I had a ew adult mentorswho taught me some very important lie lessons at an early age.My parents divorced when I was a young boy and my motherwould drop my baby sister and I o at my grandmother’s housen San Francisco, to baby sit while she went to work.

My Grandmother was an amazingly talented and classically

rained artist. I would spend hours each day watching her paintnd actually had my hands in some o her paintings. She lovedo get her grandchildren’s “innocence and sense o carereechild knowing’” as she would call it, into her works o art.As I got older, we would talk a lot about all kinds o art, andmost importantly, how to treat our lie as our greatest work o rt. Lie was the ultimate blank canvas and the only limitations

were our own imaginations.

Tere were many things that she taught me, but three inarticular greatly inuenced me and I could still hear her

words at various random moments to this day repeating one these three statements, depending on whichever is neededt the time. All three o these pearls o wisdom have come up

more than once, at various times throughout my trading careernd each one has helped me in proound ways, so I thought I

would share them here, in hopes that someone else might alsoe helped in their moments o need.

Te frst is rather humorous, and is used when you are eelingown, making mistakes, experiencing losses, bad luck, or pretty

much in a one-step-backwards mode.

Behold the dung hillYet upon its heaping stenchMorning glories bloom

-- Unknown Haiku Poet

O course my Grandmother was the Unknown Haiku Poetut not being o Japanese descent, she would always claim thathe was not. Having heard this poem at a very young age, itook me some years beore I ully grasped its meaning. Whene is at its bleakest, this poem reminds us that it will pass.t is a message o great optimism. I seem to always recall itter a series o bad trades (the dung hill). When you have areat tradeplan and trade method, the best trades always ollow he worst, and the two steps orward mode (morning glories)lways ollows the one-step-back. It merely becomes a matter confdence in your method, and in yoursel.

Te second statement that always fnds its way into the oreront

my thoughts is: “Te true artist NEVER cheapens his style.”

Tis was repeated to me over and over throuhout my yearsrowing up. When I fnally understood the act that my lie

was indeed, my great work o art, I took those words deeper toeart. I was also ortunate to learn some critical lessons tryingo learn how to play drums at an early age too, and this idea wasnterchangeable with a phrase some o you may have heard meay over the years, “practice how you intend to play.” Practiceard, play hard. Or, to think o it another way, practice like a

wimp, play like a wimp. Tere are important nuanced lessons

in this piece o wisdom, romtaking responsibility or yourdecisions to ocus, discipline,perecting your execution,repetition (and a lot more).

Tis idea transposed to my

trading rather easily andis the KEY to my successas a trader, a traderoommoderator, a trade system developer and everything elseassociated with my career. It worked great or my rock bandsand it works just as great or my trading. It also helps keepthings very simple. I you want to succeed as a trader, thenpractice at it. Practice succeeding. Strive or excellence andnever settle or mediocrity. Tere is a step-by-step way andmentors are available to help you when you need it. ‘Nevercheapen your style’ in anything that you do. Ater all, i youare doing it, it must be worth doing, right? So do it at thehighest level!

Finally, the third thing she taught me, and I realize this mightbe somewhat controversial but she believed it and so do I.

Te grand purpose o technique is to elevate the vocabulary o your creativity, no matter what feld.

Tis took me a long while to ully understand because, while itmay not seem like it, it actually is rather straight orward, butalso quite nuanced with deeper layers. When I started workingon rudimentary techniques in both music and sports is when itbegan truly making sense.

My grandmother would go on to say that ‘technique can betaught, learned and practiced (and anyone can be a technician),but true creativity, the spark o genius, is something that we ALL have as children and actually we have it throughout lie.Many just misplace the key to unlock it. Achieving greatness inanything requires creativity AND the mastery o your techniqueto elevate to the highest level.’ Te more you know how to do(technique), the more you can say (create).

Tis helped my trading dramatically (when I fnally ‘got it’) by motivating me to practice my techniques and to gain as muchknowledge as I could. It’s an ever going process though becausethere is always something new to learn. I’ve come to the point where I can take what I have learned, and apply it in new andinnovative ways, to uncover new trade opportunities. And so

could you. Don’t take the short way. Do it right. Practice how you intend to play and realize when you have a setback, goodortune will swing back around. You have great ways to traderight at your fngertips. I you let yoursel succeed, you WILLsucceed.

Unfortunately, I lost my Grandmother at a very young age (she passed away when she was just 66). If you’d like to see some of her work, I put up a website in her honor, www.JosephineRobbins.com . Perhaps her words will help youas they have helped me.


http://slidepdf.com/reader/full/netpicks-informer-q1-2012 16/16

(800) 515-0335 x [email protected]

9400 Macarthur Blvd, 124-417

Irving, TX 75063

PULLING THE TRIGGER By Brian Short

What It Takes to Have the Nerve To Trade

What is it about trading that makes it so dicult to takeaction? Even managers and leaders o men can alter whenit comes to placing a trade in the market. Being rozen andunable to pull the trigger is a common eeling, particularly with novice traders.

Tere are a couple o reasons that pulling the trigger canbe dicult. Te most obvious one is that you are attachedemotionally to the unds in your account, and hate to put

them at risk. I you cannot aord to lose then you cannottrade eectively. You should not be using unds that you willneed to replace your car next year, or even pay your mortgagethis month. I that is you then go away, and come back whenyou have amassed some money that you can “play” with.

But the more likely subconscious reason that you may hesitateto pull the trigger is that you are araid you could be wrong,and that would make you eel like an idiot and oolish. Tis isthe last thing that you want to put yoursel through, and theonly way your subconscious sees to avoid it is not to make thetrade in the frst place. I you don’t take the trade, it can’t go wrong; thereore there is no chance you will eel like a ool –in this respect, at least.

You may need to make a mental adjustment. Some trades willbe losers, as no one can anticipate the direction o the marketall the time. What you need is confdence that you will winin the long-term, because you have developed a tradingplan which works overall. One useul tip to overcome yourreluctance to pull the trigger is to set stop losses and committo ollowing them in every situation. Tat way you can know that your possible loss has a hard limit.

How do you develop confdence in your trading? One way isby developing your competence, studying books, subscribingto newsletters, taking part in traders’ orums and attending

courses. Tese are all fne and good but in my opinionmost important ingredient to having a high level o confdeis to have a trading method that you believe in and a metthat gives you an edge in the market.

You need to understand your trading plan, and how ychosen strategies are intended to work. You can buildconfdence in the plan by careul back testing, and will also allow you to become at ease with the act thproportion o the trades will not succeed, yet the plan mmoney overall. Tis gives you license to make ailing tradelong as they are in accordance with your plan, and accept they are part o the process o making a proft.

Moving on rom the planning and back testing stages, youstart in the live market by trading a demo account, and maksure that you achieve the same results over time as your btesting indicated. I highly recommend that you make at l25 error ree trades in demo mode beore you even constrading with real money. Once you have traded a daccount, you still have not elt the strength o the emotithat using real money can evoke. When you are comort with the mechanics o implementing your trading plan, time to put it into practice, and I recommend you ease

this by using very low risk, until you eel you are mentable to cope with larger stakes. Te orex market is a gplace or a beginning trader to start because you can pvery small trades, using micro-lots basically risking penper trade.

Developing the right mental attitude to trading allows to keep the inevitable losses in perspective, and not dwelthem. Tinking about losses can paralyze your actions, makit dicult to close a losing trade and realize the loss, or to the trigger to open the next trade. Focus on executing ytrade plan precisely and exactly as you have laid it out andedge that your method has built into it will pay o.

Netpicks Informer q1 2012

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Transcript of Netpicks Informer q1 2012