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TRADING THE PLAN

TECHNOLOGY, TRADING TIME FRAMES, MARKETS TO TRADE, AND LEVERAGE What time frame has the best potential for trading profits? Which markets are the best to trade? The trend in the past 10 years or so is for shorter-term trading, particularly daytrading with high leverage. Not many years ago the trading time frame for most traders, including highly leveraged futures traders, was from a few days to a few weeks or months. Today we would call that swing or position trading. Until at least the early 1990s, real-time data was very expensive, commissions were relatively high, computers were expensive, and there were very few real-time trading software programs available. All that changed rapidly by the mid-1990s. When I began trading in the early 1980s, very few traders had software charting programs. Most of us made our charts on grid paper that we bought from blueprint shops, or updated a charting service booklet of markets that we received each week or two by mail. I also remember sitting at the brokerage office and making 15-minute charts each day by updating my intraday chart booklet every 15 minutes. Trades were not placed with an online trading platform with instant fills. We called the broker with the order, the broker called his representative, the order eventually got filled, and we got a call back with the fill price. The fill price was often a few ticks away from the market at the time of the trade decision due to the lag between dialing the broker and the order being filled. We got all of this great service for as much as $100 per futures contract! We now have very inexpensive real-time data with one-minute charts if we like, with all kinds of choices of fabulous trading software and instant order execution for about $3.00 a trade for a futures contract and a penny a share for stocks. We can make dozens of trades a day if we want. We can leverage up to 100:1 with some Forex accounts. How times have changed with the wondrous technology advancements. Are a higher percentage of traders successful today than in the pre-online trading days? Probably not. I suspect even a lower percentage are successful than in the old, hand-charting days! You are probably aware of the statistics that 70% or more (by some accounts it’s closer to 90 percent-plus) of traders lose most or all of their trading capital within months. I don’t have any hard statistics, but after more than 20 years of teaching trading and talking with brokers, that percentage has probably not gotten any better in recent years. I’ve talked with brokers who (confidentially) say more than 95% of their accounts lose money and are closed out within six months. The new technology, software, and real-time data services have not resulted in more successful traders. The new technology only provides more information faster. Traders must still learn how to use that information to make decisions. Leverage has both very positive and very negative ramifications. If you’re on the right side of the market, leverage will multiply profits greatly. If you’re on the wrong side of the market, it can clean you out very quickly. For every yin, there is a yang.

Profile for ERIC  Hunt

(wiley trading) robert c miner high probability trading strategies entry to exit tactics for the for  

(wiley trading) robert c miner high probability trading strategies entry to exit tactics for the for  

Profile for erichunt
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