P1: a/b c09
August 12, 2008
Printer: Yet to come
TRADING THE PLAN
TRADE FOR POINTS, NOT FOR TICKS One of the big drawbacks to day-trading is the profit potential is limited. Day traders trade for ticks, not for points. There is only so much movement in one day which means there is only so much profit potential. To make enough money to cover your trading expenses (software, data, education, etc.) by day-trading, you have to trade size. It is hardly worth your time and expense day-trading just two or three futures contracts, even if you have a very high win rate. I believe day-trading provides the least return for your time and investment of any time frame of trading. At the least, even if you are a successful day trader, also consider longer-term positions that last from a few days to a few weeks to capture the longer-term trends with a potential for greater rewards. Put your knowledge and experience to work for greater profit potential. W. D. Gann taught, “The big money is made in the big trends.” New traders should consider this truth carefully. Trade for points, not for ticks.
YOU CAN’T BUY SUCCESS Sometimes I’m almost ashamed to be associated with the business of educating traders and developing trading software because the business is rife with outright scammers making promises and insinuating you can quickly and easily learn to get rich fast trading. You’ve seen the ads: Learn the “secrets” of Wall Street or the professional traders, and make a killing. You’ve seen the charts in ads with the little buy and sell arrows where every trade is a big profit; or the ads that claim hundreds of percent return if only you follow their system or subscribe to their advisory report; or the trading software (usually very expensive) that will supposedly give you the buy and sell signals for consistently profitable results. If you subscribe to any trading publication or surf some of the trading sites on the Web, I know you’ve seen a lot of these outlandish promises. You’ve probably taken the bait on a few of them and spent a lot of money with little or no results. You’re not the only one. I’ve been a sucker myself, especially in the early years. I guess it’s part of the learning process we all go through when we’re learning something new and actually think there are some secrets we can quickly learn to put us on the road to riches. Beware of any promoter making unrealistic claims. It’s just common sense, which unfortunately our fear and greed drives out of our consciousness now and then. There are a lot of good trading educators. Some have been around for years and have a lot of experience trading and teaching traders. The legitimate trading educators never make unrealistic claims. In fact, I don’t believe I’ve ever seen an ad or promotion by a legitimate trading educator that make a results-based claim. They know the best they can do is teach you whatever they have become good at. How and if you apply the knowledge is up to you. The more knowledge and experience you gain, the quicker you will be able to discern what should be legitimate and useful information as opposed to having your chain pulled.