by Cliff Clark
I talk to a lot of traders on a daily basis. I like to find out what people are doing especially new traders. Most are excited to be starting their trading careers and they are jumping in with both feet. I will hear things like I want to trade stocks, options, forex, and they'll rattle off 12 different strategies and time frames that they desire to learn to trade. Then I'll ask how much money are you planning to make, and the sky is the limit on that one. When I tell them what they can realistically make the first year or two that's usually where the enthusiasm disappears. Why? Because nobody wants to hear the realities of this business.
Here's the thing. When you are learning to trade you are probably not going to make money the first year or two. The sooner you accept that reality the smoother your growth as a trader will be. The best thing you can do for yourself to take it slow and to keep things simple. Start off with taking a course to learn about the trading business. But even after you have taken that course you can't learn all of the strategies and everything else you need to learn all at once. You have to study them over time.
When you are starting out it's best to keep things simple as you learn, otherwise you will just overwhelm yourself. Your trading plan is the way to do this. Your trading plan will map out how you will progress and it will change and grow as you learn and progress. Along with your trading plan you will have a pre-trade checklist. This is just a list of 10-15 items to look at before you enter a trade to verify that you can take the trade. It will keep you out of a lot of bad trades or trades that don't fit your trading plan.
My first piece of advice is to pick one strategy and to map your trading plan around that strategy. I also recommend that you start with a very low risk level. As you perfect your strategy and become profitable you can raise your risk level over time. You can add an addition strategy as you perfect the first strategy. Keep in mind you can have different risk levels for each of your strategies. If you have mastered one strategy and are very profitable you might have a $250 risk level on that strategy, but the new strategy you are learning may have only a $25 risk level since you are still learning that strategy
You know that old acronym, “KISS”, Keep It Simple Stupid”. If you do as I am suggesting that saying won't apply to you. Your acronym will still be “KISS”, but it will stand for Keep It Simple Smarty!
2 trades for me today with +1.5R total
1st Trade QCOM +2R
148.39/149.97 exit 143.25
12% gap down under pivot support and 50ma after a strong daily double top rejection,. I took it on a congestion breakdown with a fairly wide stop, leaving my 2R target 50c over its ATR, slow but consistent move down with great RW, hit my target on the penny before it bounced.
2nd Trade AQB -0.5R
9.40/9.70 exit 9.56
I rarely trade stocks under $10 and even more rarely short them. I liked this daily chart as it broke its uptrend channel and stayed under a strong 9.50 support line enough room to its daily 50ma. I entered after a pullback with a fairly wide stop but only 1/3 of its ATR used at the time. It failed to break down with the strong market open and stayed in a narrow range.
I actually broke my plan with this trade as I lowered my stop to a pivot where price made a big bounce earlier at 11am with a large seller sitting there. My thought was that if it breaks that level again then it will likely...
1 trade for (-1R)
I took a BD on QCOM. I was worried about the target being close to the daily range, so I took a tighter stop on the 2 min chart. I am looking through PTS right now, most of the examples have 2 options for where to put your stop. It looks to me like one of the stops would be at the bottom of the main consolidation area, and the other at the bottom of where there has been a shakeout or turnaround bar (if there has been one). Due to the daily range I took the tighter one on this. In hindsight it seems obvious to take the wider stop, but in the moment it looked ok.
I was then looking at the 15 min 3BP on QCOM, but the reason I used a tighter stop in the first place was because of the range. The 15 min 3BP would have needed to have gone even further than the wider stop on the 2 min BD, so I didn't take it.
