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11/4/2008

Separating the stock index trading day into Quintos

I have always enjoyed having an usual last name. I even liked being the only “Q” in my classes in grade school.

Quinto means fifth in Portuguese, Italian and Spanish.

With Quinto for a last name, I have spent a good deal of time figuring out ways to split things into fifths, or Quintos

I have even divided the stock index trading day into its five natural parts or as I like to call them, the “Quintos of the day”.

Perhaps, even more surprising is that splitting the day in this fashion makes sense.

The reason to spit the trading day into its main parts is that all parts of the trading day are not equal. Instead, each session within the trading day is very different.

In order to maximize profits, each session requires its own strategy.

Some sessions can be very productive, while others are most often not productive.

The five parts, or Quintos, of the trading day are:

The opening - 8:30 AM to 9:00AM Central Standard Time
The morning - just after the 9:00AM economic number to 11:30AM central time
Lunch - 11:30AM to 1:00PM central time
The afternoon – 1:00PM to 2:30PM central time, and
The close – 2:30PM to 3:15PM central time

The opening is a prelude to the day and may reveal much about what is coming.

Liquidity floods into the market during the opening. You should watch the opening to see how the market tips its hand.

The morning, starting just after the 9:00AM economic number, is usually the most productive period of the day. You are naturally most alert during the morning.

I advise traders with limited trading time to concentrate on the morning session.

Lunch starts at 11:30AM central time and is usually a low probability, noisy period when the market marks time until the afternoon.

I advise traders to stand aside unless they have a strong feeling about the lunchtime activity on a given day.

The afternoon is the second best time of the day and, for my purposes, starts at 1:00PM central time. I know traders who work out at lunch and come back from their workout and a light lunch to be ready for the afternoon session.

The close is, well, the close.

Liquidity starts to leave the market around 2:30PM central time as traders close out their positions for the day.

You need to have your day made well in advance of the close. I have often seen traders desperately try to make their day in the last few minutes, mostly to their detriment.

So, there they are.

The stock index trading day broken into Quintos.

Now, that you know that Quinto means fifth, can you guess where my family originated?

If you guessed Quintos, Portugal, you would have guessed right.

Jeff Junior and I visited Quintos, Portugal some years ago and we agreed that Quintos was the fifth dullest town we had ever seen.

Wishing you success in your trading, Jeff

If you would like more information on improving your trading, then my Electronic Trader Mentoring Program may be just for you.

You can hear what other traders, like yourself, have to say about me as their trading coach, check out the testimonials tab.

Please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124.

Posted at 2:05 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

10/16/2008

Two Great Futures Traders

The markets have gone from interesting to bizarre.

Friday the Dow futures had a 1,000 point range.

Monday the Dow was up a record 936 points.

Today, the CBOE’s volatility index, the VIX, reached 80.

We used to think the markets were volatile when the VIX was in the 30’s.

So, with all this in mind, we can agree the market is volatile.

But, what do traders do when faced with this unprecedented volatility?

· Fearful, timid traders hide from today’s markets, afraid to trade.

· Overly aggressive traders just get more aggressive, hoping to be rewarded for their bold, but undisciplined trade.

· Smart traders approach today’s ultra-volatile markets with caution and patience, knowing that their careful, disciplined trade has a reasonable chance of yielding positive results.

Two of my favorite professional traders are examples of just this smart trader mentality.

One trades a fund from his home in the rolling countryside south of London and the other trades his own account in an equally pleasant setting in suburban New Jersey.

Both are gingerly trading today’s wild markets knowing that their disciplined trade will be rewarded as long as they are patient.

Both are nicely ahead for the month of October and my guess is that each will end the month with reasonable, but not outsized profits.

Each is carefully picking his battles, looking to identify opportunities and willing to miss potentially good trades that just do not seem right.

When I first started making money on the floor, I wanted to be a big trader.

I wanted to have huge positions and make big money.

After seeing my account and my blood pressure swing wildly with my oversized positions, I decided that the key to making a real living trading over the long run was consistency.

The two traders, from England and New Jersey, understand this. Each is exploiting the market consistently and each will continue to have success over the long run.

That is why this is the tale of two great traders.

As for me, I am proud to serve as the trading coach and mentor for each of these two great traders.

If you would like to take your trading from good to great, you should look into having me as your trading coach and mentor in the Electronic Trader Mentoring Program.

If you would like to hear what other traders, like yourself, have to say about me as their trading coach, check out the testimonials tab.

To find out more, send me an e-mail to jq@fptrading.net and let's find out if having me as your trading coach will help you take your trading from good to great.

Wishing you success in your trading, Jeff

Posted at 1:15 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

10/6/2008

Your most powerful advantage

Today is just another Monday.

The stock market is down 500 points, the VIX is at a record 56, and there are four men on horses in the front yard.

No wonder rainy days and Monday’s get me down.

However, amidst all this bad news, as a trader, I have very good news for you.

In fact, the news I have shows how powerful you are.

What news you say?

You do not have to trade.

Let me say it again.

You are not required to trade.

You can watch a day like today and rest easily (except for the braying of the horses outside).

You can choose the days and the times that you want to trade.

Just think, what if you were a trader at a bank or a hedge fund and you were required to trade every day. As an institutional trader, you would be required to trade on a day like today; although, the good news would be that you would be trading someone else’s money.

But, you have the power to pick your battles and to trade only when you see reasonable opportunities that suit your style and risk profile.

So, there you are.

You have power because you do not have to trade.

Wishing you success in your trading, Jeff

If you would like more information on improving your trading in the Electronic Trader Mentoring Program or are interested in finding out more about trading in the Photon Trading Room, please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124.

Posted at 9:42 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

10/3/2008

What will the changes proposed in the financial markets mean for our trading? Part three of my series “May you live in interesting times”

According to the online encyclopedia Wikipedia, “May you live in interesting times” could be an ancient Chinese proverb, a Chinese blessing, or it could be a Chinese curse. It might even be a clever phase made up by a Westerner, sort of a believable-sounding deception. You will have to judge which of these best describes the interesting times in which we live.

As for me, I think that we are living through all of the above, but rather than wax politically, I would like to talk about how the likely changes in regulatory environment may affect the futures and options markets that we trade.

First, exchange-traded futures markets have a long history of appropriate regulation. Today’s regulatory structure includes oversight by the federal government in the Commodity Futures Trading Commission, by a very effective self-regulatory organization in the National Futures Association and by the various futures exchanges, most notable of which is the Chicago Mercantile Exchange.

Importantly, exchange-traded futures have clear transparency, and mark profits and losses to the market each day. Unlike the over-the-counter markets, exchange-traded futures contracts are traded in an open setting where profits and losses are not estimated, but are accurately tallied and paid, each day.

It is, therefore, very likely that new regulations will make trading on US futures markets more advantageous for institutions than the unregulated over-the-counter markets that are at the center of much of the current financial market problems.

This likely increase in liquidity in the already liquid markets we trade is positive for exchange-traded futures and options. Further, the incredible volatility we have experienced in the last several weeks is likely to be tempered. But, if the past is any indicator, we are in for an extended period of higher than normal volatility.

Once again, all this bodes well for trading in futures and options markets.

Also, the likely job upheaval in the investment business will probably mean more second career traders looking to turn their interest in trading into a meaningful second career. These serious, committed traders are exactly the kind of person that the Electronic Trader Mentoring Program is designed to help.

If you are not taking full advantage of today’s exciting markets, perhaps, my one-on-one trader coaching in the Electronic Trader Mentoring Program could help you capitalize on these interesting times.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it.

However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 6:31 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

9/23/2008

How do you trade when volatility explodes? Part two of my series “May you live in interesting times”

Years ago when I was on the trading floor, I remember a day when the market exploded.

The markets had been quiet for many months and all at once on this day the market took off, catching everyone by surprise.

It was an amazing day, not unlike several of the days in the last two weeks.

Just after the close, I looked over at the nearly empty trading pit to see the biggest broker on the floor sitting on the top step of the trading pit with his head in his hands, his elbows on his knees repeatedly saying, “God must be punishing us”.

I have to admit that it was a bizarre day, but I am fairly certain that God was not then, nor is he now, punishing us.

The fact is that when volatility spikes upward traders, even experienced traders, have trouble getting used to the new level of higher volatility.

The same thing works in reverse when traders have trouble getting used to lower volatility when volatility first decreases.

The good news is that, once the volatility increases, markets tend to stay at a high level of volatility for an extended period and, best of all, good traders get used to the higher volatility.

However, until you are adjusted to this new higher volatility:

1. I would trade proportionally smaller than I did previously;

2. I might consider adjusting my loss limit per trade to account for the greater noise in the market; and

3. I would not lose more in a highly volatile day than I was willing to lose in a normal day.

Trading is about is about picking your battles and it is about figuring out a way to be rewarded. You do not need to spend more money in a volatile day in losses than is absolutely necessary.

The smartest traders are the ones who gingerly trade these volatile markets until they have found ways to consistently be rewarded for their efforts.

My partner in Transformative Trading, Ken Gaus, says that this is a great time for making directional bets using options. Options are not my area of expertise, but I trust Ken’s advice.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it.

However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 6:38 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

9/17/2008

Is the money in your futures account safe? Part one of my series “May you live in interesting times”

I woke up early this morning, got ready for my morning run, checked out the Dow and saw that it was down nearly 100 points.

I, then, clicked on Bloomberg.com and saw the top headline saying, “US Takes Over AIG” followed by the headline “Russia Pours Cash Into Banks”. These two headlines were followed by seven other headlines, five of which were nearly as bad and only one of which was modestly positive.

This week, 158-year old Lehman Brothers has gone bankrupt and AIG is being taken over by the government and it is only Wednesday!

As the Chinese proverb says, “may you live in interesting times.”

I have been blessed to have lived through some very interesting times

I could reminisce about the crashes, the failures and the floods I have seen, but, instead, I would like to talk about whether or not your money is likely to be safe deposited with a US-based futures clearing firm during these tumultuous times.

First, a US-based futures brokerage firm, also called an FCM, is not a bank.

Your futures firm does not loan one customer’s money to another customer, like a bank. It is required to mark all positions to the market and account for all of the money from each of its customers every day. If one customer is short money due to trading losses, the firm must put up its own capital in place of the customer shortfall that very day.

Your money at an FCM is placed in specifically identified Customer Segregated Accounts so that your funds are segregated from the operating funds of the FCM.

Second, a US-based FCM is highly regulated.

Each US-based FCM is subject to continuous monitoring by the National Futures Association and the Commodity Futures Trading Commission. If the firm is a clearing member of the Chicago Mercantile Exchange, it is subject to the stringent financial requirements and the supervision of the exchange, as well. Each day, every FCM completes a Segregation Report to prove that all of its customer money is secure.

Lastly, I would only have as much money in my futures account as is necessary to reasonably do the trading I intend to do.

After all, keeping more money in your account than you need makes keeping strict discipline more difficult and it does not make sense.

So there it is.

The money in your account at a US-based futures brokerage firm is likely to remain secure. Keep just enough in your account so that you can trade the size you want, and not more.

That way you can concentrate on these interesting times and not worry about the money in your trading account.

The Electronic Trader Mentoring Program is often filled to capacity and many times there is a waiting list of traders anxious to become part of it. However, there are currently a few openings should you be looking to improve your trading and better capitalize on these exciting markets.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

Posted at 3:19 PM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

9/16/2008

Sticking to your well thought-out plan

In the interest of full-disclosure, I must start by saying that this post deals with a close friend of mine. It is the story of how a master trader confidently sticks to his well thought-out plan.

You can read about my friend in the current issue of Trader Monthly or, once you register, you can read the article online here.

The Trader Monthly story is about one of the truly great traders of our time, my friend Bill Dunn.

I have known Bill since the early nineties.

He has been my close friend and, although he would not admit it, he has served as an important example and mentor for me.

Bill owns Dunn Capital, a CTA whose trading history goes back over thirty years.

He has had some spectacular years and some down years, but over that extended period of time, he has earned an annual rate of return for his investors, after fees, of around 15%.

As I recall, his funds reached a peak in February of 2003 that was not been equaled until 2008. Because Bill charges no management fee and only collects fees from clients out of profits, he has not made any money in fees from his original clients in nearly five years.

What would you do if you did not have any current income for five years?

Would you turn your trading upside down to make it "work"?

Would you give up trading?

What Bill Dunn did was keep trading exactly as he had done for the previous thirty years.

While keeping to his well thought-out plan, he bought the office building he had been renting and completely remodeled it. He even added a whole new floor on top.

Over these five years, I talked to Bill about once every other month and not once did he express any doubt that his trading would rebound. Not once did he complain that the market had changed. Not once did he talk about changing his basic system.

His program had an edge proven over many years and he fully expected there to be volatility in his returns.

As this relates to your trading, you can take comfort in knowing that even a master trader's returns are volatile.

Like Bill Dunn, you need to have a clear plan and you need to execute that plan with absolute discipline and complete confidence and you will be rewarded - maybe not today, but over time you will triumph.

Wishing you success in your trading, Jeff

If you would like to receive my "Four Steps to Success in Futures Trading" and my occasional e-mail newsletter, just send your e-mail address to jq@fptrading.net.

If you would like more information on improving your trading in the Electronic Trader Mentoring Program, please feel free to contact me at jq@fptrading.net.

Posted at 8:31 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

8/1/2008

Your own theory of the markets

In order to be successful as a trader over the long term, you need to have a theory on how the market works and how you are going to capitalize on it. This theory will be your guide, year in and year out, as to the kind of trades you will take and the tactics you will use to exploit this belief.

The vast majority of traders never try to understand the markets.

Instead, most traders search for tactics that “work”.

When I was in the proprietary trading business, we had a new trader who was the best we had ever seen. He made money nearly every day and we quickly increased his trading size to capitalize on this wunderkind. We held him up to the other traders as the ideal trader.

He had a system that worked.

It worked beautifully and, then, it did not work.

When his system did not work any longer, he was lost. He did not understand the markets. He had just stumbled on a set of tactics that worked for a time.

It is clear that tactics come and go.

Any combination of moving averages, stochastics, MACD and other technical analysis tools will often work until they do not. Traders who rely on any set of these tactics, without understanding the working of the market, will be caught flat-footed when last month’s successful tactic stops working because the trader did not really understand the market; he just found a trick that temporarily worked.

What should you do?

You should develop your own theory of how the market works and how you will capitalize on it.

To help you get started, you can receive a copy of “My theory of trading” simply by e-mailing me at jq@fptrading.net. I will be happy to send you my theory of how the market works, not in an attempt to convince you that I am right, but to serve as a guide for you in developing your own unique theory.

By developing your own theory of the market and implementing strategies and tactics to capitalize on your theory, you will have taken a giant step toward finding long term success through your trading. In this way, you will join the minority of traders who can reliably predict that they will be successful in their trading in the future, even when they cannot predict what that future will bring.

Wishing you success in your trading, Jeff

Posted at 8:38 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

7/14/2008

Newport, Rhode Island - the Lake Geneva of the East

Last week, my wife and I visited Ken Gaus, my partner in Transformative Trading, at his home in Rhode Island.

On Monday , we attended the first day of the Hall of Fame Tennis Tournament in Newport, Rhode Island.

The first match was between Rohan Bopanna from Bangalore, India (serving in the picture above) and Kevin Kim from the USA.

As I watched these two professionals play, I could not help but think of the parallels between tennis and trading.

In the tennis match, each player tried with all his skill and might to get the ball past his opponent who was trying with all his skill and might to make sure that he did the same. Each serve and return attempt was the best the player could do.

Sometimes his best worked and sometimes it did not.

Just like trading, each player was giving his all in the clear understanding that a percentage of his best shots would result in points and a certain percentage would not.

Each player knew that he needed to stay focused and not dwell on past losing points or congratulate himself on recent winning points. He needed to stay focused on the point at hand knowing that if he was able to consistently perform as he had practiced, he would be rewarded.

Trading is like that.

You stay focused. You keep doing what you know you should do and, as long as you stay at your best, you will be rewarded on average for your disciplined performance.

There is another interesting comparison between the professional tennis match, we saw, and trading.

Imagine, yourself as a novice tennis player trying to keep up with either of these professionals on the tennis court. I cannot speak for you, but as for me, I would have no chance to hold my own against these professionals. If I was playing against them, the only good thing would be that the inevitable loss would be quick, if not painless.

In trading, you are competing with the best professional traders in the world, but in trading you do not have to be the very best in the tournament to win. You just need to consistently do what you have planned; keeping your discipline and exploiting the opportunities presented to you and you will be a winner.

The day after tennis, we reverted to full-fledged tourist mode and visited two of the great seaside mansions of Newport.

I feel a kinship to Newport as Lake Geneva, where I live, is sometimes called the Newport of the West.

The highlight of our tour of the mansions was visiting Cornelius Vanderbilt's 70-room, 65,000 square foot "cottage", The Breakers, pictured below.

The scale of the cottage is hard to describe.

The dining room is 50 feet by 50 feet and the ceiling is 50 feet high.

I am proud of my dining room here in the Newport of the West, but, I have to admit, it is noticeably smaller than Vanderbilt's 50 foot cube.

Wishing you success in your trading, Jeff

If you would like more information on improving your trading in the Electronic Trader Mentoring Program or are interested in finding out more about trading in the Photon Trading Room, please feel free to contact me, directly, at jq@fptrading.net or +1-312-987-8124

Posted at 11:19 AM by U15257514\jquinto | Permalink | Email this Post | Comments (0)

7/17/2007

Jeff Quinto’s Guest Lecture to the LBR Group on learning to trade, sizing, dry spells and the grind

Linda [16:09:32]> HI Gang! We have a guest lecturer today, Jeff Quinto. He works with the traders in the Photon Trading Room, part of FuturePath Trading. He will give an introduction, talk about a few things, and then take questions. He knows a lot about the grind of trading, including long flat periods, and frustrating days.

If any of you wish to ask Jeff questions after the talk or get in touch with him, his email address is: JQ@fptrading.net

JeffQ [16:11:28]> Hi everyone!

Good to be here again! I had a great session last year.

I would like to do is talk a bit about getting started, dry spells, the grind and, then, take questions - that was most fun for me last year, hearing your questions!

Let me tell you about the best trader I was ever involved in training. If I told you what he made in a recent year you would be impressed, but that is less important than the struggle he went through to get to that point which says a lot about the dedication it took, but also, that it is possible to do this. The first thing I want to say is that as great a trader as he is today, it took 9 months before he even broke even But, after 9 months, he started making money. He slowly and steadily increased his profitability.

Learning to trade and being successful takes a long time. One of the reasons that people fail in trading is because they give up part way through the learning curve. You DO have to make progressive improvements in your trading, but it still takes awhile. It can be years, too, not just 9 months. Any occupation where you can make this kind of money takes years to learn. It is too lucrative a business for people to make it that quickly. The reality is it can take even up to three years to find a consistent groove.

Throughout this period, though, you should be making progress. You need to be keeping track of your progress. Record keeping is vital to keeping track of your progress. You need to be able to judge how and what you did.

As this top trader became more proficient, we devised methods for him to increase his SIZE as the market rewarded him and decrease his size in bad times. When one increases size they often tense up. You need to be able to do this automatically; as you make money increase size; and as you have flat periods or draw downs, decrease size.

On days that are WORKING for you, you NEED to PRESS!

This is the KEY! Press on Good days - if you are having a good day press and press.

If you are having a bad day or are out of synch, stand aside - lose small amount only, then say you are not in the groove and walk away from it.

Which leads to the GRIND - what do you do, when you come in each day and you lose and you are disappointed and you are down.

WHAT TO DO?

The first thing I note is that we all have control over only one thing in life – ourselves.

So when I get down to the grind, I try to do things that are positive for me - exercising, eating right, sleeping - doing all the things that we should be doing, but somehow we do not do them. That is one way that I fight the grind by being as positive as I can - I can only control myself and do positive things for myself. I can not control the market.

freddy [16:10:34]> Jeff - talk to me about frustrating days! thx!

JeffQ [16:24:45]> Frustrating Days: The first thing you have to do is have a trading plan and then look for good trades. My brother-in-law always used to say, “If you come to work each day and make good trades, the results will take care of themselves.”

You have to be CLEAR on what you intend to do. You have to be honest with yourself which is something that people do not always do. When you are frustrated, you make trades that do not fit your plan and you are making trades you should not take. You end up SABOTAGING your plan.

Are you frustrated because the market is not accommodating your plan, or are you frustrated at your own actions and performance?

The trader I was talking about earlier, would simply walk away on the frustrating days. He would be mad that he lost on the day, but it would not change his attitude. Some days you are in tune and some times you are NOT. It is just part of the probability of things.

rajhima [16:25:09]> Jeff: Any hints or tips on increasing size?

JeffQ [16:29:31]> My idea regarding size is that you prearrange how you are going to handle size based on your performance. You must have a plan that:

if you are up, say, 20 ticks - you trade 2 lots;
if you are up 40 ticks you trade 4 lots.

You must make sizing automatic. It must be easy to implement. It must be decided in advance. If your account is up N %, you increase size by x amount. It must be predetermined and vice versa. If you are down by N amount, you reduce size - all according to a prearranged algorithm that suits your risk profile and amount of capital you have. It must be easy for you to implement this for it to work properly.

vince1 [16:26:13]> Jeff - so talk to us about patience as it pertains to the good days and bad days.

JeffQ [16:31:47]> Let's talk about patience - I think the good trades ought to work immediately, so I do not give flat trades any patience. If it does not work when I think it should, it is suspect. As long as a trade is working in your favor, you have to stay with the trade. Patience to stay with a good trade comes with experience. If you get out of a trade because it looks like it faltered, but, it is only a pause, you have to be prepared to get back in.

Let me tell you the mindset of a very short term trader, in three progressive parts:
1) The market is designed to pay you money;
2) A good trade works immediately; and
3) anything that does not work immediately is suspect.

In this way, what I am doing is looking at the market and saying, the market is designed to pay me money if I can figure out how to operate within it. Because I am convinced it should pay me money, every trade I put on should explode in my direction. And,
if it does NOT do that, then I am quick to get out of it.

Now, we all know that every trade we do does not explode in our direction. The fact is, most trades are more complicated than that. But, you see how it affects your ATTITUDE. That is the attitude you should have. Of course, it is dependent on time frame - working on a daily time frame with immediacy versus working on 1 minute time frame are naturally two different things.

Everyone takes a different number of trades and has his own style - an active trader may trade 20 times a day.

iggie [16:37:21]> do you have any audio tools for purchase r/t to your mentoring concepts?

JeffQ [16:39:23]> Our Mentoring Program is designed around one-on-one daily interaction because people learn in their own way. Your trading needs to be a reflection of your own personality. I would not be disappointed if someone was learning more quickly than I was or making more money then I was making. You need to develop a plan that makes consistent returns for YOU.

In terms of a plan, in the Mentoring Program, I use a written template for a plan, but anyone can make their own template. Try to put down on the plan:
what setups you are going to take;
the hours that you are going to trade;
put in the most detail that you can; and
DEFINE what you are going to do during the day.

In the case of my students, we share these trading plans between the trader and me. First, it holds the trader accountable for doing what he planned to do. In your case, whether you tell someone else about it or keep it to yourself, you have to make yourself accountable as to how you execute your plan.

Your plan can EVOLVE over time, but you should not change every ten minutes. I would be very slow to add new setups or change the way I do things. A well thought out plan should be something that you are convinced can work.

Things that are related to risk should NOT change quickly - what are you going to do if you have three losers in a row, or lose x amount - that is something that should NOT change because that is what makes you an effective trader.

One of the things that I see time and again with people - one of the things that I see is that this great plan gets thrown out the window on frustrating days and it becomes
free form trading, a veritable trading free-for-all. This is where people really do a great disservice to themselves.

They have a great plan. Tey just do not have the discipline to stick with it. Here it helps to have someone else to talk to. Have someone that you are held accountable to – to ask you did you follow your plan? It helps to have someone to share this with at the end of the day.

acies [16:39:51]> How do you feel about stop and reverse trades as a successful trading style?

JeffQ [16:45:21]> This is not my style. I believe in trading WITH the energy. Over my years of experience, the real money is made trading with the energy. What you describe is just a different style from mine.

There are all types of things that people do that lead to successful styles, though I do not try to push people into a specific style of trading. It is important for you to come up with your own trading style.

In our Mentoring Program, I help traders focus on risk and how to increase size and decrease size and, then, I hold traders accountable to it. So, the style is less of an issue to me, if it is actually working for YOU!

iggie [16:44:55]> Do you have specific tricks/strategies you use to build discipline in the traders you mentor? If so, can you give some examples?

JeffQ [16:48:57]> In terms of discipline, I meet with my traders over the Internet every day and we go over their trades. Both the trader and I know clearly what they were intending to do and we look and see if they actually did it. Sometimes, I see a trade that just does not fit and I tell them it did not fit or that it was “bone-headed” and that helps tp hold them accountable.

Because we have a plan and we are executing trades within that plan, I do not want to hear about a trade that is not in the plan. Over time, we can add new trades to the plan. Then we can execute those trades. Cut and dry.

A lot of this comes down to accountability. That is a problem with people because they are out there in their homes and offices by themselves with nobody looking over their shoulder to check on them.

In addition to holding traders accountable, as I have been in the business a long time, I can tell you if there is something that has greater odds of working or not. In the long run, you must build your own way of trading though.

pearlstone [16:51:06]> Jeff: could you give an example of trader having a profitable day and how to press winnings?

JeffQ [16:52:35]> OK, let’s say that you start the day as a 5 lot trader. You are now up 10 ticks on 5 lots (10 ticks times 5 contracts). Now, you increase your size so that you are a 10 lot trader, making the same trades, doing the same things, except that you are a 10 lot trader.

I like to talk about TICKs, not Dollars. It puts money in the abstract that way. We are just making ticks here - same thing with increasing size, none of it should be a big deal. A trader that presses something knows he has the trend for the day pegged, so if you have the right game plan or road map for the day (which is impossible to do every day), but when you DO have the market pegged, keep trading it, keep increasing size as you are rewarded.

If your equity backtracks by a certain amount, call it a day. The MOST debilitating thing you can do if you increase size is to keep the full size on and then lose. So, in my scenario, you are only giving yourself so much more to do. You have to be willing to stop if you start backtracking – it is VERY important not to turn a winning day into a losing day. Trade aggressively in the direction of your game plan WHEN the game plan works.

There are many days and times of day that are not productive. The morning tends to be the time of most opportunity. Lunch can die down, don’t press trades at lunch if there is nothing going on..

Here is something I advise, if you have a BAD losing day take the next day off and do something you enjoy. Do not do it as punishment. Do it to take a rest and recharge your batteries.

What most people do is they come back again and again and repeat the same mistakes. There is nothing wrong with taking a breather from trading, be it an afternoon or a few days.

Also, it is important to have hobbies that give you pleasure and are very different than trading. I like to hike and do things outside. That is how I get joy in a way that is different than the markets.

When I work with traders, they put their trades on a CHART. They either print off a chart or put it on your computer showing where you bought and sold during the day, as well as how many ticks you made or lost and how long you held the trade. This is a great tool because when you put your trades on a chart, you can see absolutely what you did and not what you THOUGHT you did.

You can see when holding a trade made sense or when you should have gotten out sooner. All these things become evident when you look at a chart with your trades put on it. Another thing we do as part of all trading plans is to keep statistics - any stat that will be helpful as to how you are doing.

Here are some of the obvious ones:
average hold time for winners
average hold time for losers
maximum hold time for winners and losers
the amount of heat that you took
and then the distribution of ticks per trades like a bell shaped curve

From these things, you can get an idea of what you are doing . I really like the HOLD TIME for winners and losers. People FOOL themselves with what they are doing with actual trades. They THINK they hold their winners longer then their losers. Often, the opposite is the case. Look at this over time. It becomes more subtle with a more experienced trader. It is really important information

Linda [17:06:08]> Sounds like you could also use number of bars as well, so as to adjust for trades off hourly chart versus trades off 5 minute chart.

JeffQ [17:06:18]> We look at minutes most often.

Here is another SURE SIGN of someone not making it:

They hold losing trades overnight

In my world, you would never hold a losing trade overnight. Why would you hold any losing trade overnight - it shows up on your statements in the morning

If you made a rule that said I WILL Carry NO trades with a debit overnight, I bet your trading would improve by a huge percentage.

iggie [17:09:10]> What can I use to track time?....a cooking timer or what?

JeffQ [17:10:16]> A cooking timer might just be the ticket! I have people who use EGG timers and turn them over with each trade. Of course, your trading style can not change to anything longer or shorter than the time it takes to boil an egg if you do that.

Another idea would be to use a stop watch. We had a guy in the trading room who had two stop watches around his neck at all times. He looked like he was timing race cars, but it worked for him.

The place that you trade is important, you need to control your environment at home. It needs to be quiet. You should not be disturbed. The point is, control the things you CAN control - yourself, your environment, and recognize you can NOT control the market.

You need to be serious and focused the whole time you are trading - FIGHT DISTRACTIONS.

Here is story for you – SPECIALIZE – successful traders often excel in one market, but do not trade well in other markets. The best bet is often to concentrate where you make your profits trading, often it is in just one market.

Linda [17:17:40]> Nothing wrong with that - sounds like you should know your game and what works best for you, and have patience if you are still going through the learning curve and finding out!

vince1 [17:17:32]> What is the best way to focus on multiple markets - sometimes I miss trades because I am babysitting a position - how do you figure out the most effective amount of markets to trade for each individual.

JeffQ [17:18:32]> You are going to miss moves. That is OK. You can only focus on so much. Sometimes you are focusing on the right market and sometimes the wrong one, but you do not know in advance.

Linda [17:19:30]> Sort of like, you get the direction or main play right or you do not -same with picking markets. Sometimes you pick the right ones, other times, they might stall.

JeffQ [17:20:22]> The new Photon Trader Pro trading software will have tools that may be helpful, such as trailing stops of your design, so you do not have to baby sit a position. Again the best trades work right away, in my world, I would not be babysitting a trade - just have stop in, manage the trade, but do not watch every tick on longer term trades - it works or it does not.

Linda [17:21:38]> Thank-you everyone for your questions! We will clean up the transcripts and have them posted for your review tomorrow. Any last Questions for Jeff?

rajhima [17:21:34]> There are lots of days when I make good money in Currencies and give everything back in Indexes and vice versa...Any hints at how to manage these? In other words, I feel like being in a zone in Currencies and carry that into Indexes and get whipped.

JeffQ [17:22:58]> It might be helpful to have a risk plan for each market since they are totally independent - each market should have its own limit and risk parameters. Each market should also have its own separate sizing strategy, so you do not give back money. Think about starting over again when you start to trade the Indexes.

My email address is: JQ@FPtrading.net
my number is: 312-987-8124

If anyone is in Chicago or comes to this area, I invite you to stop by my office to talk about trading, see the trading room, and also, if you wish any of you are welcome to contact me about coming to trade for just a week or two out of the trading room if you want a different experience. Our traders can use TT trading software, Photon trading software, and CQG trading software.

We are all waiting for the new release of the Photon Trader Pro trading software that has trailing stop functions on the chart that are simple to use! Stay tuned!

Linda [17:28:59]> Thank-you, Jeff, for taking the time to share some stories, advice, and words of wisdom. I like the emphasis on accountability to your plan that you have in your program.

JeffQ [17:30:02]> Thank-you for having me as a guest on your site, Linda. Thank-you for your questions, everyone and I look forward to meeting more of you one of these days! Again, please feel free to contact me if you have any follow up questions that come to mind!
Good Night!

Linda [17:31:06]> Thank-you Jeff
Excellent lecture
Good night!

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