Hidden Traits Of Successful Trading

Posted by on Mar 1, 2016 in Blog

Successful trading relies on so many factors, and most of the time, discipline is a big part of good trading, and knowing when to and when not to trade will help you have more wins than losses in your trading. Often times you read about being to be ice cold in your trading and gung ho from the open, but you are human, not a robot, and have to respect other factors. Here are some essential tips regarding the best times to trade alongside the times when you just have to step away the game.

1. Be careful trading around the cash opening time in the emini SP.

Traders that have size to move will tend to trade around the times when there is the most liquidity and one of the most liquid times of the day is the cash open of the equity markets which is 8:30am Chicago time (9:30am EST). You turn on CNBC at that time and you see them ringing the bell as trading starts in the equity markets.

Orders from institutional clients often start at the cash open. Why? Generally they are working a basket of stocks against it. Now the orders can be small from 50 lots to a few hundred to as big as 5000 lots and more. What is important is that the orders will start at the cash open and they can take a few minutes to a few hours or even all day to complete. This is why you see the market swing 5 points in a few minutes pretty quick.
If you enter a trade around the cash open, you may find yourself getting stopped out with alarming frequency and then the trade goes in your favor but you are already stopped out and booked a losing trade.

I find it better to just stand aside at this time and let the market work its way through its order deck, so to speak, and settle down and then for the market to form its direction for the day.

2. Get in late and get out early. Huh?

Here’s one valuable piece of information, the first and last ticks are the most expensive. So what you should do is wait for confirmation before getting in the trade, and get out before it’s quite late. Once you have picked a level that you believe might be able to stand as high, why not confirm that it is actually the high before reversing, by seeing something in the order flow. Yes, you will miss the exact top when you are right, but it may be better than having the market not so much as pause as it blows through your expected high. If the market gets through this level, you know the trade failed and you can wait for the next level to trade around.

3. Once you are in a trade and the market is not reacting how you expect, get out.

Let’s use going to the beach as a metaphor here. If your group is the only people on the beach, you are able to control the risks and how it would affect your group or family. With a growing crowd, you’d have more distractions and there are higher chances of things going wrong. In trading, when everyone is already in, this may not be the best time to go the opposite direction, and there is absolutely nothing wrong in simply stepping aside when you feel like it.

As a regular trader, you’re going to have to struggle with knowing that everyone shares the same opinion. But here’s what you have to keep in mind, when everyone is already aware of something, the expert traders already anticipated the event and are already getting out and unloading their positions to the latecomers.

However, if you have correctly anticipated the situation, you have to get rid of the ‘ego feels’ as this may lead you to make wrong judgments. You have already made your money on the trade by being extra cautious, and many people may not have believed that you were right.
Simply put, when you have already made money, you have to make sure that you are doing the right thing before you decide on whether to proceed on the trade or get out of it. Do not let your ego lead you to making an irrational decision.

4. If you’re not feeling well, do not trade.

You may think that this advice is somewhat irrelevant to trading, but being sick may cause you to make the wrong decisions. Trading usually requires split second decisions, so if you are not in a good condition to judge something, it’s better to not risk it at all. A second of hesitation can make all the difference between making a good trade or a bad trade. It’s possible that you lose your discipline when you are sick, thinking that you are in the proper state of mind to trade. If you actually decide to go for it despite your colds, flu, or sore throat, you’ll see the next day that you have lost the trade, worse, it’ll be a bunch of lost trades in a row.

Trading requires intelligent judgment. And some of the time, your gut will tell you if something does not seem right. If there is some sort of hesitations coming from you, it’s better to just set trading aside. This is basically why you have to be in a perfect or darn near normal condition mentally and physiologically when trading. So before you risk so much money in trading, keep in mind all this advice and make sure that this information is taken into consideration.

Happy Trading!