behind-great-trader-is-great-strategy

Behind Every Great Trader is a Great Trading Strategy


Trading can be fun and profitable. When done well, it may even change your life. But, before you become totally obsessed with rewriting your own Cinderella story, keep in mind, once the novelty has worn off you will encounter highs and lows. When you’re frustrated or bored, you may be tempted to take short cuts and skip important steps. How you navigate these moments will make the difference in your trading trajectory.

Think of trading as a business. The market doesn’t owe you anything; and you are responsible for your own success. You can grow your account by incredible margins by honoring your trading technique and continuously improving your skill set. Here’s where a solid strategy can focus your trading, accelerate the learning curve, and keep you making money reliably.

What is a trading strategy?

A trading strategy is your personal guide for how you’re making decisions on when to buy and sell in the market. It provides clarity on why you’re trading, your goals and rules of engagement.

Do you prefer to trade in the morning, mid-day or late afternoon? The time of day you trade will impact the types of trades you take and indicators you’ll use.

Will you swing trade or day trade? Holding stocks overnight greatly increases your overall risk. You need a plan for getting in and getting out.

Are you a pre-market or after-hours trader? Will you go long, short or both? Brokers have various rules and regulations that dictate when, how and how often you trade.

Will you trade cryptocurrencies, forex, futures or penny stocks? Each stock exchange varies in lliquidity, volatility, cost and risk.

The most important component of a trading strategy is your risk management plan. By clearly defining how you will manage your trades, you can easily spot points of weakness in your routine and make adjustments along the way to improve your risk-reward ratio.

Why a trading strategy?

Trades in high-volatility stocks require quick thinking on-the-go. You can lose money within minutes by getting stuck in a loop of analysis paralysis. A trading strategy can supercharge your execution by doing the hard work up-front. Maximize your risk and minimize losses by creating a consistent approach that reduces the amount of time it takes to get in and out of trades.

At some point along your journey, you may hit a plateau in your growth. By benchmarking your goals and keeping track of your progress, you’ll have a historical record of what is working well and where you can improve.

Having a clear formula for your trading also boosts your confidence so you can rely on your own gut instincts without following the crowd or falling victim to bad trading habits.

What goes into a trading strategy?

Consider these components when building your trading strategy:

Set your intentions: Take a moment to reflect on why you’re trading. Think about what attracts you to the stock market and what personal qualities make you a good candidate for success as a trader. Evaluate your lifestyle and how trading blends into your daily routine. Imagine the lifestyle you aspire to achieve and how trading can help you get there.

Objectives: Think about what you want to get out of trading, whether it’s personal development, financial stability, professional growth or sheer enjoyment.

Goals: Benchmark your progress by defining measurable milestones — what you will do and by when. Set short-term (a few months to a year), mid-term (2-5 years) and long-term (5+ years) goals. Your goals should be specific, time-bound, actionable and rewarding.

Begin with your current account size. How much will you grow your account and by what date? It may be helpful to set quarterly targets that coincide with market earnings seasons, in addition to a year-end goal.

Don’t forget to set goals for your learning. Define exactly what you want to learn and how you will get there. How many charts will you study each day? How many books will you read and by when?

Approach: Now that you have clearly defined goals, outline the actions you’ll take to achieve them. For each goal, explain how you will get there. For example, if your goal is to read 12 books by the end-of-year, start by identifying the best trading books to read. Then, purchase one book. You may decide to purchase 12 books right away! There is no right or wrong answer. The point is to be intentional about your goals and specific about how you will achieve them.

Learning: Make a plan for how you will continue to invest in your learning, whether it’s joining a bootcamp, finding a mentor or listening to your favorite podcasts.

Aspects directly related to your PnL

Trading style: Here, you’ll define your unique trading style. There are f our main styles to choose from:

  1. Scalping: quick trading happens within seconds and requires fast decision making.
  2. Day trading: momentum trading takes advantage of uptrends and down trends to make quick profits. You may hold a stock for a few minutes to a few hours.
  3. Swing trading: mid-term trading with positions over days or months. This type of trading requires patience since you’ll be holding over night.
  4. Position trading: long-term investments that move over the course of several years. Think: “Warren Buffet method.” This option foregoes short-term profit for long-term wealth.

You may choose one or more of these trading styles depending on your personality, risk tolerance and financial goals.

Risk management: The most important part of your strategy. Start by determining how much of your account you will risk per trade. It may be helpful to pick a range of stock prices you will target and a set number of shares you’ll execute with each trade. Identify how many trades you’ll take per day, per week, per month and per year. Then, detail how you will manage getting in and out of trades; your target risk-to-reward ratio; how much you’re willing to lose; and how you will use stop losses to stay accountable.

Trading rules: Create a set of rules or a checklist to guide your trades. Consistency in your trading routine can help you spot weaknesses early on; course correct; and create new, winning habits. Your rules may include: 1) use stop losses on every trade; 2) always buy (x) amount of shares; 3) never purchase shares below (x) price point; and 4) never trade on an empty stomach.

Your rules will be unique to your goals and trading style.

Trading routine: Now that your rules are defined, it’s time to create a routine around how you’ll execute your trades. Organize the day to accommodate your trading cycle. When will you do research and scan for stocks? At what times will you begin and end your trading? How often will you journal and review your trades?

Be disciplined!

Trading community: List the names of people you know who can serve as mentors and study partners. Identify close friends and allies who are supportive and can provide encouragement when you encounter challenges. How will you ask for help? Who will you reach out to for help? Sometimes, you just need one or two people you can safely vent to about your performance.

Evaluation: Detail how you’ll evaluate your trades. Set dates for how often you’ll revisit your goals; and make a plan for how you’ll adjust when you get off track.

Where to go from here?

Choose your medium. Journaling platforms like Tradervue allow you to track, analyze and share your progress with others. Google Docs or Sheets is a free and simple way to outline your trading plan.

The bottom-line

Your trading strategy offers clear guidelines for how you engage with the market. It will be unique to you and evolve over time as you learn and grow. Building a strategy takes time, but it’s an important first step toward winning results.

Get out there and crush it!

For real-time insight follow me on Twitter! @Mv3Trader

Comment below with your opinions and questions.

Daily Premarket Insight

 

Friday Premarket Insight

Premarket insight for today’s Futures market with technical analysis of Nasdaq, Crude Oil, Gold, and Euro Fx futures. Daily affirmations and preparations are always a bonus! ?

Key Points for Today’s Premarket Insight:

  • Economic Outlook
    • Retail Sales
  • Recession fear in sight
  • Contract month rollover index futures
  • Day off for me: Other business
  • Premarket strength: Moderate

Traders are feeling fear of recession over economic global concerns. Markets are seeing selloff across the board in all areas of today’sFutures market. Also, contract volume is shifting to next contract month (H) for index futures. Things are pretty slow right now, but there’s still a chance for some interesting activity throughout the day.

Stay calm, plan the trade, and trade the plan.


For real-time insights follow me on Twitter! @Mv3Trader

Comment below with your opinions and questions.

Rob

Mv3 Trader

“Trade Consciously”

 
 

edge-clear-futures-broker

Edge Clear Futures Broker

At Edge Clear, we are led by industry experts who understand the complexities of trading. Our mission is to simplify your costs and provide you with a seamless trading experience that combines the best of technology, service, and risk control.

Key Features of Edge Clear:

  • Mission Statement: EdgeClear’s mission is to redefine the trading experience by providing unparalleled customer service, robust technology, and a personal touch. We are committed to empowering our clients, from entry-level traders to seasoned professionals, with tools and support that enhance their trading journey. Our focus is to be a catalyst for success, offering a platform where expertise meets innovation in the trading world.
  • Your Personal Broker: Giancarlo Saraceno
  • Sierra Chart: Experience the power of Sierra Chart, a versatile trading platform with advanced charting, cross-platform compatibility, and reliable data feeds, providing traders with an intuitive and dynamic trading experience.
  • Zero Order Routing Fees for Teton: Keep costs down with Edge Clear – enjoy the benefit of zero transaction fees specifically for Teton Order Routing. Experience efficient and cost-effective trading without the burden of additional transaction charges.
  • Professional Services: Elevate your trading experience with our comprehensive professional services. From EdgeQX, a quant-fund program for automated trading, to CTA managed accounts tailored to your goals, and personalized CME membership consultations, we offer a range of solutions designed to optimize your trading journey.
wholesale trading structure and price action

Wholesale Trading: Reading Market Making Structure and Price Action for Better Trades

Can you spot our market maker, aka wholesale, in the screenshot above?

What is Wholesale?

Wholesale is at the core of what moves the financial markets every single day. In fact, wholesale is a key driver of all markets. This fact is important to understand because the financial markets (stocks, options, futures, forex, crypto, etc) are the same as any other market. People get together and exchange products of interest for a gain or loss.

Wholesale in the financial market is performed by market makers, facilitating the exchange of financial assets between participating buyers and sellers.

There are two terms we should be familiar with to understand the business decisions and actions of the wholesaler, inventory and supply.

A wholesaler collects inventory at “best price” depending on current market conditions with the goal to later resell that inventory for a profit.

This inventory becomes supply when the wholesaler is ready to sell the products to buyers in the market for a profit.

Learn more with live narration of how I read price action.

 

Simple Analogy of How Wholesale Conducts Business

To illustrate how this wholesale works in the financial markets we are going to look at through the lens of retail arbitrage.

A retail arbitrageur, or retail arbitrage seller, will look for discounted items in local stores and deals online with the goal of reselling those items for a profit.

On a larger scale, most convenience and grocery stores operate this way, but that’s another topic for another day. Retail arbitrage is typically easier to understand because anyone can do it.

Let’s walk through this illustration from the retail arbitrageur’s (wholesale) perspective. Let’s call our wholesaler for this analogy, Bob.

Bob is looking to buy several shoes, not for his own fashion, but to sell to other people interested in those shoes in his local market.

Bob goes into shoe store 1 and looks for shoes in his price range.

Bob is looking for a specific number of Air Jordans (AJ’s) since he knows his local market has a special interest in those shoes.

Store 1 only has a limited supply of AJ’s so Bob knows he will have to go to another store to find enough AJs to sell to his local market for the profit he wants to walk away with.

In addition to the AJ’s in stock at store 1, Bob also buys some Adidas and Pumas with the purpose of selling those to Store 2 which should also give him more money to fill his inventory of AJ’s. He purchases as many as he can and heads to Store 2.

On the way to store 2 however, Bob met some customers who bought some of his excess inventory. Of course he sold those for more than he paid for them at store 1.

At store 2, they have AJ’s but still not enough to fill his target inventory. Store 2 also was looking to build their inventory of Adidas and Pumas which allowed Bob to sell the rest of his excess inventory.

Bob purchases as many AJ’s as he can get from store 2 plus other brands to repeat the process on his way to store 3. Because of the sold excess inventory, Bob was actually able to purchase the AJ’s to build his inventory even more at a discounted rate.

On to store 3 and AJ repeats the same steps, selling some excess inventory along the way. And once again, thanks to his sells from the excess inventory, Bob was able to fill his target inventory from store 3 at an even bigger discount, also going beyond the inventory of AJ’s Bob was targeting.

Now Bob quickly heads back to his local market with a full inventory, plus excess, marketing all the new shoes in his inventory along the way through his social media outlets. Of course, he sold a few pairs along the way to his target market.

Once he reaches his local market, Bob is met with excited (emotional) shoe enthusiasts ready to buy the AJ’s from him, without knowing, or even caring, that Bob payed much cheaper than they are paying to buy them from Bob.

The more shoes Bob sells from his inventory, the lower his supply gets and as a result the more he charges for the remaining shoes in his supply.

Eventually, Bob satisfies the majority of his local market and shoe sells begins to slow down. So what does Bob do?

Bob starts lowering prices to unload the rest of his inventory in preparation to do market research for what shoes buyers are interested in and heads back to the stores for new inventory.

As a wholesaler, Bob repeats this cycle over and over for massive profits. His local markets loves buying the shoes Bob keeps in his inventory, giving Bob a thriving business.

 

Market “Research”..

There’s one other key element that we haven’t discussed yet.

How does Bob know which markets are worth his efforts and what to sell in that market?… Customer data.

Wholesale pays for data about participants in the market which they use to make trading decisions. This data is extremely valuable to the wholesaler as it let’s them know which markets and products should give them the best opportunities to make money.

In our example, this would be equivalent to the Bob paying for customer profiles from the shoe stores and online marketplaces.

This information can help Bob develop a strategy around how he purchases and sells shoes for an efficient business.

 

Why is the recognition of wholesale so important?

Spotting wholesale’s collection of inventory can help us have a slight edge over other participants, unaware of what is behind real-time price action. Alongside wholesale, we can enter our position at “best price” and profit with wholesale as their business is creating momentum in the market where most traders are jumping into trades with more risk.

There are several technical tools and data points that can be used to identify and analyze wholesale trade price action. This article is a highlight of the core concept.

Some of the key things I look at is structure, volume (mostly by price), and VWAP.

Highlighted on the chart below is the price structure wholesale leaves behind.

Get out there and crush it!

For real-time insight follow me on YouTube and Twitter! @Mv3Trader

Comment below with your opinions and questions.

easy-to-start-businesses-for-new-entrepreneurs

Easy-to-Start Businesses for New Entrepreneurs

Easy-to-Start Businesses for New Entrepreneurs

Starting your own business is a great way to gain financial independence while doing something you truly love. There’s no need to settle for the nine-to-five grind. That said, becoming an entrepreneur requires passion and perseverance. You’ll have to put in some effort before you’re up and running. Read on for a quick guide to getting your very own company off the ground.

 

Decide on a business model

 When selecting a business model, do your research. Ideally, you will opt for a low-risk business that doesn’t require a lot of investment upfront. Accion Opportunity fund recommends trying home-based businesses. This will spare you the significant expense of commercial rent that a brick-and-mortar business requires. It also gives you greater flexibility in terms of location. Day trading is one business you can do anywhere.

 

Get the necessary education

Depending on the path you pursue business-wise, you may need to get additional educational credentials. Even if a four-year degree isn’t needed, added knowledge or professional certifications can help. For example, if you pursue day trading, you need to learn about markets. Mv3Trader helps people learn the art of day trading, giving them the tools they need to set up their very own business.

 

Establish a limited liability company

 Once you’ve decided on a business model, write a business plan to get organized. This outlines exactly how your company is run. You can then register your business as an LLC. This will offer tax advantages, protect your personal liability, and simplify your bookkeeping. Look up your state’s guidelines for LLC formation—for example, the requirements to start an LLC in South Carolina are different from those to found one in California.

 

Open a business bank account

 Once you’ve registered your LLC with your state, you should receive a confirmation notice. You can use this to open a business bank account. This is beneficial as it allows you to separate your personal and professional financial transactions. It also makes your business more credible. Finally, having separate accounts will simplify your bookkeeping and tax filing when the time comes.

Calculate your overhead costs

 Your business bank account will also be used for business expenses. Before you commence operations, tally up a list of all your overhead costs. These could include tools like computers and software. Get Sling provides an easy guide to calculating your expenses. You can then look for external funding to cover these costs. Sources of funding could include government grants, angel investors, and crowdfunding, among others.

 

Get the tech tools you need

 Once you have the startup capital you need, you can invest in the necessary equipment your business requires. As a day trader, there are a few essential items you’ll want, including a computer, fast internet connection, day trading brokerage account, and charting software. You don’t want to skimp on these basic items. It’s worth paying for top-quality products that will perform well and last you a while.

 

Figure out your tax obligations

 Finally, for the not-so-fun part: Figuring out your tax obligations. If you earn money as a business, you need to report that income and pay the appropriate taxes. Keep in mind that tax obligations vary depending on the type of income. Day trading profits are one example. This quick guide provides an introduction to day trading taxes, what you can expect to pay, and how to file.

 

If you hate the idea of sitting in an office every day, it’s time to think about alternatives. Starting your own business is a great way to break free from the hamster wheel and become your own boss. Consult the guide above to help you get there.

For more content to help you get your day trading career off the ground, check out the Mv3Trader resource hub.

Get out there and crush it!

For real-time insight follow me on YouTube and Twitter! @Mv3Trader

Comment below with your opinions and questions.