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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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If the trader's data feed goes down, much of what already has been discussed will helpTURBO CHARGING THE TRADING COMPUTER There are three things traders should be doing on a weekly basis to ensure that their computer is running at maximum efficiency. The first two of these involve deleting files on the computer that are unnecessary. To do this, first go to the Recycle Bin, which is an icon located on the desktop. Right click, select empty recycle bin, and delete the files. Every file the computer user deletes is not really deletedit is just moved to the Recycle Bin. To really get it out of the computer and free up memory, the trader needs to empty the Recycle Bin. The second place where memory is gobbled up is in what is called the cache. This catchtes all the Web sites the trader visits for faster downloading of the site next time it is visited With the advent of broadband, this is an unnecessary feature. To clean the cache go to Start, Settings, Control Panel, Internet Options. Under temporary Internet files click delete files. A pop-up box will appear asking if the user wants to delete all offline content. This is important to do, so the trader should click the box to indicate yes. Hit ok and sit back. If the computer user has never done this, it can take five to ten minutes to delete all the garbage on the computeror longer. It may appear that the computer is frozen. It's not. Walk away and come back later. The serious trader should do this at least once a week. Finally, once these two things are completed, the serious trader will want to defrag his or her hard drive. Disk fragmentation slows the computer down and is often the cause of a variety of other problems such as hangs, crashes, and errors. Fragmentation accumulates rapidly through normal computer use, and program access time continues to increase, problems worsen, and the productive life of a computer will be shortened by years. Defragging the hard drive puts all the pieces back together again, making the computer run much more efficiently. Traders should do this weekly, if not daily. Go to Start, Programs, Accessories, System Tools, Disk Defragmenter. Make sure the hard drive is highlighted (usually this is drive C) and click Defragment. This can take 20-30 minutes if this has never been done before. There is also a program called Diskeeper that eliminates fragmentation automatically so it is never an issue. THE BACKUP PLAN: WHAT TO DO WHEN YOUR COMPUTER CRASHES OR THE POWER GOES OUTBECAUSE THEY WILL Once a trader's computer is in top working form, there are still other technical problems that can occur. In my experience, there are four main problems that all traders should be prepared for: 1. Black- or brownouts that cut off all electricity. 2. Cable or DSL goes down. 3. Difficulty in contacting a broker. 4. Daia feed goes down or the trading platform goes down. These are problems that can happen at any time. Serious traders can prepare themselves for all these eventualities. A black- or brownout will occur when it is leasl expected. The last one happened to me when three other traders had booked appointments to spend the week trading next to me at my office. That is hard to do when there isn't any power. The point is that the timing is never good. I've personally been involved in half a dozen of these through the last two years for a variety of reasons. This can relate to the weather, a power grid going out, or a car accident involving a telephone pole. It can happen out of nowhere, and traders will suddenly find themselves without power, losing their ability to view the market and execute trades. To combat this situation, the serious trader must have the following in place: Battery backups on the computer: These are available at any major office supply shop. In the event of a loss of electricity, these will give the trader around 30 minutes of power, which is plenty of time to close out positions or reset parameters in case the power is going to be down for a long time. This also gives the trader time to manually shut down the computer, which is much safer than having it go out suddenly because of a power loss. Noncordless phone: These are the old-fashioned phones that have a cord attached to the headset. When the electricity goes out, so does the cordless phone. With the old-fashioned corded phones, a trader will still be able to make a phone call to his or her broker. Obviously a cell phone would work in this situationbut those things run out of juice at the worst possible moments. Corded phones can be purchased for less than $20 at any department or electronics store. Dial-up backup: Cable or DSL can go out even when the electricity is still on. This usually happens at the absolute worst time, so the astute trader will want to be prepared. The best way to combat this is to have a fully charged laptop connected to a phone line. This way the trader has Internet connectivity if the DSL or cable goes downand the trader will also have a backup in case the electricity goes out. By having a laptop that is fully charged and ready to go. attached to a phone line, a few hours of valuable time can be gained. Another technological trend in the industry is for brokers to let computers do all the work. Although this provides for efficiencies and cuts costs, the bottom line is that if I have a problem, I had better be able to get hold of my brokers right away. If 1 call my brokers and can't get hold of them, 1 start foaming at the moutha signal that it is time for me to switch brokers. If I want to be on hold, I will call the airlines, not my brokers. My suggestion here is to take advantage of technology and get the broker or brokers hooked up on an instant messaging program. This is an incredibly efficient way to stay in touch throughout the day. If my data feed goes down, 1 can lJvl (instant message) my broker for a quote. My expectations for my brokers are that I can contact them via phone or instant message right away. If they are not available, then 1 have the number and instant message as a backup. In trading, there is no excuse for not being able to get a live person to help out with an order or question right away. What else do we pay them all the commissions for? If the trader's data feed goes down, much of what already has been discussed will help. Being able to contact a broker to get a quote or place a trade in this situation is imperative. Yahoo Finance is also a great site to get free quotes on stocks, options, and futures. Finally, the most neglected aspect of any computer user's life is the backing up of data. I recommend getting a Maxtor One Touch drive. These are available at places like Best Buy, or online at www.maxtor.com. Once it is hooked up. all a trader has to do is touch a button and the entire hard drive will be backed up. It seems like a pain to set up until that one day when the computer finally does crash. Trading successfully requires an edge. Traders who choose to remain in ignorance about what is really going on with their computer, or are outta luck when the power goes out, are leaving themselves at a decided disadvantage with traders who are prepared. By staying up to dale on the technological front, the trader has an advantage over those who don't. And having an advantage over other traders is the only thing that will make the trader a winner in this business. NOT ALL QUOTES ARE CREATED EQUAL Now that we've beaten the nontrading technical issues to death, let's look at issues geared specifically for trading. This typically comes down to three areas: 1. Quote software 2. Trade execution software 3. Market-related subscriptions and services Let's look at quote software first. Much of the decision to use a specific charting software package typically comes down to whatever a person has stumbled across as he or she began the trading journey. For most traders, this is not a good thing. [ remember when I first started trading online in the late 1980s, and 1 had to hit refresh every time I needed a new quote. I was charged a fee each time I hit refresh if I didn't trade enough, [ stayed with that brokerage for about three weeks, and that was three weeks; too long. It is important for the trader to have a quote system that is robust, is in real time, and has the flexibility to easily add a variety of indicators and tools. The ultimate goal of traders is to develop a trading style that best fits their own personality. A flexible quote system gives people the ability to try different things until they find the setups and techniques that work best for them. There are only a few quote vendors who fit this bill, and there are many who do not. The bottom line is that good quotes are not free and can easily run a few hundred dollars a month. Skimp on the desk, not on the quotes. The two main quote systems 1 use are TradeStation (www.tradestation.com) and eSignal (www.esignal.com). TradeStation makes it possible for me to easily add my own indicators and studies, and I like its chart functionality and ability to back-test specific setups and data, I like eSignal because it has fast reloading time and is robust and easy to use. Although I like having two quote vendors in case one is having problems, for my own trading it is a must. For example, I follow the German DAX market, and I rely on real-time put/call ratios throughout the trading day. As of this writing, eSignal carries data on the German DAX, while TradeStation does not. And. to top it off, Tradestation carries data on the put/call ratio, while eSignal does not. It's important to find out everything a quote vendor offers before signing up. Obviously, if all a trader follows is the DAX, then TradeStation is not going to be a big help. At some point TradeStation will cave in and add it, and who knows, it may have already added it by the time this book hits the shelves. I'll also continue to bug eSignal about adding the put/call ratio, because at some point it will have to bow to pressure from the trading community and offer it up. Interestingly enough, most quote vendors do not offer the put/call ratio, which is a hugely important reading of current market sentiment. Another good source I use for quotes is the market data available at the Chicago Board of Trade's (CBOT) Web site, www.cbot,com. There are of course other good quote systems available. The key is to utilize a robust and flexible version that best fits a trader's needs. For the most part, traders will get what they pay for in this area. The best way to find a good quote system is to first and foremost ignore any marketing material that is put out by the company itself. This is like believing that a can of soda is good for you because it says diet on the label. One of the biggest marketing gimmicks in trading is free level II data.** Level II data are worthless and shouldn't be watched in the first place. Larger traders use Level II to trick and fool smaller traders by putting up fake size and using every method at their disposal to hide what they are really doing. It also causes traders to overtrade, which is the number one way to gel out of this business in a hurry. Traders will save themselves a lot of frustration simply by turning this off. In sum, ignore the marketing and ask other traders who have been actively slinging stocks and futures for at least five years. A BAD EXECUTION PLATFORM CAN INFLICT CAPITAL PUNISHMENT ON YOUR ACCOUNT In the late 1990s and early 2000s, it was all about faster executions. A trader who had an execution platform that was faster than the others had an edge. Online Web-based brokers caught on and started out offering 60-second guarantees on fills. Those of us who were using direct access laughed in their face. Sixty seconds might as well have been a week. Today, nearly every broker has adapted and everybody has lightning fast executions. So what platforms have the edge? Think back to what I say about trader psychology in Chapter 2. Most of the mistakes traders make are emotional. I've watched traders get flustered, especially in futures trading, and make mistakes with their orders. They go long five contracts of the mini-sized Dow and then make an error in trying to place their stop that ends up liquidating their position. Other times they put a target in place and end up doubling up on their position because of a mechanical error. Or, worse, they don't feel like going through the entire process of placing a stop, then placing a target, and then remembering to cancel the remaining open order once either the stop or the target is hitso they don't place a stop or a target. These are the traders who rely on their judgment while in a trade and create great opportunities for the rest of us when they inevitably freak out. Manual order submission and trade management is a tedious, error prone process. Coupled with heightened emotions* it is a recipe for trader blowout. Maybe not today, and maybe not tomorrow, but that day is always lurking on the horizon. In addition, some traders simply are not computer savvy. They are not comfortable on computers, and it is easy for them to fumble an order. The best computer users are kids, and it's because they have grown up playing video games on their PCs, Some traders I know have deliberately learned to play one person shooter games on their PCs in order to improve their speed on the keyboard. The most popular of these is called Call of Duty. This game places you in various battles during World War II, and it is literally act fast or diekind of like trading. By the time people get through this adventure* their eye-hand-mouse-keyboard coordination will have improved exponentially. My trading partners and I have all gone through the game, and it improved our hand-eye coordination considerably. This game is available at stores like Best Buy for $30. Trading execution software today has evolved to help traders protect themselves from . . . themselves. Think of a typical trade. Let's say I go long 10 contracts of the mini-sized Dow futures at 10614, I place a 20-point stop* and I want lo exit half my position on a 10-point move to 10824, and for the rest of my position I will trail my stopevery time the Dow moves 10 points, 1 will move my stop up 10 points. This requires active trade management, with the pressing of a lot of keys and many mouse clicks. One mistake and I can turn this winning trade into a loser What if, each time I bought the mini-sized Dow, my trading execution platform knew I would be using a 20-point stop and a 10-point target on the first half of my position? If it knew that, then it could place the orders for me automatically, and I wouldn't have to do a thing. What if it also knew that when my first target was hit, I wanted to bring my stop up to breakeven? And it also knew to change the number of contracts in my stop from 10 to 5 when the first target was hit? What if it also knew to then trail the stop? What if I had a target, and it knew to cancel my stop order once my target was hit? All automatically? So all I had to do was get into the trade, and after that I could essentially walk away because the software was managing the trade for me according to my specifications? The purpose of my day would be to sit back, relax, and focus on finding high probability entries, instead of having to scramble around once I'm in the trade and actively manage it* process that can be mentally straining and cause many emotional fluctuations. That is the kind of software that is available today. All traders have to do is wait and be patient for an appropriate entry level, take the entry, and then the software can manage the trade for them according to their own specifications. This process removes a lot of the men-tal stress involved in trading and helps to prevent traders from making the common mistakes that ruin many of them. This type of functionality is not readily available with many brokers, but I'm sure they will catch on and the improvements in this field will continue to roll along. Today this type of software is available through third-party vendors who create the code, and then brokers elect, or not elect, to offer this platform to their customers. Three of these platforms that I'm familiar with in this category are TradeMaven (wwwJrademavenllc.com), Strategy Runner (www.strategyrunner.com), and NinjaTrader (www.ninjatrader.com). In my experience they are all fantastic leaps in trading technology. TradeMaven is memory-intensive and can slow down a user's computer, so it is important to have a fast, stand-alone system when using this. Strategy Runner is also good, and I used it for a while, but it does charge a per-trade fee that can quickly add up. NinjaTrader has a low monthly fee and is easy on system resources and also has a small per-trade fee. This is the one that I currently use. Figure 3,3 shows how it works. Figure 3.3 illustrates a shot of the Strategy Manager window, where traders can enter in their predetermined trade entry and exit points. The Strategy Manager is open and the Position Strategies tab is selected, The strategy that is highlighted is called TradeTheMarkets, which is a strategy I created. In the position type box (Pos Type), I have selected the bottom choice (Stop/3T). This means that this strategy will have three profit targets and one stop order. In other words, I can buy six lots of the E-mini S&Ps and scale sell out of my position two lots at a time, at predetermined exit points. The details are entered in the middle of the screen. For this trade, when I get in long or shon, the software will automatically place a 2-point stop, and k will automatically place orders so that I can scale out of two contracts when I'm up one point, another two contracts when I'm up two points, and the final two contracts when I'm up three points. In addition, once I am out of my trade, the open stop order is automatically canceled. This screen focuses on my target exil strategy. My stop exit strategy is different, and you can see that a stop strategy called JohnCarter is selected. (See Fig. 3.4.) The Stop Strategies tab allows the trader to create a single stop or a trailing stop. The trailing stop will automatically move based on the parameters put into this screen. As the various profit targets are hit, the stop loss will move up a specified amount, ensuring that an increasing portion of any profits are protected. Traders may have just one setup that they use, or they may have half a dozen or more that they have created over the years. Each setup that a trader uses should have a different set of rules for exiting the trade. Some of the setups may utilize a 3:1 risk reward ratio (risking 1 point to make 3) while others utilize a 1:2 risk reward ratio (risking 2 points to make 1). Some of the setups may use trailing stops and multiple targets, and some may have stationary stops and single targets. All the various exit and stop strategies can be created for each setup, on each market in which it is going to be utilized, and matched together Once these are all created, all traders have to do is tell the software which setup they are about to take, on which market, and then focus on the entry level. Once they enter the trade, the software does the rest of the often very tedious and error-prone work. What is also nice is that a trader can have a couple of plays running simultaneously in different markets and not get frazzled watching after all of them. This type of technology automatically brings discipline and focus into the trader's life and generally makes the trading day smoother and more deliberate, leaving a trader refreshed at the end of the day instead of worn out. |
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