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Real Time Trading Alerts: The Problem With Being Spoon Fed

Brendan Egan — Mon, 06 Sep 2010 23:26:32 GMT

I can't even count the number of people who have asked me to provide a real time trade alert subscription service. Well for those of you interested in this service I have great news -- after much thought about providing this type of service, the answer is still absolutely not! Why is this good news? Because trust me--I am only doing this to protect you from yourself. There was a point in my trading that I signed up for several different real time trade alerts and even though I was spoon fed positions I still wasn't able to properly manage them the way the pros can.

In private coaching we often look at live positions and call them out in real time--the vast majority of these positions end up being winners and our analysis was correct. You may be thinking this sounds great and you would love to take advantage of my analysis, however my reason for not providing a real time trade alert service is simply because it really does not help with your trading education.

If you are truly interested in learning more about how I trade with price action, you would check out the Price Action Trading Course which is 6+ hours of instructional videos. However those looking for real time trade alerts generally don't want to learn my strategies but rather they want to piggy back my trades--which I have said time and time again doesn't end up working so well.

In the near future I am going to start calling out more positions that I spot on the 123LearnToTrade Twitter Account, so be sure to follow us on Twitter to receive these tweets, however there are no plans for any sort of live position calling subscription anytime in the near future. Far too many people will use these alerts the wrong way and end up not only hurting themselves from an educational and trading standpoint, but also end up hurting themselves financially.

If you truly are interested in real time position analysis, I would much rather do this in a more controlled and one-on-one environment so we can make sure you understand the purpose of this type of analysis and actually learn from it. Sign up for a free coaching consultation so we can talk more about this opportunity. And remember before you run off to sign up for some other real time trade alert ask yourself this simple question: Would you rather be given a few fish and maybe survive for a few days, or would you rather learn how to fish and be able to survive for life? For me, the choice is crystal clear.

Trading Rule 17: Adapt To The Market Around You

Brendan Egan — Thu, 02 Sep 2010 18:17:08 GMT

Remember that the market is always changing and that every moment in the market is unique. What works extremely well today may not work so well tomorrow. This is why in my Price Action Course I have 10 different strategies that I follow. Why 10? Well, these 10 are very effective and the also occur all the time.

It is important to understand that as the market changes and goes through cycles, some trading strategies will work better than others. It is important to not only identify this but to place your trades accordingly and be able to adapt to changing market conditions. This is the true difference between a mediocre trader and a successful trader. So just because breakout trades are occuring everyday for 2 weeks doesn't mean this will continue--and a successful trader is able to identify these cycles and adapt to them accordingly.

Trading Rule 16: Stay In Trades Until You Have A Reason To Exit

Brendan Egan — Thu, 02 Sep 2010 16:23:17 GMT

Say I enter a trade that goes up 10 cents then down 10 cents then back up 10 cents. A lot of new traders would close out of this position at their entry price after this occurrence, or at unchanged. There is a lot of noise and manipulation that exists in the markets, and it is important to set a predefined stop loss and profit target and stick with them.

All too often when I was a new trader I would get nervous and think the trade was going to go against me and I would close out of the position prematurely with either a very small loss or a very small profit. I'm in trading to make money--not to make pennies on each trade. And after I would get out of the position 9 times out of 10 it would turn around and go in my favor, doing exactly what I thought it would do.

It is extremely important to follow your stop loss and profit target, and not close out of your trades before it is time to end the trade. This can be very difficult for some people to do, so if you need help with this concept drop by 123LearnToTrade.com and sign up for a free coaching consultation so we can talk over the issue.

Ever Feel Like Your Trading Method Stopped Working? We All Do...

Brendan Egan — Thu, 02 Sep 2010 13:57:32 GMT

Have you ever had a day or week where you just feel like everything you do in the markets is wrong? No matter how strong of a level you find, no matter how picture perfect a trade looks, you get into the position and it just goes against you for seemingly no reason at all?

Well, it happens to just about all of us at least a few times--and the longer you have been trading the more times you have likely experienced this. Something we talk about in the Price Action Trading Course is that markets go through cycles and phases. What works extremely well today might not work so well tomorrow. But not to worry--these cycles repeat themselves over and over and over again. So just because something isn't working today doesn't mean it won't work again tomorrow.

That is not to say that you can just trust any trading method to guide you through the markets. You need time tested strategies that have shown they will work in the vast majority of market conditions, such as the ten strategies outlined in the price action trading course. Not each and every one of these strategies will show up everyday, however I can say that the vast majority of the time these strategies not only show up all over the market, but more importantly they work.

Now this also means that if you have a trading method other than ours that has been working for years and all of a sudden stopped working for a few days you don't need to panic--chances are the market is just going through a new cycle or phase and will get back to normal soon. The best thing to do during this time is use the sitting on your hands method of trading--that is not to place any trades at all.

So remember, when you sense a change in the market and things just don't feel right, go with your gut and sit on the sidelines for a bit until you see something develop within your methodology.

Trading Rule 15: Deep Pockets Move Markets

Brendan Egan — Tue, 31 Aug 2010 15:52:01 GMT

It truly does take just one deep pocketed trader to make or break a pattern. What if we approached a critical price level and I accidently sold 10,000 shares at that level rather than bought 10,000 shares? I would drive price substantially lower and begin the chain reaction of taking out and activating stop losses.

It is important to remember that at any given time, a small amount of traders can influence or manipulate the market. This is a concept that we discuss more in depth within the Price Action Course, however in short it is important to learn how to look out for signs of market manipulation, through both price and volume. This is a more advanced topic, however for newer traders it is important to understand this fact. There will be trades that should have been profitable but because the market was manipulated you will end up in a losing position. Move on, learn from the experience, and prepare for the next trade.

Trading Rule 14: Move On After Your Trades

Brendan Egan — Tue, 31 Aug 2010 15:35:39 GMT

Think back to your first relationship--either in junior high, high school, or college. When that relationship ended, you probably thought the world was over. Looking back on it now, however, you realize it wasn't that big of a deal.

This is very similar to trading. Newer traders mope about and think about trades long after they are over. But professionals are used to taking tens of thousands of trades and when they have a trade go against them they forget about it and move on.

As a trader, it is extremely important to learn from your mistakes but not to overly analyze any one given trade. Last year I placed hundreds of trades, and no one specific trade stands out to me any more than any other. Whether I make $50,000 on a trade or I lose $10,000, it is important to accept the outcome of that trade and move on to prepare for the next trade.

Trading Rule 13: Limit Risk : Define Your Trades

Brendan Egan — Mon, 30 Aug 2010 21:09:00 GMT

As a newer trader I would sit down and just start trading. I didn't spend much time planning and calculating my entry, stop loss, and profit targets. Today, I would never place a trade without giving all three of these aspects serious consideration.

The majority of new traders do not limit risk--meaning they do exactly what I used to do and that is place trades almost randomly. It is extremely important to develop a sound and successful trading plan before you jump into live trading. Unless you are able to successfully identify your entry, exit, and stop loss, you are taking on much more risk than you ever bargained for, and are merely gambling in the markets.

Trading Rule 12: Never Expect Anything

Brendan Egan — Tue, 24 Aug 2010 15:42:32 GMT

Some traders come into the markets expecting to turn their small investment of $5,000 into a multi-million trading account. While there are freak stories of this happening, it certainly is not the norm. Rather the reality of trading is that 90-95% of newer traders end up failing and leaving the markets with substantially less money than they came into trading with.

So what does this mean for you as a newer trader? Well, it means that if you want to become a successful trader, you will obviously need to find out exactly how the professionals conduct their business. You will need to find out how successful traders make money, which sometimes isn't an easy task, and then learn from their trading style and make it your own. Fortunately for you, I have put together the Advanced Price Action Trading Course which I along with dozens of others believe is an excellent way to learn exactly how professionals trade.

In trading, you should come into the markets without high expectations, and be pleasantly rewarded when you end up finding success.

Planning Your Trades And Preparing For the Unknown

Brendan Egan — Fri, 20 Aug 2010 15:46:56 GMT

Think back a few years to your younger days. I remember not that long ago playing a pickup game of football at a park down the street from my house. We didn't have a set or definite playbook, however before each and every play we would huddle up and discuss what each one of us was going to do.

From here, we would run our routes, each going a different direction to try and get open for a pass from the quarterback. I then noticed that no one else on my team was running the route they actually planned. We spent time and effort designing a quick play to try and complete a pass yet no one else was following the play except for me. I ran a zig-zagging route on this play, and before I knew it I was wide open. I looked over my right shoulder and saw a perfect spiraling pass coming straight for me. I put out my arms, grabbed the ball, caught it, and tucked it into my chest. I then looked up in front of me and knew exactly what my next goal was--finding some way to make it about 50 more yards to score a touchdown.

Attachment 69

There were several other players from the opposing team standing between me and 6 points, and I knew that I had to find some way around them. Exactly how I was going to make it around them I didn't know--when we huddled up we discussed the routes we would run, but we never put much thought into what we would do once one of us caught the ball. I started running and trying to dodge the opposing players, but without a plan I was soon tackled just a few yards away from where I made the catch. It was now 4th down, and we had no choice but to punt the ball away and miss out on a great opportunity to at the very least get a first down and at the very most score a touchdown.

So why exactly did we fail to score? Was it because we weren't as good as the other team? Or maybe because we weren't as fast as them? Or perhaps we didn't know as much about football as them? No. It was none of those reasons. It was actually because they planned not only what they were going to do while we were running our routes, but they also planned exactly what they would do once one of us catches the ball and how they would block us from scoring 6. You see, our team had a great plan for the first part of our goal--catching the ball--but we fell short on the second part of our goal which was moving the ball father down field.

Just yesterday I was able to spend a few hours with one of my local coaching students. We looked at several charts while the market was open and looked at and analyzed several of his recent positions. Much like my football team, he was having a hard time with knowing exactly what to do after entering his positions and more importantly was having a hard time following his actual trading plan. In both football and trading, almost anyone can plan the first part of the play, but it takes a much more experienced player or trader to know how to follow that plan properly and how to manage the play or trade once it is entered.

So we spent time analyzing his charts and positions and talking a bit more about not just how and where to enter trades, but we also discussed trade management and how to actually manage the trade, both financially and emotionally. We discussed placing profit targets and stop losses and following them on each and every trade. We also spent time pointing out what would be a good and bad position on several stocks. This may sound like more basic trading knowledge, but sometimes even the easiest parts of trading become a challenge when you put your hard earned money on the line. The reality of trading is, sometimes there just is no substitute for receiving one-on-one support from a trading coach to not only help you with your known trading issues, but to bring to light any other issues that you may not realize you have, and to give you the confidence and reassurance in your trading plan that you so desperately need.

Now I believe he has the tools necessary to not only plan his trades and spot good entries, but more importantly he knows to follow his trading plan on all of his trades and he knows how to properly manage the trade. Now this isn't just an overnight process--meeting with a trading coach certainly can dramatically change your trading and your performance, however it is a process that still takes time to fully absorb and adapt to. Repetition is key to learning anything, including trading, and the more time you spend with both the markets and with a trading coach the more experience and knowledge you will gain.

The moral of this story is that in both football and trading, not only is an initial plan important, but equally important is the ability to follow that plan and to be prepared to adapt to changes that may arise. Professional football teams practice exactly what they are going to do when they catch the football--but come game time their emotions sometimes get the best of them. Additionally, while football players can practice different routes and techniques to score touchdowns, each and every situation in a football game is just a little bit different than each and every other one. A good football player needs to know how to manage these emotions and adapt to the slight changes that occur in each and every game. This is just like a good trader. A good trader needs to not only spot and enter trades, but they need to manage their emotions so they stay within their trading plan, and they also need to know exactly how to adapt to all of the different changes that can occur in the marketplace. If you find yourself struggling with this, take a big step in the right direction by reaching out for help. Click here to setup a free coaching consultation.

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Trading Rule 11: Go With The Flow - Follow The Pros

Brendan Egan — Wed, 18 Aug 2010 19:39:49 GMT

In one of my trading coaching sessions I pulled up a chart and showed it to my student. He looked at the chart and gave me his opinion of how he would trade the given chart. He was completely wrong and was telling me he would trade against an extremely strong uptrend.

In trading, it is important to trade with the professional traders rather than against them. I talk a bit about trading with professionals in the Price Action Course, however in short it is important to not only trade in the direction of the current trend but also to place trades at critical price levels and place them in the same direction as professional traders. If you are able to successfully follow professional traders and the big money then you will certainly find success in your trading endeavors.

Trading Rule 10: Markets Are Zero Sum

Brendan Egan — Mon, 16 Aug 2010 18:27:08 GMT

Unfortunately for us, the government is the only one with the ability to print and create money. A common misconception about financial markets is that wealth is created and lost through them. While some people end up rich from trading and others end up poor, I can guarantee that the markets don't have any form of a printing press.

Rather trading is a transfer of wealth--which means in the long run for me to make money someone else has to lose money. And for me to lose money someone else is making money. So in a sense, trading is a zero-sum game.

This is important to remember because when you trade you are in a sense fighting it out with each and every other trader out there to try and make a profit. Trading is not a simple profession and should be treated as such. Remember to calculate and think about each and every trade you place or else you will simply be transferring money from your account to another's.

Trading Rule 9: The Market Accepts No Responsibility

Brendan Egan — Sun, 15 Aug 2010 17:46:25 GMT

Being responsible is an important part of being a trader. I can often weed out beginners from intermediate traders simply by viewing how responsible they are with their trading.

What is the number one way to see how responsible a trader is? Simple ask them about their last losing trade and what happened. If they respond that their analysis was wrong and they got into a bad position then they are likely an intermediate trader. If they respond that the market acted irrationally and the market was wrong then they are clearly still a beginner.

The market never accepts any responsibility and is never wrong. Only individual traders are wrong about what they thought the market was going to do. Remember, part of becoming a trader is taking the responsibility off of everyone and everything else and putting the responsibility of trading on your shoulders.

A Sneak Peek Inside The 123LearnToTrade Advanced Price Action Trading Course

Brendan Egan — Sat, 14 Aug 2010 03:53:24 GMT

I've received a few questions about what is actually inside the Advanced Price Action Trading Course, so I grabbed a few seconds of video from about 1/10th of the lessons and put together a short video giving you a sneak peek inside the course. This 5 minute video is just the tip of the iceberg in the now 6+ hour, 60+ lesson trading course.

If you're all set to get started with this trading course, click here to sign up! And if you have any additional questions about the trading course, click here to contact us.

Trading Rule 8: Everyone Has Losing Trades

Brendan Egan — Fri, 13 Aug 2010 17:38:19 GMT

Every so often I stumble upon a trading website that offers a 100% success rate. I don't know exactly what type of system or software they are selling, but I immediately know that anyone with that high of a success rate is lying.

You see, even professional traders only have a 65-75% success rate. The other 25-35% of the time they find themselves in losing positions, but since they understand money management and risk:reward they end up making a great deal of money by the end of the year.

As a newer trader it is critically important to understand that no one is ever always right when it comes to trading. Every trader has losing positions and trades where their analysis is wrong--it is just part of the trading experience. Be hesitant of anyone claiming to give you something unrealistic--because in the world of trading if it sounds too good to be true then it is too good to be true.

Trading Rule 7: Losing Trades Will Happen

Brendan Egan — Thu, 12 Aug 2010 19:18:05 GMT

Ask anyone that owns a business if they have ever invested company money in something that didn't work out and they will tell you that yes they have. Risk is part of every single business and every single trade as well.

Traders need to view their trading activity as a business. They need to accept that there will be losing trades or losing ideas and that is just part of being in this business.

Lastly, remember that every trader has losing positions. Even the most experienced traders have dozens if not hundreds of losing positions each and every year, yet they are still able to be profitable traders. Remember to study up on risk:reward before jumping into live trading and understand the necessity of losing trades.

Trading Rule 6: Trading = Risk Taking ; Nothing Is Guaranteed

Brendan Egan — Thu, 12 Aug 2010 15:25:37 GMT

Ever hear the saying no pain no gain? Well, that is especially important to understand and remember when it comes to trading. Each and every trade has the potential to be a huge winning trade or a huge losing trade.

In trading, there are no promises, no ways to get rich quick, and no guarantees of profits. As a trader you must fully understand that some if not all of your money in your trading account is at risk when you place a live trade.

There are money management and risk tactics that can help lower the risks of trading, some of which I talk about in the Price Action Trading Course, however even I take a risk with each and every trade that I take.

If you are not willing to accept the risk of loss in each and every trade then you are not ready to become a live trader.

Trading Rule 5: Every Moment In The Market Is Unique

Brendan Egan — Wed, 11 Aug 2010 21:29:44 GMT

Each and every scenario and trade in the market is entirely unique to each and every other scenario or trade. In my Price Action Trading Course I outline 10 of my trading strategies as well as dozens if not hundreds of examples of these strategies. While there is a text book form of these strategies, it is important to remember and understand that each and every time you spot one of these setups it will look a little bit different than each and every other time.

Likewise it is important to remember that every moment in the market is unique. Just because the market did one thing one day does not mean that it will do the same thing the next day. The participants in the market change from day to day and even hour to hour which makes every single experience in the market completely unique.

It is a necessity for traders to always be prepared and alert for the markets because each and every moment in the market is completely unique.

Identify Your Weaknesses In Trading

Brendan Egan — Wed, 11 Aug 2010 19:04:29 GMT

Today in the US stock market we saw a substantial gap down followed by price very slowly drifting sideways. I have included the intraday charts as of 3PM EST below:

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Over my few years as a trader I have identified this type of trading day as one of my worst in terms of performance, and therefore when I see these types of scenarios develop I always am extremely cautious when placing any trades.

This type of situation where we see a huge gap down followed by slower price movement the rest of the day is not an extremely normal occurrence--on average I would saw we only see it around once a month or so-- and this is why I am able to completely avoid these scenarios to protect my trading capital.

The lesson to be learned here is not to avoid these types of days because I struggle with them, but rather to identify your main weaknesses as a trader and either find some way to improve them or find a way to avoid them all together. Whether you struggle with trading when the market moves extremely fast on high volume or you simply struggle with a certain type of chart pattern, it is important to identify your weaknesses and learn how to properly manage them.

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About Brendan Egan

Brendan Egan — Mon, 09 Aug 2010 19:01:04 GMT

I always get a lot of questions about why I started trading, how I got started, my mentors, and my best/worst trading week. So I took a few minutes over the weekend to put together an "About Me" page so everyone can have access to my trading background.

You can view this page and learn more about me by clicking here.

The Most Common Psychological Trading Problem

Brendan Egan — Sun, 08 Aug 2010 16:31:46 GMT

I've been trading for a few years now and have been helping and educating newer traders almost just as long. More recently, I published the Advanced Price Action Trading Course and went even further to personally coach traders in a one-on-one environment.

Through these experiences I have identified what I believe is the most common psychological problem facing most intermediate traders--and that is failure to act on trades which they should and failure to exit trades which they know they shouldn't be in.

This may sound like a simple, basic problem with a trading plan or with technical analysis, but I can guarantee that this problem goes much, much deeper. Just the other day in fact I received an email from a member asking for a coaching consultation because they are suffering from this exact problem--and in fact looking through all the coaching consultations I have done, I would say about 70% of them are because of this one major psychological issue.

Now, this is good and bad news for traders suffering from this problem. Good news because this is a common psychological issue that I personally have also gone through and know how to deal with. It is something that I constantly go over in private coaching and once we finally get the trading webinars up and running (hopefully later this month) we will undoubtedly address this issue during this time as well. The bad news, however, is that while this is one of the most common psychological issues, it can also be the most difficult to overcome as well as the one issue that I think causes most traders to ultimately give up trading or fail. 99% of traders suffering from this type of issue know that they are suffering from this issue but don't know where to turn to get help.

I would like to share a short personal story from when I suffered from this issue. I was trading around 200 shares of $AAPL, $RIMM, $AMZN, $GOOG, etc. during this time, and I often would see excellent trades set up right in front of my eyes. However rather than hit the "buy" or "sell" button, I would sit there and find an excuse to not get into the position. I would then think about it, hesitate a bit, and get ready to place a trade. Only problem is by this time, price has run right past what would be a good entry, and I would either not enter into the trade that I should have or worse yet I would enter into the trade with a terrible entry price, and then let price reverse soon to go against me. Here is an example breakdown of what my P&L report used to look like at the end of the day:

Position 1) Missed out on a great trade
Position 2) Took a trade but got in way after I should have, leading to a loser of $50-$100
Position 3) Got into a position exactly when I should, but got excited when I saw the profit and scalped out of the position way too soon. Profit of $30-$60 when it should have been a profit of $100-$150
End of day P&L: Slightly Negative

Now this pattern would go on, and on, and on and I wouldn't think much of it because I was only losing a small amount of money each day. But after days turn to weeks and weeks turn to months, these small losses add up not only financially but also psychologically. Having 1 winning day for every 4 losing days is not healthy for your trading psychology, and I personally did not overcome this problem until reaching out to a mentor.

The most common psychological problem is simply not being able to pull the trigger on a moments notice, not be able to hold on to winning positions, and not be able to let go of losing trades. Again this may sound like an analysis or trading plan problem, but it truly is a deep psychological problem that requires much more than a spruced up trading plan or some help with your analysis. 9 times out of 10 there is some other problem causing this psychological problem in your trading--ranging from being under capitalized to not having the proper trading mindset--but ultimately the underlying issue must be identified and addressed before you can move on with your trading and be on the road to profitability.

So the bottom line is, if you are suffering from these types of problems you really do need to reach out for help. I have seen several traders who have taken the Advanced Price Action Trading Course overcome these exact issues after beefing up their trading plan, technical analysis, and watching the trading psychology videos within the course. I have also seen traders reach out in coaching consultations and private coaching who have also overcome this same exact issue. One thing I have not seen much of is traders overcome this issue entirely on their own. If you find yourself having these types of issues in your trading, take a moment to fill out this short and 100% free coaching consultation form and we can setup a time to chat more about your trading.

Swing Trading vs Day Trading -- Which One Should I Do?

Brendan Egan — Thu, 05 Aug 2010 21:45:02 GMT

Newer traders often put a lot of time into figuring out if they should become a swing trader or a day trader. While it is critically important to decide what type of trader you are going to be, it is also possible to be both.

I personally have done swing trading as well as day trading, and I feel both have their pros and cons:

Day Trading:
Arguable the best part about day trading is that it is done on an intraday basis. This means not worrying about premarket or postmarket price swings and not having the added stress after the market closes of a position going against you. It also generally leads to a much better nights sleep :)

On the negative side, some traders find it difficult to trade based on smaller time frames, such as the 5 minute and 15 minute charts. Large price swings are often hard to take advantage of on an intraday basis, however when swing trading the profit margins on each specific trade are generally larger.

Swing Trading:
The best part of swing trading, in my opinion, is that anyone can do it. Unlike day trading, swing trading is not as time consuming and can be done on the side with another full time job. Swing trading usually requires a platform that allows you to place OCO orders and trailing stops. A swing trader can get by doing just a few hours of research and trades per week, which is extremely attractive to some.

I would say the most negative aspect of swing trading is either missing out on big moves because you are away from the markets or being exposed to huge pre and post market swings. There can be an added amount of risk in swing trading but generally that is offset by greater rewards.

Which One Is For Me?
Well, I personally do both and I think it is important to understand both swing and day trading. If you are unsure of what you want to do, make sure you learn trading methods that can be applied to both time frames, such as the ones taught in the Price Action Trading Course.

However it usually comes down to a time issue when traders pick between day trading and swing trading. Most day traders that I know also do some swing trading on the side, however most swing traders rarely day trade due to time constraints. Decide how much time you can allocate per week to trading and decide your risk tolerance and then you will arrive at a general idea of whether you should be a swing trader or day trader.

Investors ideas

Jampone — Sat, 31 Jul 2010 16:04:02 GMT

Hi guys,

This is my first blog entry and I want to share something I have learned in the past few months and I think it�s a really good Idea for those who are investors.

To start with, I need to introduce myself.
I am from Brazil and have been trading since january 2009, I also took the price action pro course. At the moment I cannot trade the brazilian market because I am working for a broker in the futures sector (Deutsche Bank). During this month I am working there I noticed that big instituions don�t really work with a lot of Risk. I noticed that the bank is almost always doing some kind of hedge to reduce the risk of the trades they place. Now I am going to mention some simple ideas for those who like holding long positions for minimum 6 months.

let�s suppose you bought 1000 shares of Rimm and you don�t want to sell it for the next year. you bought the shares when price broke above 50,00 with a stop below 48. At the moment price are at about 57,50 and approuching a previous low (resistence) and when you look at NASDAQ index and it�s also approching some resistence, you can do the following:

1- doing hedge selling futures contracts.
When you sell futures contracts and the index goes down, the price of the stock is also likely to go down. If it does go down, you are going to lose the value of the stock but you�re going to earn the short position in the futures contract. if the index breaks the resistence and goes up, you stop with a loser in the index futures but you win with the price of the stock, that is likely to go up as the index goes.
Result: you�re not going to lose the amount of you profit doing this kind of hedge.

2- selling options with a strike a little above the current price.
Let�s use the same example, you expect the market to correct in the next few days and you have 1000 shares of RIMM, you bought when prices broke above 50 with a stop below 48. Current price is 57.50. to protect your profit you sell 1000 call options of RIMM with a strike price at 58. If the market goes down, you�re going to lose with the value of the stock but you�re going to earn with the options you sold. As the strike is above the current price, the options�owner is not going to execute his options and buy the shares for 58, so all the money belongs to you. if the market goes up and the stock price stays at 59, the options�owner is going to execute and buy your shares for 58, so you�re going to win more 50 cents in the trade.

Well I hope you understood what I meant.
Any comments let me know!

What Is Price Action Trading?

staray22 — Wed, 28 Jul 2010 15:48:07 GMT

I have been thinking about checking out the Price Action Trading Course but still don't fully understand what price action is. Could someone just give me a brief overview of what their view is on price action? There are a lot of different definitions out there...

Thanks in advance!!

Learning From Your Mistakes: Why Failure Is A Critical Part To Success

Brendan Egan — Wed, 28 Jul 2010 14:58:29 GMT

I am a firm believer that trading education is a critical part to becoming a stable and profitable trader. Without education traders make mistakes that could be avoided. However at the same time learning from your mistakes is a critical part of trading, and a part of the equation that cannot be bypassed.

I have spent a good deal of money on trading education and was fortunate enough to know a few traders who mentored me personally. I would say I received first class trading education for a fraction of the cost that it normally would cost. However, I still made tons of mistakes in my first year or so as a trader. All of my mentors told me that this mistakes were unavoidable and actually part of the learning curve.

In trading, there are certain concepts that you can only learn by experiencing them. And what this usually comes down to is making mistakes and having failures and then getting back on the horse with a new knowledge and understanding of the markets.

I remember I used to always use the level 2 screen (a tool that in my opinion is not very helpful) and I would disobey my method because I thought price would breakout due to what the level 2 was saying. However after I lost money a few times doing this, I realized the level 2 screen is not accurate and reliable and I shouldn't be using it. Now my mentors all told me not to use level 2, but I disobeyed them and ultimately the only way I learned not to use level 2 was by experiencing failure with the level 2 screen and then growing from this experience.

Another great example of this is when I used to use indicators. This is something I talk a little bit about in the price action trading course, however in short I had the same experience with indicators as the level 2 screen. Finally I realized it was time to ditch the indicators and learn and understand price action--and this again was something that I only was open to doing after I had experienced a failure.

So while trading education is extremely helpful in making sure you don't blow out your account making stupid mistakes, there is also a need for trial and error in trading--and some of the lessons that stick in my head the most are the ones that I experienced first hand with my trading mentor.

Trade What You Know And Know What You Trade

Brendan Egan — Tue, 27 Jul 2010 00:18:38 GMT

I always get questions from traders interested in the price action trading course regarding my 10 trading strategies which are outlined within the trading course. They usually ask what types of trading strategies are explained in the course, how well are they explained, but one very intelligent question that I don't get often but just answered for someone is:

"Do you use all 10 of your trading strategies all the time and how effective are they in everyday trading?"

Well, I realized that this is one of the few questions that I haven't talked much about in my blog or on the price action trading course information page, so I thought I would take a few moments to explain how I trade what I know and know what I trade.

I know all 10 of my trading strategies inside and out, yet in certain markets I am just better at spotting certain setups than in others. Some traders don't understand this concept. While it is important to trade what you know (in this case my 10 trading strategies) it is equally important to know what you trade. And by this I simply mean know the market you are trading and know the current behaviors of that market. For 1 month the 1-2-3 pattern may show up everywhere, then the next month it may only show up a few times but the re-encounter pattern might show up all the time.

So the bottom line is while it is super important to understand your trading strategies and setups inside and out, it is just as important to understand when these patterns are most effective and when they are occurring the most so you can know what to look for. Naturally as you progress as a trader you will also realize that certain patterns and setups are more natural for you as a trader, and you will begin to rely on those select few patterns more and more and more. Remember it only takes one effective and efficient trade setup to become an extremely profitable trader--in my trading course I give you all 10 of my trading strategies for you to pick and choose which ones are most effective for you as a trader.

Post Your Story Of How You Started Trading...

Brendan Egan — Sun, 25 Jul 2010 18:43:41 GMT

123LearnToTrade member staray22 posted a great new thread that I would appreciate everyone replying to when they get a moment. You can find the thread here: A Tale Of A New Trader...

Basically what he shared with us is his story of why and how he started trading, and was curious to hear the stories of others as well. I posted my whole story on that thread and I am also interested in hearing more about how and why everyone got started in the markets!

A Tale Of A New Trader...

staray22 — Sun, 25 Jul 2010 02:11:11 GMT

I am always curious in hearing stories about how you started trading and why so I thought I would make a place on this site where we can all post our stories of becoming a new trader.

My story is quite simple-- I got laid off of my full time job of 22 years and thought I could turn to trading for easy income. I obviously learned that I could not get easy money from the markets but I am starting to really learn what I am doing and I hope that someday I will be a profitable trader.

Why Trading Knowledge Simply Isn't Enough...

Brendan Egan — Sun, 25 Jul 2010 01:45:36 GMT

When I wrote the Price Action Trading Course, I learned a critical lesson about trading education: Knowing how to personally trade isn't the most important skill necessary when it comes to educating others about trading. It is, in my opinion, more important to know how to teach someone what you know about trading.

Likewise, while most individuals looking for trading education love to flock to a trader who makes millions a year and posts a list of their trades on their website, that does them no good if that trader is not able to teach their methods to others. There are tens of thousands of trading related websites, some of which are scams and others that are actually run by successful traders, but out of these sites there are a very select few that actually are run by traders that also know how to teach others.

Every person learns at a different pace, has a different learning style, is able to comprehend different types of demonstrations, and a good trading educator needs to realize and have solutions for all the complications that arise while teaching others how to trade.

So my advise is simply to do research into not only the trading methods used by various trading website owners but also to do research into their ability to clearly teach those methods. What good is a successful trading method if the trader who knows it so well cannot effectively pass along his knowledge?

The Power Of Simplicity

Brendan Egan — Thu, 22 Jul 2010 17:04:39 GMT

In everyday life we strive to make things simpler. That is the goal of most individuals, and actually of most corporations as well. Why did the Mac get so popular from 2000-2010? Simply because Microsoft came out with operating systems that were not working properly and difficult to navigate. So Apple set forth with two goals in mind that Microsoft clearly didn't have-- make a product that works properly and make it easy to use. Today, Apple is one of the largest corporations on the planet.

So clearly we see the evolution right before our very eyes of a company that went from a few guys in a garage to one of the largest companies in the world. Did this happen by chance? No. It happened because Apple found a better, simpler way of doing things.

Now this certainly doesn't mean that Apple is the only one out there---there are literally tens of thousands of companies that make computers--from big ones like Dell to smaller companies that some of us never even have heard of.

This reminds me quite a bit of trading---there are tens of thousands of different methods that exist and yes, to some degree, each and every one of them work. However why settle for anything other than the best? I believe the best needs to work properly and be simplistic which is exactly why I turned to Price Action Trading.

When it comes to most aspects of life, individuals always want things that are the best and the simplest. However with trading, most people refuse to accept that there is a better way of trading and a simpler way of trading. I know I was the same exact way--I thought that I needed to have fancy lines (aka indicators) all over my charts and have a masters degree in math to figure out some of these methods. Until one day I literally saw the light and was turned on to Price Action Trading. It took me some time to adapt to it and get used to it, however once I did I never looked back.

This is the primary reason why I put together the Advanced Price Action Trading Course--because there simply is not enough material out there that covers Price Action Trading. So if you are ready to simplify your trading, I invite you to check out the price action trading course--and if you still don't believe me, check out what the other course members are saying here. For less than the cost of your next losing trade you can take a trading course that will completely change the way you approach your trading.

A good, simplistic approach built Apple into one of the largest corporations in the world--and a good, simplistic approach can do wonders for your trading, too.

100th Blog Post and Happy 1/2 Birthday to 123LearnToTrade!

Brendan Egan — Tue, 20 Jul 2010 02:44:46 GMT

Wow, over the past 6 months 123LearnToTrade has gone from a brand new website with 0 members and 0 content to a flourishing trading powerhouse with tens of thousands of visitors, over 1,500 registered members, 100 posts in my blog, several dozen price action trading course members, and a handful of private coaching students. It hasn't been an easy road, and it is a road that we aren't even a fraction of the way done paving, but I think the progress the site has made in just the past 6 months has been substantial.

In the months ahead, progress will continue at an even faster pace with building new structures on the website, including trading webinars, and building more visitors and members to make the site more interactive. All of this with just one goal in mind: helping traders learn to trade.

I thought I would take a moment to outline 10 of the most viewed posts in my trading blog now that I have reached 100 blog posts. Here is a list of the most popular blog posts:

If you haven't already checked out these great blog posts, I suggest taking some time to look them over as they truly are excellent free educational resources. I also would like to invite you to take a moment to register with us for free, check out our price action trading course, or sign up for a free coaching consultation. Thanks to everyone who has helped 123LearnToTrade with our mission statement thus far, and here's to continued trading success!

The Importance Of Colors and Environments In Trading

Brendan Egan — Mon, 19 Jul 2010 18:09:37 GMT

This may sound a bit absurd--but I have found that the color and layout of your work environment has a dramatic impact on your trading results.

I believe this is primarily because trading is such a psychological profession that our environment plays a critical role in the outcome of our trades. But rather than try and explain why this is true, I will simply focus on a few ways to create an environment that will positively effect your trading.

There are four primary things that come to mind with trading environments--two of which are color related and two of which are more physical surroundings.

1) Office Color: Your trading office or environment should be a color that stimulates your mind and makes you feel comfortable, yet not too comfortable that you lose focus. For me, a deep blue color was exactly what I needed. Typically, trading environments should be positive places, so a brighter color yet not one that is distracting works well.

2) Platform Colors: Just as important if not more important is the color of your charts, level 2 screens, and the overall color and layout of your trading platform. I have found that most trading platforms and charting packages use depressing colors (dark grays, dark greens, etc) however most platforms also allow the user to adjust colors. By simply changing around the color scheme of your platform, you can create a new, refreshing place to trade.

3) Environmental Light: It is extremely important to have proper lighting in your trading environment. Whether it is artificial or natural light, make sure your workplace is evenly lighted and the balance of light is in line (not too bright, not too dark). This is critically important to reducing strain on both the mind and the eyes.

4) Layout of Environment: Lastly, keep your trading environment laid out properly and clean. We want this environment to be extremely functional, so take into account things you may want to do during the day. I always have water nearby, a small snack, and something else to entertain me during slow market times.

These are just a few small and inexpensive things you can do to try and improve your trading environment, which in turn should help improve your trading results. A positive, clean, organized, and functional workspace really can make a dramatic difference in your trading. Below I have provided a short video clip of my trading environment--if you have any questions or comments be sure to let me know!

Time Management With Trading And Trading Education

Brendan Egan — Thu, 15 Jul 2010 17:40:44 GMT

Time management is certainly a critical part to not only trading but also to your trading education. For example, the price action trading course is about 7 hours long now, and most people who buy the trading course watch it multiple times and refer back to it. So just viewing the course takes a great amount of time out of your day--then you have to sit down, study that materials, ask questions, learn, practice, and finally act upon everything taught in the course. This process takes a great deal of time and energy to complete successfully.

So not only does getting educated about trading take a good amount of time, but you then need to set aside time to actually trade. A full time day trader typically trades for 20-30 hours per week. Some traders do analysis outside of market hours for anywhere from 5-15 hours per week.

We can clearly see that trading on a full time basis takes more time than most normal 9-5 jobs. Now that is not to say that you can't swing trade or even day trade while working full time, because you most certainly can, and this just makes my point of time management being the key to success even more valid.

Aside from trading psychology issues, which clearly ranks number 1 on the list of problems traders encounter, I believe time management issues ranks in the number 2 spot. With trading comes a great deal of freedom--no boss, no set work hours, no set number of days off-- this is something I talk about more in the price action trading course. Most traders trade from their home or home office, where the number of distractions that exist are limitless. From family to friends, pets to telephones, tasks around the house to television shows--there literally are thousands of things that distract us at home that most individuals at an office environment don't have to deal with.

So finding the time and discipline to actually 1) get educated and 2) trade are two of the most difficult tasks facing traders. I know I personally still get distracted from the website and from trading throughout the day and it is something that traders need to constantly battle and overcome to find success in the markets.

Trading Mistakes, Problems, and Errors and How To Fix Them

Brendan Egan — Wed, 14 Jul 2010 19:05:05 GMT

What is the biggest mistake, error, or problem you have made while trading? Well, for me, I think my biggest mistake was actually something I didn't do and that is get educated properly about trading right from the get go.

Now of course being the owner of a trading educational website I am going to say how important it is to get a proper education, but I think most of the members of the site will agree how important it truly is to get educated and get a quality education.

For me, I would have saved thousands of dollars had I just gotten educated properly in the first place. Instead I did things on my own and didn't really know what I was doing with my trading. I was using indicators that I couldn't even pronounce the names of, I had charts that looked like they belong at NASA, and my discipline was worse than a 3 year old. These are all things that I have since improved on dramatically and wouldn't have improved on these areas without a quality trading education.

So rather than me talk about the importance of a good trading education, I'm going to leave this blog post open ended and ask for some responses from our members.

What was your biggest mistake, problem, or error as a trader and more importantly how did you fix it? Would you agree that most of your problems, mistakes, and errors as a less experienced trader could be avoided with a quality education?

How To Pick A Trading Coach - 5 Steps To Finding A Trading Coach

Brendan Egan — Mon, 12 Jul 2010 19:40:52 GMT

As you know, I have been offering trading coaching through 123LearnToTrade for several months now. However, my trading strategies and my approach to the market is not for everyone, and there certainly are individuals who are looking for a trading coach to teach them about other types of strategies. So I have outlined a few things I think are important when picking a trading coach.

1) Make sure the coach trades as well as coaches. A lot of people out there simply start trading related websites but they themselves don't actually trade or stopped trading to just work on their service. Make sure you are getting coaching from someone who still plays an active role in the markets and is current on what is happening now in the markets.

2) Make sure they teach a time tested method. Tons of people try to sell indicators and softwares that time the market and tell you when to buy and sell. They then also make more money by selling support for these systems and softwares. Make sure your trading coach is in touch with the market and truly understands markets before you move forward with them.

3) See if they will offer a free consultation. Not everyone's personalities or trading styles are compatible. This is the main reason why I always offer a free consultation to anyone interested in receiving coaching from me. If the coach you want to work with doesn't advertise a free consultation, ask them if they will offer you one and I think most coaches will be open to it.

4) When in doubt, check them out. Find a coach that has reviews and has been coaching for some time. Most trading coaches also will have a trading blog or some other free form of educational materials that you can read before you sign up with them. These can provide important clues as to how the coach trades, teaches, and what their personality is like.

5) Find a well rounded coach. Trading psychology is just as important as money management which is just as important as analysis which is just as important as... I think you get the idea. Make sure your trading coach focuses on all aspects of trading and doesn't just specialize on one specific aspect. To be a successful trader, you must be well versed in all things trading, and a good trading coach should bring all the elements of trading to the table.

By following these 5 simple steps I think you will be well on your way to finding a quality trading coach, and more importantly getting a quality trading education. If you would like more info on my coaching services, simply click here.

Markets And Traders Overreact To Big News Stories

Brendan Egan — Sat, 10 Jul 2010 00:34:28 GMT

A few weeks ago everyone thought the oil spill and British Petroleum ($BP) would cause the market to undoubtedly crash again. A few weeks before that the Goldman Sachs ($GS) story of federal investigations hit the press and yet again we thought the market would crash. Not too long before that the Toyota ($TM) recalls were issued leaving a great deal of mistrust in the automaker and yet again we thought this would surely cause the market to react.

Months before this dozens of other news stories hit the fan, from Fannie and Freddie ($FNM $FRE) to Lehman Brothers, from AIG ($AIG) to General Motors, and we thought it would change the entire economy, change the entire market, and cause mass chaos among traders.

It's funny how hard we have to think to recall some of these catastrophic market events, however at the time that the event is hot in the news everyone has it on their mind when they place their trades. A true professional trader knows how to read both fundamental and technical aspects of a company and understand the impact that news stories may have on a given company. The reality is most companies are able to survive just about anything as long as they are a strong and solid company. So many times a great opportunity arises on a fundamental front yet as traders we are just too scared to get into a position.

So next time a big story hits makes the news, will you be the one too scared to get into a position because you believe the over hyped newscasters whose job it is to make you interested in their show, or will you be the one who reads in between the lines and finds out the real news story and subsequently capitalizes off it?

How To Deal With Positions That Go Against You For No Reason

Brendan Egan — Sat, 10 Jul 2010 00:04:25 GMT

I would say that law number 1 of the price action trading course, of my personal trading rules, and of trading in general is that the market is always right. With that being said, there are times that we feel as if the market is wrong because our analysis just doesn't work for what the market is currently doing.

Case and point: Not too long ago I had a position that looked like a picture perfect entry. I used one of my 10 trading strategies outlined in the price action trading course and I thought it would be one of my better trades of the year. Soon after entering into the position, it went against me and went against me fast. I didn't have a hard stop loss in place because I was monitoring the trade, and I soon got out of the position with about a 1% loss. The stock continued to go against me after I exited, and ended up falling some 3 or 4 percent before it was all said and done.

Now why exactly did the stock do this? Well, I have no clue first of all and secondly it was something that I was certainly not expecting. Being a trader for a few years now, I remembered that while this one position and one trading strategy just went against me, I can think of a handful of times that it went in my favor. In fact, I estimated that using this one trading strategy my positions went in my favor about 7 times and went against me about 3 times, so it had about a 70% success rate.

So while I am a more experienced and more psychologically sound trader, I knew that this one losing position didn't mean that the trade setup wouldn't work anymore or that I was screwing up as a trader. We can perceive the market as irrational at times, meaning it does things we never thought it would do. However as long as we have a time tested trading strategy, in the long run everything will pan out.

This post is designed more for beginner and intermediate traders who are sitting there after having a losing position questioning their method. I know I went through this and every single trader out there has gone through it at some point in time. Rather than question your trading method (assuming it is a reliable one like the ones taught in the price action trading course) then everything will pan out in the long run. It is super important that rather than questioning the method you spend time to look at what went wrong, understand why, or understand that it might just be one of those few trades that you can't explain. Either way, it is super important to put the trade behind you and get ready for the next trade, because it is always right around the corner.

A Closer Look At Homebuilder Stocks

Brendan Egan — Thu, 08 Jul 2010 16:05:22 GMT

I've been keeping a real close eye on the housing market as I believe the markets are at what could be a critical turning point and the two things that can push the market one way or another are the housing market and unemployment.

$SPY tracks the price movements of the S&P 500 stock index and is shown in the chart below in blue. $XHB similarly tracks a basket of home builder stocks, and is shown on the chart below in red.

Click Chart To Enlarge

Attachment 63

Arguably the housing market crash began in early 2007 when the bubble began to burst, however main street did not know the effects of this until 2008. Likewise, the stock market took a break from it's uptrend around 2007 and began to stagnate. All this time, we can see that $XHB was crashing at an alarming rate before the stock market crashed in 2008. Since then, $XHB has falled at an alarming rate, and while $SPY is only down about 20% from late 2006-present day, $XHB is down about 60%.

To me, this is reflective of the current state of the economy. While $SPY measures companies from just about every sector, the housing market is what got us into this mess and is measured very closely through new home sales and the number of homes being built, which is measured by $XHB. I believe we will need to see a strong rebound in the housing market, both new and old homes, and until I start to see $XHB creep back out of the mess it is in I won't believe the recession is fully over.

So what does this mean to us as traders? Well, I've said this hundreds of times now, but we need to be extremely cautions. The market is clearly still on edge which is shown through the recent volatility and large down and up moves, and until we see the market fully stabilize again I think the best way to trade is to follow the crowd and be very cautious and alert when placing trades.

Attached Thumbnails

Why I'm Keeping My Eye On The Housing Market

Brendan Egan — Wed, 07 Jul 2010 19:53:36 GMT

Lately I have been keeping a very close eye on the housing market and mortgage rates. And no--I'm not looking for a new house.

Remember way back in 2008 when the market crashed? Well, one of the largest reasons the market crashed here at home in the US is the housing market. There were several factors that caused the crash--including adjustable rate mortgages and lax credit regulations which lead to excess demand and ultimately lead to a surge in home foreclosures as individuals realized they just bought more house than they can handle.

Since 2008, the government has worked hard at fixing the housing market as they know this is one of the major factors that caused the big stink in the economy. However more recently, tax credits for homebuyers have expired, and the last housing report certainly was reflective of this. So what exactly does this mean? Well, in my opinion, we are about to see what could be a second leg down in the housing market. The housing market really hasn't improved dramatically from late 2008, although the stock market certainly has gone through quite a correction, rallying on the Dow Jones from around 6,000 points to over 10,000 points.

While I am a technical trader and trade primarily based on price action, which I talk more about in the price action trading course, I always keep my eye on large economic events that could change the direction of the market. Currently we are seeing record low mortgage rates, which should alone be a big incentive for individuals to buy homes. However the demand that we should be seeing right now simply isn't there--which can only mean one thing--people don't have the money to buy homes right now, even given the added incentive of ultra low mortgage rates, which is going to likely cause the housing market to move sideways or even lower until a new equilibrium is reached.

This is extremely important to keep an eye on as traders because if the housing market does not improve or even crashes lower again, the world's financial markets could follow. Housing is basically what got us into this mess, and I am still a firm believer that housing will get us out of the mess as well. Without strong housing data and numbers, I do not think the economy as a whole can improve, and therefore I do not believe the stock market can have the solid foundation necessary to continue it's long term uptrend. So swing traders and investors, understand that the market could make a turn at any point and be sure to monitor any long positions extremely closely. I think next month's housing report could shed some more light on this situation and give us a stronger indication of what may occur in the months ahead.

Happy 4th of July!

Brendan Egan — Sun, 04 Jul 2010 19:28:41 GMT

Just wanted to wish everyone here in the United States a happy and safe 4th of July. Also just want to remind you that most US markets are closed tomorrow, July 5th, in observance of the holiday. For the markets that are open, be extremely cautious as there will likely be very low volume throughout the trading day.

Attachment 62

Be prepared for a higher volume and likely more volatile trading day come Tuesday as everyone heads back to work.

Attached Images

Taking Profits When Trading: Too Hard For Some, Too Easy For Others

Brendan Egan — Sat, 03 Jul 2010 01:26:23 GMT

Interestingly enough, one of the things that almost every trader struggles with is taking profits. As a new trader, it is drilled into our heads that we need to have a predefined entry and predefined stop loss, which most of us as intermediate traders follow extremely well. However, it is not frequently discussed exactly how a position should be managed and where we should exit our trades.

One thing I always do before I enter a trade is define my entry, stop loss, and profit target. This is something I also always explain in my examples in the Price Action Trading Course. Traders must drill into their heads that defining a profit target and sticking with it is just as important as any other aspect of the trade.

There are typically two issues that arise when taking profits: Traders who take profits too quickly or scalp out of a position that could run further and traders who hold on to positions too long and hope to swing for the fences with every trade. I talk about both of these and how to find a proper balance in depth within the trading course, however I think it is important to just skim the surface of this issue and explain the significance of not knowing when to take profits.

Most traders actually suffer from taking profits too soon. They get into a position, see a little bit of green, and don't want the position to turn against them so they scalp out of the trade with just a small win. The problem with this obviously is that this trade could have run further, and the trader then sees price continue in the direction of their trade. This leaves the trader feeling like they made a bad decision, however most traders never learn from their mistake of exiting too soon. This type of trading usually results in the trader either losing money in the long run or constantly breaking even.

The second major issue is holding on to a position too long. Not every trade can be a home run so to speak, however some traders don't know the signs of when price may reverse and when they should exit their position. These traders then hang on and watch the position turn against them, and they either end up with a small winning position or even sometimes a losing position that at one point in time was a healthy winner. This also leads to either losing money in the long run or constantly breaking even.

These two problems luckily can easily be solved with a proper trading education, and it is extremely important that all traders have a predefined profit target and stick with it. This is what makes a trader consistently profitable over time.

Where The Market Has Been So Far In 2010

Brendan Egan — Thu, 01 Jul 2010 21:40:48 GMT

I always think it is interesting to step back for a minute and realize where the market has been for the past 6 months, where we are now, and where we may head in the future. 2010 is already halfway over, and the market has moved a great distance since January.

Click Chart To Enlarge

Attachment 61

The market started out the year in slightly positive territory, however ended January on a negative note which some say dictates the direction for the rest of the year. However from February until April we rebounded very nicely and were up about 10% on the year for all of the major indicies, however it took us over 75 days to get there and less than 45 days for us to more recently crash back down and end up worse than 10% to the downside.

Without looking at any other volume or price action, I think this paints a clear picture that traders and investors are still cautious, panicy, and on the edge of their seats. So what does this mean for the rest of the year? In my opinion, we are going to see a lot of volatility, choppy price action, and lots of back and forth days. This increased volatility for some is a great way to make money, but for the inexperienced trader can lead to their demise rather quickly. Keep an eye on volume and price action at all times, and always be prepared for the unexpected to happen without any notice.

Attached Thumbnails

Reality Check: Are You Too Stubborn To Reach Out To A Trading Coach Or Trading Course?

Brendan Egan — Thu, 01 Jul 2010 17:10:30 GMT

Trading is a profession that is comprised predominately of males, usually between the ages of 25 and 65. Given this statistic, it is my opinion that this demographic is probably one of the most stubborn in general, however when I look at traders in this demographic I find that they are even more stubborn than most average 25-65 year old males. This is probably because trading is a profession with limitless freedoms, however this also in my opinion is one of the reasons why over 90-95% of traders fail within their first 18 months, and many within their first few months.

My primary reason for founding 123LearnToTrade was to provide a place for traders to get quality trading education--through blog posts, trading courses, private coaching, and any other means possible. However, in talking with individuals regarding trading education, they are very hesitant. This is in part because of all the bulls**t that exists on the internet about trading, but is also because these stubborn individuals want to teach themselves how to trade.

I would personally never teach myself how to become a doctor--simply because I wouldn't want to kill someone making a mistake that could be avoided. Much like becoming a doctor, becoming a successful trader requires instruction and guidance from a veteran trader. However new traders still refuse to seek guidance, and want to learn things the hard way. They think they can outsmart the system and take the "less expensive road" to trading success. And while they may never spend a single dime on trading courses or coaching, they usually lose anywhere from 10 to 100 times more in the markets than they would have spent on a trading course or coach who could have helped them avoid losing some if not most of that money.

Just the other day someone called me who was interested in the Price Action Trading Course but stated that he was a bit hesitant to buy the course. I asked him how much he has lost in the markets within the past year and he said that he has lost almost $10,000. This individual has thrown $10,000 out the window and into the hands of professional traders but is hesitant to spend a few hundred dollars on a quality trading course! Dozens of traders have thanked me for saving them money--some of which are shown in the trading course testimonials page-- yet I know that there are thousands of traders who come to 123LearnToTrade and pass up on a quality trading education simply because their ego is too large or they are being too cheap to buy a quality trading course.

Don't ever forget that we are all traders trying to reach one objective--consistent profitability--and when these newer traders refuse to take the least expensive, quickest, and least painful road to getting there, I am simply left in awe. There are very few broad rules that exist in economics---however one of them is that we must assume that every individual is rational and makes rational decisions. It is just unfortunate that traders do not all make rational decisions and once they finally do begin to think rationally it is often too late to save what is left of their trading accounts...

Ways To Avoid Getting Rusty In Your Trading

Brendan Egan — Thu, 01 Jul 2010 16:54:29 GMT

It's finally summer here in Chicago and the weather has been beautiful. I found myself taking some much needed time off from the site as well as trading, however as I return for a few days before the long July 4th weekend, I find myself a bit rusty and out of sync with the markets.

Usually I am able to have a "sixth sense feeling" about the markets and the price movements, however whenever I miss a few days of trading and especially when I miss a few weeks, I find a disconnect between myself and the market. To battle this, I suggest the following:

1) When you return from any length of time away from the markets, don't just jump into positions. Take time to scan the markets, scan the stocks or currency pairs that you watch, and get a feel for their price action over the time you were gone.

2) Take a long and hard look at the broad markets. Get a strong feeling for what has happened, understand the emotions traders felt while you were gone by studying price and volume movements, and make sure you have a sound understanding for what the critical levels are in the broad markets.

3) I often find that my first day back is a terrible trading day. Because of this, I try to not take any positions on my first day back, but rather I just spend time studying the market and charts and getting back in sync with the market. Remember, you can't lose any of your hard earned money if you don't open positions, so to battle the problems of over trading and taking trades that aren't in sync with the market, I try not to trade at all my first day back.

4) Review the Price Action Trading Course and especially check out a few lessons that focus on areas which you are struggling. Make sure all the concepts that are important to finding profitable trades are fresh in your head and you are following your trading plan and rules. It is very easy to forget concepts that are new to us and if we spend a long time away from the market we can even forget our habits that we have had for years, so I think the trading course is a great place to refresh some of the concepts that we should be using everyday.

5) Lastly, take the plunge when you find a good position and get back into the market. It may feel a bit foreign or shaky at first, but we all need to take our first step eventually. I always make sure I take a position at least by my second day back, and from here things naturally progress back to how they used to be.

Summer months are very tempting to traders, so I suggest that you work hard at not spending too much time away from the markets, especially given the volatility and higher volume that we are seeing this summer.

The Power Of One Trader And Why You Shouldn't Drink While Trading

Brendan Egan — Thu, 01 Jul 2010 04:10:47 GMT

Millions of people have been charged with DUI---driving under the influence---but is the next, new term going to be TUI--trading under the influence?

Well, that appears to be the case for one UK based oil futures trader. He apparently bought around 7 million barrels of oil while drunk, causing a huge spike in the price of oil. While his little drinking mistake cost his company about $10 million, it cost other traders who based their trades off of this price spike hundreds of millions of dollars.

While this certainly is an interesting story on its own, rather than just shake our heads at the fact that someone can just piss away $10 million dollars I think we should take a moment to learn a very basic market concept that I talk about all over the Price Action Trading Course--basic supply and demand.

It is incredible to think that one trader can literally change an entire market--and an extremely liquid one at that. This one trader not only caused a price spike, but he caused tens of thousands of other traders to place trades based on his price spike. So while he traded only around 7 million barrels, which in and of itself is a lot, he caused millions and millions of other barrels to be traded due to his demand causing such a fast change in price.

So for those who doubt the power of one trader, this is a prime example of how just one individual can change the entire market. Market manipulation is a topic that I personally love because most traders don't know how to trade it, which makes it super successful for those who do know how to treat manipulation. It is something I talk about in much more depth in the Price Action Trading Course so for those who are interested be sure to check out the market manipulation lessons!!

5 Of My Favorite Trading Quotes

Brendan Egan — Thu, 24 Jun 2010 04:54:08 GMT

Here are 5 of my favorite trading quotes. I think all of these topics are taught and explained in the Price Action Trading Course, however here is a brief and general outline of each quote:

(1) If you don't know who you are, the stock market is an expensive place to find out. George Goodman

(2) A market is the combined behavior of thousands of people responding to information, misinformation, and whim. Kenneth Chang

(3) Knowledge arises from experience. Just as a musician practices diligently to become a concert pianist and an athlete spends uncounted hours on the court to become a great tennis player, a trader must gain experience through actual trading to become an expert trader. James F. Dalton

(4) Historical price patterns continue to work because human nature doesn't change, and neither does the law of supply and demand. Study past successful stocks if you want to see what future ones will like. William O'Neil

(5) "Trade for extremely consistent gains, and tiny losses - not for a few "homerun" gains and many "modest" losses. Mike Reed

These are just a few of the thousands of trading quotes I have lists of and have come across over the years. Again a lot of these concepts are taught more in depth within the Price Action Trading Course, however I always like to not only give people who have not taken the course an idea of what is inside but also give those who have taken the course another perspective and the words from the mouth's of other great traders and economists. More quotes to come in the near future :)

Why YOU Need To Learn How To Use Volume In Your Trading...NOW

Brendan Egan — Thu, 17 Jun 2010 14:01:43 GMT

A few weeks ago I talked to 15 different traders: 5 of them have been trading for less than a year, 5 of them have been trading for 1-2 years, and 5 of them have been trading for over 2 years. I asked each and every single one of them if they use volume in their trading, and them knowing how important I think volume and price action are they all responded "yes".

So now that I have established that all 15 of these traders are using volume, I wanted to know exactly how they are using volume and whether or not they are using it correctly. I remember as a newer trader I always would say that I was using volume but I really didn't know how to properly utilize volume. So I spend just a minute or so showing each of these traders a chart and asked them to analyze exactly what the volume on the chart is telling us and where we would want to take a position. The results of the survey showed the following:

Attachment 56

So obviously only 3 out of 15 traders, or 20%, actually know how to properly use volume in their trading. It certainly wasn't a surprise to me that beginner and even intermediate traders don't know how to use volume, but the fact that even advanced traders didn't know how to properly analyze volume was mind boggling to me.

A few months ago I authored, produced, and published a 6+ hour long video trading course that outlined specific price action methods and most importantly talks about how I use volume to spot trades. Today, in light of the results I have found and the lack of understanding that exists about volume, I would like to share with you part of just one of the sixty lessons that I teach in an effort to at least get you headed down the right road in terms of volume.

So just what is volume? Volume is most simply the measure of transactions taking place in the market. So for any one unit of volume we see a transaction, or a buyer paired with a seller, taking place. So why is it important to analyze the level of volume with respect to price movements? Well, simply put, it is important because we need to know how many people are placing trades at given areas. Remember, supply and demand are what move price, so if we see a large increase in volume followed by a large price movement, we know that there is a very high amount of demand and a relatively low amount of supply. We can then place our trades accordingly and follow the crowd or momentum as price moves higher.
Just yesterday I was getting ready to place a trade on Apple ( $AAPL ) when I found myself using volume to decide if I should get long or short. As a newer trader, I would see price approaching an area of resistance, for example, and I never would know if I should get short and assume price would bounce off resistance or if I should get long and assume price is going to break out. Well, in the following example, I used volume to tell me exactly what price was going to do next.

In the following chart you will see elevated volume as well as relatively large upward price movements. Price was quickly approaching prior resistance between the $265.80 and $266 area, and I was getting ready to take a short position as price approached this area. However, I always and I repeat I always look at volume before placing any trades, and I saw that for mid-morning volume was as high as it normally is during the open or close. This told me that there are a lot more participants taking part in this price movement than normal for this time of day, so I knew that price was much more likely to break through resistance than to bounce off it.

Attachment 57

So rather than fight volume and fight momentum, I looked to take a short position instead. And while price did temporarily pullback when hitting resistance, volume returned into the picture a bit later in the day and caused price to continue upward, as high as about $268.50. This represents a $2+ price movement in just a matter of an hour or so, which is a great amount of price movement for such a high probability, high reward, and low risk scenario.

Attachment 58

So let's zoom in and look at exactly what happened and exactly why I didn't take a short position. In the chart below, we can clearly see elevated volume and upward price movements. As price approached the area of resistance, we can see that the buyers backed off, which is shown in lower volume, because they waited for the sellers to jump into the picture and cause price to pull back some. However, the sellers were scared of all the volume they just saw (like myself who was not willing to get short here) so price only was able to pull back ever so slightly. When the buyers realized this, they all jumped back into long position or got into new long positions, and added to the demand and volume at this given area. Following this event, we saw price break right through resistance and do so quite strongly, leaving us with a picture perfect trade.

Attachment 59

So through just this one example, I hope you will not only have a slightly better understanding for what volume is and how I use volume, but more importantly I hope you will start to use volume in your trading if you are not already, and I truly hope you will be one of the few traders out there that actually uses volume properly. There are thousands of factors that can influence the outcome of any trade that you place, and by adding volume to your trading edge you just have that much more of an advantage over every other trader in the markets.

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Going Forward With The Weekly Trading Webinar

Brendan Egan — Sat, 12 Jun 2010 15:50:41 GMT

After much debate, I have decided that it will benefit everyone best if we go forward with the weekly webinar and weekly market outlook newsletter. More details will follow soon, however I think the following will be the structure:

Weekly Newsletter:
Will be sent out either Sunday night or Monday morning every week and will outline major events in the market for the coming week (for stocks, futures, and forex) and will also talk about my personal market sentiment and where I think we could head in the week ahead.

Weekly Webinar:
Will occur at 4PM New York Time every Friday and will recap the trading week, allow time for questions and answers, and we will basically talk about whatever the subscribers want to talk about. The webinar will last no less than 1 hour in length and I'm going to try and always keep it under 2 hours.

For those who cannot attend the webinar, I will be recording it and submitting each week's recording to a forum which you will have access to as long as you are a subscriber. Additionally, I will open a forum where you can post questions that you have if you cannot attend and I will be sure to touch on those questions during the webinar.

If anyone has any other questions or suggestions, please let me know. Otherwise I will nail out some final details in the next few weeks and open the webinar up to subscribers. The cost is probably going to be $27/month, or less than a dollar per day.