Appendix 1
Checklists for Trade/Vesting in the Markets
Inherent in every intention and desire is the mechanics for its fulfillment . . . intention and desire in the field of pure potentiality (markets) have infinite organizing power. And when we introduce an intention in the fertile ground of pure potentiality, we put this infinite organizing power to work for us.
—Deepak Chopra
In this appendix we share with you some forms that we and others have used to ensure that we are trading with the rules that have been established as profitable. Plus we share other miscellaneous concepts that contribute to a good bottom line.
One of the best things about the markets is that every day is a new day. Think of it as if you were playing a new video game. The market does not remember playing with you the day before or even the trade before, therefore each game must be played according to the market’s behavior for that day or time frame. If we try to play the game as we played yesterday, we will almost always lose. The market does not remember if you won or lost yesterday, nor does it care. It is simply doing what it is supposed to do because that is its function. Think about the millions of iterations a video game has to run; it never plays the same game. It is always changing, therefore the challenge continues. The same holds true for the markets. If anyone really discovered how to win every time, the markets would no longer exist, and the game would be over. How much fun would that be?
What we can do each day as we begin our “game” is be ready for what the market has to offer instead of hanging on to our preconceived notions of what it is supposed to give us. Trading is the most naked psychotherapy in the world. So make sure that you have all the tools in place to trade well and have fun at the same time.
You must do research to find an approach you are comfortable with and understand it thoroughly. Do not leave any questions unanswered. Trading is your future, and you need all the insight you can get to do your best.
Here are some things that are a “must do” before being ready to trade. Data sources are very important; you must have a reliable provider to ensure correct data. There are many to choose from and it is worth doing the research to get the right one for your needs. End-of-day data is much less costly than real-time quotes.
Before you put real money in the markets, we suggest that you paper trade for awhile; if you cannot make money on paper, you should not expect to make it in the real markets. It is much better to make mistakes on paper than with your starting capital. There are simulated trading accounts such as Auditrack where you can practice until you are completely comfortable with the signals and the approach. If you are a seasoned trader this exercise may not be necessary for you. If you need more assistance, contact our office.
You must set up a trading account. Once a client came to a tutorial with $10,000.00 in cash to trade, unaware that was not how it goes. There are many brokers to choose from. There are full-service brokers, discount brokers, and even on-line brokers. If you are a novice trader, you may choose to start out with a full-service broker to assist you with placing your trades and make sure that you are not making clerical-type mistakes. If you are an experienced trader, you simply need someone to execute your orders. You will pay according to the service you require.
It is important to see what features the different brokers offer. Some will give free data quotes with an account; some even pay interest on the money in your account. It is important to make sure you have a reputable firm and receive the services you need. Look at its record. Does it have satisfied customers? If you choose an on-line broker, make sure that you have an alternative way (telephone number) to reach them if your Internet service goes down. This is very important if you are an intraday trader. In most cases, you can negotiate better commissions depending on your account size and the number of trades you execute each month. Just remember your broker works for you. He should not influence your trades or decisions. Make sure that you understand the language of the markets when placing trades. Do you understand a stop limit order? Do you know what a contingency order is? If not find out! This information should come from your broker.
One day you will say, “Sell” instead of “Buy.” This is a simple mistake, much different from not knowing what your order means. If you are trading commodities, there are a few more things you must know, such as contract month expiration. In the stock market, contract month expiration does not exist. Commodities have different contract months. They change and expire so it is important to know when to exit a contract month and roll over to the following contract month. You do not want 5,000 pounds of pork bellies delivered to your house.
Know your margin requirements. Margin is the amount of money required to trade each contract. This money must be in your account before you can enter the market. Tick size and price movements are also different in commodities. Each commodity may have a different point value and may move in different increments. For example, the Swiss franc moves 1 point at a time and each point is worth $12.50. Soybeans move or trade in quarters and each one-quarter is worth $12.50 or $50.00 percent. All these small details are what make the difference in you being a prepared or an “impaired” trader. You would not want to fly a plane if you did not know how to read the instruments. Why would you want to risk your money without having the knowledge available to you?
Many traders begin with a limited amount of equity, therefore it is imperative that they do not overtrade or have unrealistic goals. The smaller the account size, the longer it will take to build up equity, but small consistent profits eventually can equal large profits. In the beginning, most traders will have a drop in equity before it takes off. This drop is common, almost a safety feature. We have found that traders who make large amounts of money quickly because they were luckily in the right place at the right time normally end up losing it all. They think they know how the market behaves. They were just lucky. It is important that you trade markets appropriate for your account size, trading style, and experience.
For example, some traders come to us with the idea of only trading the S&P 500, even though they have never traded before. The end result or goal is unrealistic. They do not understand that it is better to make mistakes in less volatile markets while fine-tuning their trading skills before jumping in with the big dogs. If you were just learning how to drive, would you want to go directly to the freeway with experienced drivers going 80 mph? No, you would want to practice on the back roads and empty streets until you were comfortable with all the aspects of driving. Same is true with the markets. We want to be ready for those drivers doing 80 mph, not scared of them.
Once you learn all the details, trading becomes “automagic.” Remember how awkward everything was when you first learned to drive? There were so many things to coordinate all at the same time. Remembering to put your foot on the brake to go into reverse, looking in the rearview mirror, trying to judge distances—it all seemed so difficult. Now think of how easy or automagic it is when you drive compared to then. Most of us are talking on our cell phones, looking around, or having conversations with our children. We are not thinking about each individual step it takes to drive; we just do it. That is how we want our trading to be—automagic.
Once you have all the technical tools in place, such as your account, a broker, and a trading approach, you must make sure the most important part of your trading system is ready, you!
Here are some checklists to help you get ready for each trade.
Chart Checklist for Daily Trading
Elliott wave: Impulse wave ______ Corrective ______
Head Checklist for Trading
