Starting January 2, 2003 we are going to make a change to our usual "Starting Account." This year we are going to begin trading a small account, in order to demonstrate how a trader might begin trading with a limited amount of capital, and over the course of the year, gradually build up to trading more contracts, and making more money.
We'll begin with our recommended $5,000 account, which is more than adequate for trading one E-mini S&P contract. Many brokers will allow you to start trading E-minis for a much smaller starting account. This is our suggestion for a reasonable start and an amount we are comfortable with for our trading account for 2003.
The strategy is simple. We will begin the year with our $5,000 account, and trade 1 E-mini S&P contract. As the account size grows, we will trade additional contracts. Stay tuned for more information as the weeks go by, and we will demonstrate how a trader can get started with a small account, and eventually grow to being able to trade multiple contracts.
This update contains a series of guidelines for knowing when not to trade and when to use extra caution.
Subscribers and current free trialers, read this Mentor Update "Knowing When Not to Trade" by visiting the Mentor Update Library.
Both libraries require a user name and password for access. If you have not had a trial within the last 6 months, sign up now
If you have had a recent free trial and liked what you saw, now is a
good time to subscribe as our special
pricing is in effect awhile longer.
Beginning January 2, 2003 we will be trading the e-mini contract (currently ES H3 for the March 2003 contract) rather than the big contract. We are making this switch as more traders prefer the e-mini contract with its smaller risk.
Our recommended account size for the e-mini is $5,000 per contract you wish to trade, so if trading three contracts, a $15,000 account would be comfortable. Many brokers will open accounts with a smaller per contract amount, so check with your broker. For your own peace of mind, the larger your account size, the easier it is to trade.
Traders who want to trade the big contract may still use our signals, with the occasional e-mini trade being stopped out, while the big contract may not have been. When this occurs, if following the real-time signals, you would be expected to either exit your remaining contract(s) or manage the remaining contracts on your own.
The Daytrader's Bulletin will be making some changes to increase trading profitability and to reduce drawdowns for our subscribers. Principal will be the manner in which we enter and exit trades.
Limit Orders and Market Order
We intend to start using Limit Orders to enter and exit, instead of only Market Orders. We will continue to use Market Orders so please be very careful to note which type of order we are entering on all our Real-time Signal Trades.
Limit Orders are good for entering when price reverses sharply at the extreme of a range. For these types of trades, if using a Market Order you can lose a half to a full point on entry.
Entry Types for the various types of orders permitted on most exchanges
and check with your broker for any restrictions on the types of
The length of a free trial is now four trading days. The purpose of the
Please request your trial when you know you'll be able to come in and watch. We are unable to grant second trials until at least six months have passed. We will not grant any trials to users who attempt a second trial by means of fraud.
[Note, after this was sent I realized I wrote on this same technique in our last newsletter. Evidentially I'm trying to get that message across.]
We continue our series of the 10 Winning Techniques of Successful
No. 5: Winning traders have no directional bias. They let the market
For the last several years we've been talking about the "overbought" market, the enormous valuations of companies in the hundreds of millions with no marketable products. The bubble had to burst, and burst it did. What Chairman Greenspan called "irrational exuberance" was really just simple greed.
When the Dow peaked at 10,673 in March, 2002, few people were looking for the exits. Instead they were desperately clinging to the lifeboat, hoping and praying their stocks wouldn't fall. Now with the Dow trading under 8400, they are still holding on.
Despite the news reports of "another day of profit taking on Wall Street," I haven't met anyone who got out at or even near the top. Most watched as if helpless while their accounts shrank away. The Bull mentality refused to budge and they paid the price.
The Bears on the other hand, happily traded all the way down, selling every day and making nice money in the process. Now our market has changed. We are likely going to experience an extended consolidation, with hopefully tradeable moves to either side, but the likelihood of a long-term trend in either direction is slim.
Whether you are a Bull that believes we'll once again see those highs, or a perma-bear, having a directional bias only means one thing. You'll miss out on much good tradeable activity.
Don't get stuck in either mentality, especially not now. As a daytraders you can profit from either direction. Whether the market moves up or down, as long as there is some tradeable movement, you can profit. If you find yourself deciding direction in advance, set aside your crystal ball and check your charts for signals in the other direction.
If you believe it will be a down day, your brain will happily provide you with plenty of confirmation, and you won't notice anything otherwise. You may not even notice an obvious uptrend for the day until it is too late.
An excellent strategy to make sure you're keeping an open viewpoint, is look in the opposite direction of what you anticipate. Just look. No one is saying you have to trade against your beliefs, just keep your eyes open and see what is on the chart in front of you. Then trade accordingly.
TheStreet.com has a fun series run every Friday called "The Five Dumbest Things on Wall Street." The latest installment was their end-of-year "The Year in Dumbness: The Quiz"
You can find the Five Dumbest series by doing a site search on TheStreet.com for "five dumbest."
Mark Poyser's Wall Street Follies presents the 40
OnTheOpen is a new service which allows anyone to receive our Pre-Opening Commentary. Subscribers receive this information in the Real-time Signals, minutes before the market opens. Now, you can also obtain this valuable pre-market information outlining our analysis of the market's probable open, potential gap openings, pending reports, what happened during the overnight session, and what you might expect to happen at the open.
While we are not able to predict the future, our analysis of the overnight markets is generally very good and accurate for the first hour or two of trading.
Just for fun here are some recommendations for entertaining reading.
* God is My Broker, by Christopher Buckley
A tongue-in-cheek approach to investing. In this wicked satire by
* Seuss-Isms for Success: Insider Tips on Economic Health from the
Chock full of clever quips on topics from micro-management to market
* Trillionaire Next Door: The Greedy Investor's Guide to Day Trading
Great gift ideas for traders or just for light ready for yourself.
For these books and others visit our bookstore, or visit your local library.
[I noticed when testing this newsletter that our bookstore links are
If you can count your money, you don't have a billion
Annoying Pop-up Windows: You know those windows that suddenly appear
when you're visiting a site, pop-ups can be annoying but also can
Rather than ever clicking within a window, especially one that simply
The window you want to close must be selected, that is to say you must
Tip: Close open windows with : Alt - F4
S&P 500: Our cumulative net result up to and including
These results are posted after each trading session in the Overnight
It is our sincere desire that our web site and Real-time Signals service is an informative and educational resource for you as a trader. Please be aware that you may trade in front of us, with us, or after us and that it is imperative that you make your own trading decisions based on your specific risk tolerance and discretionary funds. There is a risk of loss in trading futures.
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