| o What does it mean to be a disciplined trader?o | | | | There was no possible way he was going to get the |
| Tape reading. | | | | same fills. The stock was too thin to warrant the size |
| - What does it mean to be a disciplined trader? | | | | he was trading. It was trading 100 -400 share lots |
| In virtually every trading book or course, there is at | | | | consistently in time and sales (quoting the same size |
| some point talk about the need to be a disciplined | | | | as well) and he was trading 5,000 share blocks. To |
| trader. Of course there is the most basic and popular | | | | make a long story short, he lacked the disciple to |
| definition of "execute your stop losses when price | | | | adjust his old share size to the new stocks. |
| gets to your number." | | | | To be a discipline trader you must never just trade |
| I have a slightly more detailed version that I feel | | | | one size fits all for every stock. Stop loss parameters |
| every active short term stock trader should know. | | | | and liquidity vary from stock to stock. |
| Trading Discipline:o To exit a trade immediately when | | | | Keep a trading Journal. You must have a method help |
| your stop loss is reached. To exit a trade when your | | | | yourself improve. Professional athletes have coaches, |
| profit target is reachedo To not trade when market | | | | you should too. Your journal is your coach. Having the |
| conditions do not match your style, to trade actively | | | | discipline to write entries every day after the close |
| when market conditions meet your criteria.o To | | | | and reading your entries daily to monitor progress is |
| always manage risk appropriately for the particular | | | | the only for the average trader to improve. If you |
| stock you are trading. One share size does not fit | | | | don't keep a journal you will be depriving yourself of |
| all.o To review your performance every day some | | | | the most valuable class you will ever pay for, your |
| time after the close. | | | | own experience. |
| I am sure everyone reading this is well schooled in | | | | - Tape Reading |
| taking a loss when you are supposed to. It is not | | | | Tape reading is a method of forecasting the next |
| however widely talked about how important it is to | | | | immediate move in your stock |
| book a profit, when its time has come. If you are a | | | | - A method of forecasting, from what is taking place |
| scalper you must book profits on your entire position | | | | now, to anticipate what is likely to happen in the |
| into momentum, there is no last second decision to | | | | future. |
| scale out, get out and go to the next trade. If you | | | | - The essence of tape reading is interpreting the |
| are an intra day position trader and the trend is | | | | action of the volume (the prints), combined with bids |
| obvious, scale out and maximize the remainder of the | | | | and offers. |
| trade. You shouldn't be afraid of a temporary pullback | | | | - Are they "marking up" or "marking down" their |
| and get out of your entire position because of noise. | | | | inventory? (bid/offer quotes) Securities are similar to |
| One of the first considerations you should make | | | | inventory in a department store. Is it flying off the |
| before you write your trading plan is deciding what | | | | shelf or is it being offered at a discount? |
| style of trader you want to be. This is important | | | | - How urgent are the participants? How do we see |
| because you will then be able to fill out your plan with | | | | this? From the size and consistency of the prints. |
| scenarios to enter and exit your stocks based on | | | | One of the most common opinions our instructors |
| your style. It is very hard to make money in all | | | | hear during our Equity Trader 101 course is this: |
| market conditions. What conditions suit your style? | | | | "I don't need to learn to read the tape, I trade off |
| What does the stock action need to look like for | | | | charts." Well my trader friend, how are the charts |
| your method? | | | | formed? That's right, from the trades (prints) |
| Once you have a clear answer, you should only trade | | | | Let's say your stock is trading at new highs, but all |
| actively when conditions match your method. | | | | the prints are on the bid, and for size. Do you think |
| I have seen more position traders get chopped up in | | | | you should look to tighten up a trailing stop on a |
| a market that is in consolidation, and scalpers lose | | | | good position or should you keep your eyes closed |
| their shirt when a trend has formed. Position traders | | | | and wait till the stock breaks down on the chart and |
| keep trying to guess when the trend will start and | | | | you give back half your profits? |
| scalpers, who make most of their money through | | | | One more example, let's say you are short and your |
| sniper like attacks of the markets ebb and flow, get | | | | stock has a fast move against you. The stock |
| hammered when the market picks a direction. | | | | normally trades 2,000- 4,000 share prints on the tape. |
| Discipline means waiting for the market to present | | | | During this bounce against you, I notice the only |
| the conditions that suit your plan, don't try to force | | | | prints that went off were of the 100-300 variety. I |
| your plan on the market. | | | | stay in the trade and you bail out. What did I see? |
| I once watched a very successful and long time | | | | The circumstances did not change. The tape told me |
| trader complaining he was getting horrible fills for | | | | nobody stepped up to the plate and did any buying |
| about a week. After listening to this for what | | | | of significance. |
| seemed like an eternity because of the way he was | | | | Next time you are at your screen, give the tape a |
| carrying on, I decided to watch his trades. | | | | little more "eye time." Watch for significant prints that |
| He was normally a short term scalper who traded | | | | actually move the stock, not every trade. |
| very liquid stocks. He decided he would trade faster | | | | Pay attention to where they are happening. Are the |
| moving stocks that were less liquid because there | | | | significant prints occurring at the end of a move or |
| was a new trader in the room who was trading that | | | | out of a breakout? These are all necessary |
| style. After about 3 seconds of watching him trade it | | | | observations to become a good tape reader and a |
| was obvious he was not trading in a disciplined | | | | better trader. |
| manner. He was trading the same size blocks in the | | | | Until next time, have a great week trading. |
| new stocks that he was trading in his old style. | | | | |