Traders Helping Traders Ezine and Paper trades

Simple Strategies for Short Funded Traders

Lesson du Jour

Here's a little something I picked up while surfing the web. Some of it might not be new to you, but it's all true – in life as well as trading.

Rules for Life

You will receive a body. You may like it or hate it, but it will be yours for as long as you live. How you take care of it or fail to take care of it can make an enormous difference in the quality of your life.

You will learn lessons. You are enrolled in a full-time school called Life. Each day you will be presented with opportunities to learn what you need to know. The lessons presented are often completely different from those you THINK you need to know.

There are no mistakes -- only lessons. Growth is a process of trial and error and experimentation. You can learn as much from failure as you can from success.

A lesson is repeated until it is learned. A lesson will be presented to you in various forms until you have learned it. When you have learned it (as evidenced by a change in your attitude and behaviour), then you can go on to the next lesson.

Learning lessons does not end. There is no stage of life that does not contain some lessons. As long as you live, there will be something more to learn.

"There" is no better than "here". When you "there" has become another "here", you will obtain another "there" that will again look better than your "here". Don't be fooled by believing that the unattainable is better than what you have.

Others are merely mirrors of you. You cannot love or hate something about another person unless it mirrors something you love or hate about yourself. When tempted to criticize others, ask yourself why you feel so strongly.

What you make of your life is up to you. You have all the tools and resources you need. Remember that through desire, goal-setting and unflagging effort you can have whatever you want. Persistence is the key to success.

The answers lie within you. The solutions to all life's problems lie within your grasp. All you need to do is ask, look, listen, and trust.

You will forget all of this. Unless you consistently stay focused on the goals you have set for yourself, everything you just read won't mean a thing.

Anonymous

Got a question that needs answering like an itch you can't scratch? Send it along to me at Erich@tradershelpingtraders.net and I'll be happy to try and clear things up for you.

A Sampling of the Markets we're covering this week...

Energies Market Overview

The Energy complex spent last week in consolidation mode. While the ranges look like anything but consolidations, the fact is that the markets stalled after the big decline from the previous weeks. I still believe that we still have more room to the downside in this sector; however the ranges are a little too choppy right now just to take a stab at a trade.

RSI is "normalizing" and nearing the 50% level on the indicator, which is just as good (and neutral) as a 50% Fibonacci retracement. While this might be enough to send prices lower, the strong weekly support that we're trading at, combined with the tendency for markets to retrace a bit after a large move in either direction, makes a bounce seem more likely for this week.

At least that's my thinking for the moment. If we see prices tighten up a bit, and/or define a resistance area, then I might try a trade early.

FLAT Energy Complex

Financials/Indices Market Overview

A strong week in the Stock market as all three stock indices rallied higher. We only traded the Dow last week as it had the strongest setup, and our trade netted us a little over $400 per contract before the weekend. While I think that we're going to see the mindices push higher for the long term, over the next week I think we'll see a bit of a pullback and possible test of the RSI trendline.

The pullback will be welcome as it will allow us to buy back into the market at a better price. Keep watching for the RSI test, as well as trendline support, for clues as to when to put on a trade.

The Eurodollar continued to rally last week in spite of our best attempts to short it. The trend is reasonably strong and it is obvious that rates are still in pullback mode, which means that we could see a run to the 95000 resistance after all.

Eurodollar

[Note that this week we've moved into the September 2007 Eurodollar contract.]

The Eurodollar seems determined to head higher for the short term, at least according to DMI which shows the market in a reasonably strong uptrend. It looks as though the market might be in a short term pullback after reacting to the resistance at 95230 earlier in the week. While the pullback might not be complete, I'll set up an order to buy the market with the trend when/if it reverses and heads higher.

Friday's range highlights the resistance at 95170 as a definite barrier to higher rates; even so I think I'll wait until prices break the 95230 line before buying in. I'm doing this because RSI is not hooking at the testpoint, and as a result we could see a little flailing by the ED before it's ready to head higher. Entering above the stronger resistance at 95230 (which is also near the 50% retracement) will help keep us on the right side of the trade.

You could cover the trade under the 95170 resistance; however the better support area is at 95140 – 95150. This will leave just over $200 at risk for the trade. The first profit target is resistance at 95500, or just shy of it. Things begin getting a little iffy as early as 95450, so be wary when/if rates continue to rally.

Looking at the spec's you'll see that the trade isn't a 3:1 reward/risk trade. I left the trade "as is" because I couldn't justify making it any tighter than it already is. Making the trade abnormally tight would only serve to get us whipsawed. Using the correct stops, gives us a better chance of hanging in long enough to make a profit. The reason I'm leaving the trade like this is because I expect the ED to continue lower, and this is a "just-in-case" type of trade. If the ED falls off a bit we should be able to sweeten the trade enough to give us our usual 3:1 return.

BUY September (07) Eurodollar at 95.235
Exit Order: 95.145
Approximate Risk Exposure: $225 per contract
Profit Target: 95.495
Approximate Potential Profit: $650 per contract
RRR: 2 1/2:1
Degree of Risk: Moderate

eurodollar chart

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here.

Wheat

Wheat came just 3/4 of a cent short of our profit target on Friday. Unfortunately this session was also a gap 'n fade day (seems to have been Friday's theme) and as a result we might see prices push lower on Monday. RSI is slightly "off" but DMI still shows the market in a good uptrend. I suspect we'll see prices continue to rally for the longer term, but for the short term we could see a reaction to the resistance at 455.

Technically the "best" stop placement is below Thursday's low at 429; however it doesn't make much sense to risk nearly $600 in accumulated profit just for the hope of riding the market higher. With this much profit at stake I would be more inclined to place the stops below Friday's low and exit on the first sign of a reversal. Barring any gaps, this would allow us to protect just over $800 in profit while still giving the market a chance to head higher. Next stop is the contract highs at 463.

CONTINUATION of Long December Wheat at 424 1/4
Exit Order: 440 3/4
Approximate Risk Exposure: $0 per contract
Profit Target: 453 3/4 (followed by 463)
Approximate Potential Profit: $1475 per contract
RRR: n/a
Degree of Risk: Moderate to HIGH

wheat chart

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here. The rest of the Markets in all sectors are covered in the Subscriber Edition.

This is only a small sample of the markets we cover!

For a detailed analysis of ALL of the markets, with explicit charts, entries, exits, stops, risk/reward ratio, potential profit, (and much more) please join us at http://www.supportandresistance.com/subscribe.html

Homework

Question:

Rob, a very experienced and successful trader, began an interesting thread at the forum...
In these posts Rob divulges some real trading gems – stuff that will help you become a more successful trader! There are at least three gems in the series of posts. Can you find them?

Required Risk Disclosure and Disclaimer