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For traders wanting to
learn day trading, my first
trading tip is simple:
Focus most on better exits, not better entries
Here’s an example of why:
On August 31, 2005 the RBI SP futures resistance areas were 1210.00-1210.50, 1214.75-1215.50, and 1219.75-1220.25. (See the horizontal lines on the 5 minute SP futures chart below.)
In the middle of the circle at A, the market finds a double bottom of sorts off an RBI zones that clusters with one of my key dynamic supports (purple line).
The day trading advice I would offer here would be to enter long near A and exit into the emotional extreme at B for a nice trade.
If the slope of the purple line had been steeper, and the RBI zone had been better-respected throughout the day… and if the double bottom had been at a new weekly low, this setup would have been as good as an entry setup gets.
Here’s the point I’m trying to make, setups will never be perfect and that’s ok as long as you exit trades when things don’t go your way immediately.
Points B and C are the interesting part of the chart. The market stalls at both of these RBI zones, right after an emotional extreme (I monitor emotional extremes on a separate chart not shown here).
An important trading tip would be to fade the emotional extremes when the momentum fizzles at an RBI support or resistance zone. The immediate response of the market is very consistent at these extremes, though most traders are afraid to trade them.
Now I don’t like to fight a strong trend like the one on this chart, but these setups at B and C are tempting to me. As you can see, the market barely paused at B and only pulled back for a scalp at C. But that’s ok because my next trading tip is:
Every trade starts out as a scalp.
If I exited these trades with anything but an aggressive, “take no losses” attitude, the market would have hammered my stop. Having the market hit your hard stops is the worst possible outcome of a trade, and for those of you who are day trading support and resistance successfully, as I have for over 30 years, you already know to avoid this trap.
Following my second trading tip, I would have broken even at B and scalped a small profit at C. That’s the key to support and resistance trading for a living - in a nutshell.
It’s your exits, not your entries that count most.
Now I imagine that 90% of traders will focus their whole trading careers on the occasional strong trend, allowing their hard stops to be run over again and again. They think that the occasional “home run” during a strong trend will make them successful if they use hard stops and let the market hit them. This doesn’t work. That’s why a lot of traders who focus on emini day trading only average from 6 months to a year before moving on to other careers.
To these “home run traders” the consistent action at places like B and C just doesn’t seem profitable to them.
As an experienced professional trader, I would point out that the emotional extremes at RBI support and resistance zones are consistent setups when you follow trading tip #1 and #2:
“Every trade starts out as a scalp until proven otherwise.”
“Work on your exits more than you work on your entries.”
My third trading tip would be to:
Use a clearly-defined set of entries and trade them exclusively.
Trade nothing else… no sudden inspiration, no special circumstances “just this once,” no impatient entries on choppy days, and no “new” version of your usual entries.
A lack of disciplined entries brings fear. Unfortunately, you can’t wait for one of your defined high-probability entries if you’ve got no confidence in them. And you can’t be confident in them if you don’t trade them exclusively and give them time to earn your confidence.
Remember this, it’s better to trade a set of mediocre entries with discipline and great exits than to trade excellent entries without discipline and first-rate exits. Changing your entries continually, tinkering with them, wasting time and money hunting perfect entries… This is all poison.
There are no perfect entry strategies
The money is made on first-rate exits, because these can be directly controlled. A clearly-defined set of excellent entry setups traded with discipline is important, but not the key.
My entry setups are based upon the RBI day trading support and resistance levels in addition to several key dynamic levels, plus a few simple chart patterns.
I write a market newsletter each day, giving my "game plan" for the next trading day. I'm as specific as possible including Support and Resistance levels that I will be buying and selling against, which provides you with great trade set ups nearly everyday.
You can get my RBI Trader's Updates in "Real-Time" before every trading day- Click Here. They will transform your entries and help make you a successful trader if you learn to exit well.
You can learn exactly how I enter and exit trades. Take your trading to a new level.
Subscribe to my RBI Updates in “Real Time" … and see how my support and resistance levels and market analysis will help your trading - no matter what method you’re using.
There’s never been a better opportunity to turn the corner and become a consistent trader.
The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. The foregoing has been prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.
We are not advocating trading futures. The prices and contracts in the TradeStalker's RBI Updates specify a manner in which you could trade. We occasionally mention the SP500 and Nasdaq futures markets because it is extremely liquid and tends to lead the other markets. This is not an endorsement or recommendation of the SP500 and Nasdaq futures markets. The risk of loss in futures is substantial. You can lose more than your original investment. We are not Registered Investment Advisors or Commodity Trading Advisors.
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