Trading S&P, NASDAQ 100 & E-mini Futures. L. Borsellino


To trade effectively, you must first have a plan, laying out a strategy for the upcoming trading day. Your plan should encompass your mental preparation, your technical analysis of the market, entry and exit points, and the nature of the market, itself. In this Seven-Part Course, I'll lead you through the highlights of devising a plan to trade. Our focus is on Stock Index Futures - in particular, S&Ps and NASDAQ - but many of these lessons can be applied to any market. My goal is to help you - whether a novice or an experienced trader - to trade better by preparing better. In Part 1, we examine the first step in devising a plan - preparing mentally for the trading day. You can't just start trading without mental preparation any more than a professional football player could just suit up and go out on the field. This mental preparation underscores what I consider to be the first requirement of trading - discipline.

Discipline is what enables you to devise a trading plan, execute that plan and stick to it when things don't go your way. With a little discipline, you may have a little success. With more discipline, your successes will be more frequent and more consistent, and a totally disciplined trader will have the best opportunities of all. In Part 2, we'll examine the personality of the market. In order to devise a trading plan, you must know, for example, if you're in a trending market or a range-bound one. I'll share some hints and advice on how to tell the kind of market you're trading - and how to learn from your mistakes.
n Part 3, we'll look at trade execution with entry and exit points and stop-order placement. We'll discuss risk and reward, dealing with losses - and wins, and how to keep your focus when everyone else in the market is losing theirs.
In Part 4, we'll go a little deeper, looking at false signals and breakouts. I'll share my advice on when it's best to be on the sidelines, and when - and why - it is important to vary your trading size and your stop-order placement without increasing your overall risk. In Part 5, we'll examine how to use stocks and other indicators to help you trade futures. Traders should use every tool at their disposal to improve their performance. We'll discuss some of our favorites.

In Part 6, we'll look at trading the NASDAQ, a high-octane market that's dominated by the tech-sector and has been known to make some pretty wild moves in a day. In Part 7, we'll answer the questions that you've generated - so be sure to e-mail your queries throughout the course. Most of all, I hope to give you an insight into my mental and strategic processes as I trade the futures markets, where I've spent nearly 20 years. While a trader's style is unique - a reflection of personality, preferences, risk tolerance, and so forth - there are some things that remain constant. Among them (and at the risk of over-simplifying) is that basic law of trading: Buy low, sell high. It may sound easy, but to do that requires intense preparation and discipline each and every day.

Trading is a mental game. The best trading system, the most accurate technical analysis, the best online order-entry system, and the fastest Internet connection won't help you if - FIRST - you're not psychologically prepared for trading. When I teach about trading, I use a lot of sports analogies because I believe there are a lot of parallels that can be drawn between the two endeavors - the intensity, the emotional highs and lows, the risks and the rewards.

Just as every serious athlete has a mental routine before each game, so must you prepare psychologically each day before you begin trading. That preparation is just as necessary for a veteran like me, who has been trading nearly 20 years, as it is for the newbie. Granted, our preparation may be slightly different, but it will encompass the same factors:

• Clearing and centering your mind.
• Preparing/Studying indicators and technical analysis.

Let's take the first one - Clearing and centering your mind. At this point, if you're saying to yourself, "Come on, I want to get to the indicators and trade set-ups," then you really need this step. You cannot dive into trading any more than a professional football player would just suit up and go out onto the field. You must have some ritual each day to separate your trading from the rest of your life. The purpose is to clear your mind of distractions and to get centered. Trading is serious business. Treat it that way.

Your choice of mental preparation will be a personal one. For me, my favorite good-weather preparation is to chip golf balls onto the green for an hour-and-a-half each morning. Or else I'm on the treadmill. Maybe you jog, meditate, do Tai Chi, whatever?There must be an activity (I prefer a physical one) that tells your mind, "Okay, the rest of my life is being put aside. I'm preparing for trading."
I've seen so many talented young traders "blow it" because they lacked the discipline or the ability to take on risk. Either they took on too much risk and lost all their capital in one or a few trades, or else they became the proverbial deer in the headlights when it came to risk. The underlying factor, I believe, was they failed at the mental game of trading.

The first rule in trading is to "know thyself." If you can't control your own emotions, keep your ego in check, and remain, at all times, disciplined, then you can't succeed. It's as simple as that. Most importantly, you MUST control your emotions when it comes to losses. Novice traders don't want to think about losses. They only want to think about how much money they can make. The truth is, losses should ALWAYS be on your mind. Why? Because losses are what will take you out of this game. Profits take care of themselves - if you keep the losses to a minimum.

Good luck - and good trading.

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