Different Types of Market Orders (Part II)

By Ahmad Hassam

Stop Loss Orders: Stop loss orders are critical to your trading survival. The traditional stop loss order does just that. It stops losses by closing out an open position that is losing money. Stop loss orders are used to limit losses if the market moves against your position. If you dont use stop loss orders, you are leaving yourself at the mercy of the markets. A dangerous proposition!

Stop loss orders are on the other side of the take profit orders but in the same direction. If you are long, your stop loss order would be to sell but at a lower price than the current market price. If you are short, your stop loss order would be to buy but at a higher price than the current market price.

Trailing Stop Loss Orders: A trailing stop loss order is a stop loss order that you set at a fixed number of pips from your entry rate. As the market price moves, the trailing stop order adjusts the order rate but only in the direction of your trade.

Suppose you are long on EUR/GBP at 1.2654. You set the trailing stop loss at 30 pips. The stop order will become active at (1.2654-30=) 1.2624 initially. As the market moves higher, the trailing stop loss order continues to adjust itself higher. Suppose the EUR/USD rate goes up to 1.2674, the stop adjusts itself. Now the stop order will become active at 1.244.

When the market puts in the top, your trailing stop will be 30 pips below the top. If the market ever goes down by 30 pips, the trailing stop loss order will be triggered and your open position closed. So in our example, you are long at 1.2654. You set the trailing stop loss at 30 pips and it became active at 1.2624.

Suppose the market never ticks up. Instead goes straight down. You will be stopped out at 1.2624. Suppose the market first rises to 1.2664. Then it declines 40 pips. Your trailing stop loss order will first rise to (1.2664-30=) 1.2634. Thats where you would be stopped out.

You must have heard the saying often while trading: Cut your losses and let your winners run. A trailing stop loss order allows you to do exactly that. The idea is that in case of a possible winning trade, you wait for the market to stage for a reversal. The trailing stop loss order takes you out of your trade instead of you picking the right level to exit on your own.

Using stop loss orders is critical in trading as it helps you in money and risk management. Trading without the stop loss orders is foolish! Never ever do that! So the key to successful trading is to cut losing positions quickly and let winning positions run. This is what a trailing stop loss order does. It helps your winners run and cuts your losses. - 23200

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading and currencies. Discover a revolutionary new Forex Robot. Learn Forex Trading!

Tips for Trading Ascending Triangles Short

By Jeff Cartridge

Ascending triangles have been very popular with traders on the long side and are not so often traded when it breaks in the downward direction. An ascending triangle is defined by two lines, one on the upper boundary of the price movement which is horizontal and one on the lower side which slopes up.

Ascending Triangles, Not Usually Traded Short

The ascending triangle is not often traded as a short pattern, but when it does break down, historically 36% of the time, it can be profitable. An ascending triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades profitable. The average profits are also less at 0.31% in 9 days.

Specific Setups to Improve Profitability

When you look at the performance of an ascending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Despite this the pattern works the best at turning points, which occur when the stock and the market are in an up trend or consolidating. The sector should be falling or consolidating to make the best profits.

Ascending triangles that breakout early in the pattern, produce inferior results to those that breakout later. It is acceptable for the stock to move all the way to the point of the pattern before breaking out. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.

If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.

Ascending Triangles Can Be Profitable

Following a series of simple rules to determine which ascending triangle to trade can improve results dramatically. By applying these filters ascending triangles are profitable on 52% of the trades and return an average of 1.07% per trade in 10 days. This is a profitable pattern to trade.

Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23200

About the Author:

Jeff Cartridge is the author of Supercharge Your Trading with CFDs and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains

Forex Megadroid Review Automatic Trading

By Frank Rivera

Following in the footsteps of the highly successful FAPTurbo, there have been several scalping robots released into the marketplace. Many of these have been proven to be cheap knock-offs and show dismal trading results that mean you'd be wasting your money on most of these. Among these releases was the Forex Megadroid and originally it seemed to get lumped into the same group as all the other cheap knock-offs. It didn't take long for people to learn that the Forex Megadroid is a good robot all of its own.

What makes Forex Megadroid stand out from the others? This expert trader is able to be used with any MetaTrader 4 forex trading platform, so this gives you plenty of options for choosing your broker.

This robot trades in the pre-Asian trading session and you'll find that it offers one extra currency pair than FAPTurbo can offer. The EUR/USD can display reasonable spreads throughout the pre-Asian session so you'll find that there are frequent opportunities for trades.

This robot is a little more accurate than FAPTurbo or any other robot for that matter. It picks entry points that are a little more accurate than others. It also has a little bit different trading strategy than other EA's out there. It doesn't trade as often as FAPTurbo, but it usually gets bigger profits per trade. For example, you might be getting several $5 and $6 winners out of FAPTurbo, but you can expect some $25 and $30 or more winners out of Megadroid. It just won't trade as often. You will get two trades at the most per day and sometimes one or none.

The major difference is that it places noticeably fewer trades, but the win percentage is also reported quite a lot higher too. At a reported 95% trading win percentage this is quite an impressive robot.

It's also obvious that this software doesn't require a lot of customization like its competitor FAPTurbo. This can make the Forex Megadroid ideal for novice trader as you simply download the software and install it onto your MetaTrader 4 platform. Drag and drop it onto the appropriate chart and let it run on its own.

If you've never traded on the forex market before, then this robot is ideal. The easy to follow guide can show you how to get your account up and running with your robot so you could be making profits within minutes.

Overall, this is a very effective robot that can get the job done. It's similar to FAPTurbo except it's more accurate and uses a different currency pair. You won't get that many trades, but you can feel more comfortable about the ones that you do get. Check out Forex Megadroid if you've been looking for a consistent way to grow your account. - 23200

About the Author:

Do you want to try out an automated forex trading system? They work great and can double your money in only a few months. See this forex trading software here and even a little money can turn into a lot!

Tips for Trading Descending Triangles Long

By Jeff Cartridge

The descending triangle can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. The pattern forms when the two boundary lines that contain the price movement converge to a point. The top line slopes down toward the bottom line which is horizontal.

Descending Triangles, Ok To Trade

The breakout of the descending triangle would be expected to be down, but a strong support level causes 43% of the patterns to break to the upside. The upside breakout of descending triangles can deliver positive returns with 41% of the patterns being profitable. The average return for the long trades is 0.87% in 8 days. So it is not the best pattern to trade long, but could be profitable.

Specific Setups to Improve Profitability

When you look at the performance of a descending triangle in bearish market conditions you will see the results were not as strong as they were in more bullish years. Trading descending triangles when both the sector and the market, are in an up trend or consolidating improves your trading results. Because of the shape of the pattern the share will naturally be in a down trend so in effect you are entering a retracement in the share during a bullish market phase.

Descending triangles that breakout early in the pattern, produce inferior results. A breakout is better if it occurs after the pattern gets 30% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 2% when compared to the stock price.

Descending triangles with two highs at the same price or two closes at the same price should be avoided, as this usually occurs in an illiquid stock. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.

Descending Triangles Can Be Profitable

You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 1.45% in 10 days and is profitable on 51% of the trades. Overall this makes descending triangles attractive to trade.

Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23200

About the Author:

Jeff Cartridge has been trading CFDs since 2002and created the website LearnCFDs.com Discover Patterns of Success

Introduction to Trading Systems

By Maclin Vestor

A good trading system is about much more than just selecting stocks. Certainly that is important as well. However, a good trading system will provide the ability for you to protect against losses, manage your money, add proper leverage when necessary, and also select a stock selection maximizing your reward and minimizing your risk.

The guess work is taken out of the way for you. The stock is purchased when criteria is met, the amount of stock purchased is also based on certain criteria. The stock is sold when criteria met, and there are protective measures against a stock's demise, and where possible and appropriate leverage is created to maximize the returns without taking on more risk than you can handle.

This trading system will be talked about in 5 additional parts in addition to this intro. This post is designed to explain the trading system, its functions and how it operates.

1) Exit strategy. Every good system trader will first know the exit strategy. It doesn't matter what vehicle selection you use, if you have no exit strategy, you're stuck. The trick is to understand that unless you want to get trapped in an investment you have to know when you're getting out.

A good exit strategy has both loss protection, and profit taking, and sometimes even a 3rd stop. The first 2 might be a maximum loss, and a maximum gain before taking profits, while the 3rd one will be a trailing stop that rides the gains up, and will sell the remaining shares. There are other exit strategies such as hold forever and write covered calls against it to collect income, or protective puts in place of a stop-loss.

2) Protection. Although #1 covers most of the protection, there are several other ways to protect yourself. Protection is vital to allow you to stay in the game. Many people know that if you lose 20% you need a 25% gain to make up for it. Losses not only can result in a series of losses that wipe you out, but they also hinder your ability to gain in the future. a 95% loss for example requires a 2000% nearly impossible goal to make up for this loss. So even if you flip a coin and have a 50% chance of gaining 200% or 50% chance of losing 95% of it, you should probably not take it if all your money is at risk, because it doesn't have the downside protection A series of wins followed by 1 loss would prevent your ability to stay in the game. Even though those odds SEEM fair, they are not without proper protection. Protection ensures that you won't have that 95% loss, and it absolutely restricts that loss to a fixed amount, rather than take 100% risk.

Such forms of protections are writing calls, in this situation you are given a premium so if the stock tanks to zero in a worst case scenario you'd still end up with the premium, this is minimal protection, and only protects a marginal amount of decline before the losses continue. The other form of protection would be buying a protective put. This actually in fact does protect against catastrophic losses. The lower your stock goes if/when it crashes, the more you make from your put or puts. You are the one paying a small amount in order to protect against any sort of decline below the designated price. The lower this price, the cheaper the option. If a stock is at $50 and you buy a protective put at a strike price of 40, you will NOT be protected against losses from 50 to 40, but beyond that you will be protected to the downside.

These are somewhat more sophisticated forms of protection. Basic forms of protection are diversifying, and perhaps being short. If you buy a stock at $100, and you short one in the same sector at $100, if the whole sector goes up, you are betting not that the market will go up, not that the sector will go up, but that stock A that you are long will outperform stock B in a bull market, and stock B will under perform stock A in a down market. This offers protection although it may limit the gains as well, Plus, you actually have to be right in your thesis.

In addition, if you are short, and the stock market booms, you may get a margin call and be forced to sell. Also, if you do not use money management, you are at risk of a short term swing requiring you to sell all of your shares of the stock that went up, in order to pay for those that you were short that went up, and if you can't cover your short, your entire account is in jeopardy of being wiped out.

So rather than being short, I recommend replacing it with buying put options, although this has lots of risks involving time decay as well that you must understand before investing. Using a business entity such as a C Corp or a LLC is another form of protection that can protect you potentially against higher taxes, and personal financial trouble such as a bankruptcy on your record if you intend on using forms of leverage such as loans.

3) Money Management and Control. A good trading system will have a form of control. it will allow you to not give up that control when things go bad. In other words, it allows you to manage your money. Money management is very important. Perhaps one of the most important things is position sizing. If you buy $10,00 of stock for one stock when you only have $10,000 in your account this is very poor money management. Continue to do this, and eventually you will suffer a large loss which will be great, and it will be very difficult to gain enough to make up for it. In addition, if the price goes lower depending on your system, you may want to give yourself flexibility. Extra cash on the sides is another form of money management. It doesn't have to be cash per say, but some form of safety. Various forms of currency, sometimes some gold, bonds, and money market accounts that are all fairly liquid would be a few examples.

4) Leverage Leverage is about using your abilities to gain, the strength of your trading system and various tools to minimize risk, and increase gain. When you take on leverage, you should be able to reduce your position size in comparison to your capital, and still have a similar reward or gain.

Forms of leverage include options, the further out of money option you purchase, the more leverage you have if that stock does make a strong move. You can also sell options to raise capital to invest in some cases.

Another from of leverage is a loan. Whether it's a credit card, a home equity loan, going on margin, or a business loan for an asset holding company, or even taking a company public and using the capital to invest, the idea is to gain money at x% and to invest it and make a greater return than x%. if you can do this, and manage money well, and protect yourself, Your gain is only limited to the amount of capital you can borrow at the maximum of slightly less than what you expect to gain. Generally however, if you use a loan, you should have a form of cash flow or income that will cover the costs of the loan just in case your investment goes wrong. That's another form of money management while using leverage. Money management should be treated much differently under different forms of leverage.

5) Finally, the stock selection vehicle. You need some method to select your vehicle, based on this and your other factors you will determine time horizon and a methodology of trading. The system will help you choose your trading stocks, and exactly what to do with them. You can play around with different trading systems, but generally you should first attempt a good exit strategy and make sure your controls on parts 1-4 of your trading system are sound, and try tweaking them

Stock Trading Systems that are well defined will leave very little room for error. If you learn to use a trading system, you can choose to enhance the essential skills it takes to making your trading system better.

Unfortunately, many day traders are slaves to the computer screen and can miss a moment. Focus on building the better trading system, and not placing the better trade, and you will give yourself some valuable time. If you are really using a system, you don't need to be the one to place the trades, and can instead higher someone to do the work for you. You can use that extra time to improve your system, or find new ways to invest, or learn how to become a better trader.

You can learn other tips like this at the System Trading|Stocks Trading Systems blog, which is full of tips for day trading, options, swing trading, momentum trading, and advice on building a trading system. - 23200

About the Author:

Maclin Vestor teaches about varioustrading systems and teaches you how to buy stock that works for you.