Answering Your Trading Questions

I write for a lot of different sites and magazines aside from this one, and I get all sorts of questions from stock market questions, to forex questions, to general trading questions and also on specific techniques.

So, I am going to go over some of the questions that are commonly asked and also give a few notes on each one.

1.  A recent article I wrote for Investopedia has created a massive surge in emails.  It was entitled : “Quit Your Job to Trade Stocks?”  It talks about many different avenues people can use to become traders, not just the stock market.  So as a bit of an addendum to that article I am going to offer a few additional points.

• The proprietary trading firms mentioned in the article are located all over the world.  To date this is the most complete list I have been able to find of proprietary trading firms http://www.tradersnarrative.com/list-of-proprietary-trading-firms-735.html.  These firms vary from country to country as regulations and legal requirements are different, but as a general rule you don’t need to have a background in finance or any trading experience.  In fact often firms prefer if you don’t – then they can mold you into the trader they want without having to break down old bad habits.  By searching the internet you can see what firms are in your area, contact them with a query letter or resume, and meet with as many possible to see which feels like the best fit for your personality.  Firms such as these generally do not offer salaries are completely performance based.

• If you are interested in trading forex, you can open an account for as little $100, and trade commission free.  To find out more about forex trading visit the forex tutorials section of this site.  There you will also be able to read more about CFD trading.  The broker I recommend for forex trading and trading commodity CFDs is Forexyard.  I personally use them, so if you sign up or have questions about the platform, let me know.

2.  If you visit this site with any regularity you may know that I love chart patterns.  Trading with charts patterns gives me specific entry and exit signals, including profit targets and stop levels.  To find out more about chart patterns and how I trade them, check out my ebook: Profiting From the Forex Market Using Chart Patterns.  In there I discuss also how to manage money and determine position size as well as well as many other aspects of trading.  The following are a few of the questions I get asked about chart patterns.

• How do I know if I am drawing them right?
  • Well, to be quite honest, I don’t think it matters too much, as long as you are consistent in how you draw them…as long as your reward is greater than your risk.  For myself I draw lines on my charts which connect extreme highs and lows on intra-day charts and deviate from this slightly if I can connect more highs and lows by cutting off a bar slightly.  For daily charts I will also extreme highs and lows and sometimes deviate in the same fashion as above.  Drawing lines along closing prices is fine on daily charts, but make sure then that your signals are also based on closing prices.  If you use closing prices but enter/exit on intra-day moves you will get whipsawed like crazy.
• What other indicators do you use when trading?
  • This is an interesting question.  I use very few indicators in my own trading.  But I do sometimes us an RSI and also use ATR (average true range when looking at daily charts).  But let me be clear, when trading a chart pattern I am 99% focused on the chart pattern and the indicators just give me a bit more information but I am not really concerned with them…price movement is what ultimately matters and chart patterns are price movement.
  • But, I will talk briefly about how I do use these indicators.  A daily ATR can help you calculate how long it may take for a profit target to be hit.  For instance if you have a profit target of 300 pips but the currency pair only has a 100 pip daily ATR, you are looking at least at a couple or more days for your target to be hit.  It is also useful if you are setting entry to exit points far outside of where the market is currently hoping to get filled at some point in the day.  ATR can help calculate if you are likely to get filled at all today.  If pair that normally moves 100 pips has already moved 120 pips and there is no news out and your order is still way outside the high or low, you face a small chance of getting filled.
  • Remember, ATR is an average and averages change almost daily.  Each day movement may be more or less than the average, but it does give a general idea of how much a currency pair moves in a day and we can adjust our trades according…on any time frame.
  • RSI I use a couple ways, one is rather complex and hard to discuss in a short post like this and I would need lots of charts to show and explain…save that for another day.  But another way I use it is discussed here.

3.  What is the best trading method or indicator?

• None.
  • I live by the idea that a simple trading method is the best.  I use very little gadgetry in my trading.  I do draw lots of lines right on my price action, but price is really the only thing I am interested in 99% of the time.  This comes from experience.  When I first started trading I started with very simple techniques and they worked.  Then I tried to get more complex my success declined.  Myself and many other traders face the problem of optimization…”if I add this, or add that I will make more money.”  This may be true in some cases, often it is an illusion.  Keep it simple and spend the extra time with family, friends and golfing.
  • I like chart patterns because over the long run you will make money if you follow the rules.  Rewards are bigger than losses and over the long run that means profits.  Of course following the rules, for any trading system, is the most difficult part of all.  Discipline is key.

I get many other questions, but these are a few I have responded to.  If you have questions, please propose them in the comments to this post and I will do my best to respond to them either personally or in a post such as this.  Also let me know if posts such as these are helpful and which posts on this site you like the best.  It it always great to hear from you.

To Your Trading Success,

Cory Mitchell, CMT
Chief Market Strategist

P.S.  Want more trading education?  Get 4 free trading seminars here:

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Be Sure to check them out as well!