And if that's not challenging enough, some of the smartest people in the world are professional traders. In the first chapter I discuss my trading day and how I use time and the 24-hour nature of the markets to help me become profitable and achieve greater consistency.
About the Authors
Busby, founder and CEO of Day Trading Institute (DTI), has been a professional stock trader for over twenty-five years. Tom holds a BA in Business Administration from the University of Georgia and a JD from Oklahoma City University School of Law.
Acknowledgments
The students and staff of the Day Trading Institute (DTI) make an important contribution to this book. Geof Smith, Lead Instructor at DTI, carefully reviewed all the information presented, especially all the technical data, and helped with other important ideas.
Let’s Rock and Roll
Like the Global Beat
In general, I believe that the first five minutes of a day's trading session are very important. After five minutes of trading, no index futures — the S&P 500, the Dow or the Nasdaq — could edge higher.
Stepping to the Tune
Across the board – the S&P 500, Dow Jones and Nasdaq – the bears dominated the day, as Figure 2.3 shows. In Japan and across Asia, in Germany, Switzerland, France and across Europe, in South America – everywhere – the cost of obtaining cash for businesses and consumers matters.
Gettin’ in the Groove
A far-reaching effect of higher interest rates in the United States could lead to less capital for growth and expansion in less developed areas of the world. Economic decisions by the major governments of the world have consequences that reverberate from continent to continent. Just because the floor of the New York Stock Exchange (NYSE) or the Chicago Mercantile Exchange (CME) is vacant does not mean that trading has ended.
Trading follows the path of the sun as it moves across the sky from east to west. As the sun continues its journey across the sky, European trading remains the world's most active trading hub until the New York and Chicago stock exchanges open. By knowing the global market, you have a better chance of creating a workable plan to protect your portfolio.
Trade in the major financial centers of the world affects the prices of goods traded in our markets.
Land of the Rising Sun
The first segment begins shortly after the day trading sessions close in the US. The International Date Line sits on the 180-degree line of longitude in the middle of the Pacific Ocean. South Korea, Japan, China and Russia have all weighed in on the US side and have called for a halt in weapons development.
When the first stock trades on the Hong Kong Stock Exchange on Monday morning, it is still Sunday evening in the US. In many ways, life in Japan or China is very different from life in the United States. When traders in the United States see and assess the activity of the financial markets in the East, they combine this data with the economic reality on our shores.
When the major stock exchanges in Tokyo and Hong Kong open, prices on our stock exchanges in the United States can rise or fall sharply.
USE THE INFORMATION FROM ASIA
Like the Nikkei in Tokyo, the Hang Seng records the sentiment of traders in that part of the world. Asia led the way and I simply followed the trend that started in the Land of the Rising Sun. Our area is blessed with some of the most beautiful white sand beaches in the world.
Over the years I have met many people who questioned my use of the 24-hour clock and my obsession with checking the closing prices on the Hang Seng and GET A COMPETITIVE EDGE. Individuals who deal with their financial markets around the world are some of the most intelligent and knowledgeable business people in the world. Then, if that first hunch is confirmed, I'll make better money and consistently stay on the right side of the action.
If any major economic or financial movement is on the way, that movement will be reflected in the financial markets in the East.
Land of the Long Siesta
Similar to Nasdaq, Dax is traded electronically and the trading platform is Eurex. You don't want to be on the wrong side of a big market move when the Dax is really running. But if the Dax is strong and the S&P or another index breaks resistance, I'll probably be a buyer.
I also warned them to keep an eye on Dax futures because Dax's daily low was 5,280. If the Dax opens and sinks, I will not hold a long position in the S&P or the Dow. If the Dax is strong and breaks resistance, I will follow my move and buy the Dow based on the Dax's move.
During the first 30 minutes of trading (from 1:00 AM to 1:30 AM CET) the Dax is generally very active and prices are rising.
The United States Steals the Show
It includes afternoon trading in the United States and market movements can be very different from morning ones. The American Exchange is also one of the largest options exchanges in the world, with nearly 2,000 stock options available. Without question, the United States is home to some of the largest and most influential scholarships in the world.
The health of the stock markets is reflected in several major indices, including the Dow Jones Industrial Average, the S&P 500 and the Nasdaq-100. The Dow Jones is generally considered to be not only the oldest but also one of the most watched stock indices in the world. Trading the diamond is a way to participate in the action of all DJIA stocks simultaneously.
This index tracks 100 of the country's largest domestic and international non-financial public companies that are listed on the Nasdaq stock exchange.
Short-Term
Strategies around the World
Find a stock that marches to the steps of the other stocks in the sector. Or it could be a stock that is very active in the first hour of trading and then dies for most of the rest of the stock. Of course, it cannot determine a stock's personality, but it is able to handle all the statistical criteria.
The stock box gives a more conservative recommendation and its exit is ahead of the overall ATR move. Likewise, Dow's is derived from or based on Dow Jones and Nasdaq futures on the Nasdaq-100. One of the aspects of futures contracts that has great appeal to me is the leverage.
Otherwise, a trade may be stopped by market forces and the trade will not pay off.
Swing Trading Strategies across
Time Zones
If prices rise above the high, this is a good sign for the bulls. Or I use the high and low of the last 24 hour trading session as a reference line or benchmark. He set his protective stop at 564.00, just below the low of the first 30 minutes of trading.
I know that if I am long, the low of the day's session should not be broken if the bulls continue to hold the lead. I don't want to risk more than 5 to 7 percent of the purchase price on any transaction. By adjusting my protective stop based on the high or low of the previous day's trading, I can often hold stock positions for days or weeks.
One of the biggest levels of support and resistance in this market is the annual opening price.
Approaches to Long-Term
Trading
It is where the first big battle of the year will take place between the bulls and the bears. I determine my profit target by looking at a stock chart and identifying resistance points over a three to six month period. At the end of the third quarter, I eliminate the worst performer from my three remaining funds and roll over the funds I have left until the end of the year.
Then you will have the opportunity to keep the shares and also get a premium for selling the call. As with stocks, I generally go into cash at the end of the year and reassess my strategy for the next year. At the end of the first quarter, I close the worst three and invest that money in the best five funds.
At the end of the year I go back to the money, reconsider and start all over again.
Golden Keys to Unlocking the
This information is valuable and helps me stay on the right side of things. I also check the highs and lows of the S&P 500 futures during the overnight session. Additionally, if the trend is significant, all futures will move USING INDEX FUTURES AS PREDICTORS.
The point is that, in theory, index futures predict the prices of the stock markets. Its price movement on this day mimics the movement of the questions on the Nasdaq. By resetting the V factor before each expected trade opportunity, I am able to get a clear view of the immediate volume in the index that I plan to trade (see Figure 10.21).
First, I use index futures to predict the direction of the cash and other futures markets.
Managing Risk in Global Markets
Additional sales will be forced into the market at a time when buyers are already scarce. After the market has fallen 10 percent in eight weeks, you can adjust your stop/loss orders so that you are no more than 10 to 15 percent below market prices. If the market falls sharply, the value of LEAPS will rise and offer protection for stocks that are falling.
Either way, wise traders leave the market and sit on the sidelines until they analyze and correct the situation. The stop/loss placement is the point where you place a protective stop to withdraw from the market if you are wrong. Develop the habit of placing a protective stop on the market at the same time you enter a trade.
Before you know it, you're hoping, wishing and praying that the market will move and cut your losses.
