Day Trading 4 Dummies.pdf

7/27/2019 Day Trading 4 Dummies.pdf

1/47

Table of Contents

1. Welcome

2. Overview

3. Tools

4. The System

5. Money Management

6. Tips & Tricks

7. Final Thoughts

Legal Disclaimer; Trading Futures, Options on Futures, and Foreign Exchange involvessubstantial risk of loss and may not be suitable for all investors. You should carefullyconsider whether trading is suitable for you in light of your circumstances, knowledge,

and financial resources. You may lose all or more of your initial investment. Opinions,market data, and recommendations are subject to change at any time. The informationcontained in this book does not constitute a solicitation to buy or sell any investmentinstrument. It is not to be made available to individuals in a jurisdiction where suchavailability would be contrary to local regulation or law.

Copyright 2005, All rights reserved Day Trading 4 Dummies.

1


2/47

Chapter 1 - Welcome

Welcome seems like the logical place to start. I want to first of all thank

you for purchasing my trading system. I hope in the very near future you will be

thanking me as well. I welcome any feedback good or bad. I can honestly say

that so far not a single person I have shown my system to have failed to make

money with it.

I guess its important I get a few things out of the way here. So dont worry

this is not one of those e-books that is filled with all sorts of links that are

basically trying to sell you stuff on the backend as a way to make extra money

from you. There will be a few links but more or less they will be email addresses

for feedback and my broker. There is one link that actually does lead to a product

that will cost you money, (the platform my broker leases) but I think its important

to note that I dont make one cent off the sale of that product. I recommended it

because I use it and find it to be the best of its kind out there.

Ok so who is this guy Robert J oseph and why the heck should I believe

anything he says? Well thats a great question. Quite frankly you buying this book

from me is a leap of faith that I have a very good feeling that you will be glad you

took in the not too distant future.

So there will be no rags to riches story or any of that I stumbled upon my

system while working late one night in my kitchen of my one bedroom cockroach

infested apartment. It would be a lie and Im all about telling the truth. I have

been following the markets for some time now, almost 15 years. I have traded

almost every instrument out there, most with better than average success. But

quite frankly none of them with enough success to really make my living as a Day

Trader and that is/was the ultimate goal. This changed for me about 8 years ago

2


3/47

now. This was when the CME (Chicago Mercantile Exchange) decided to create

a new trading futures contract based on the S & P 500.

Ok so for those that dont know here is a really basic Futures 101

overview, trust me its totally over simplified here. Basically a futures contract is

an instrument that allows investors to bet on the future value of whatever item

their contract is a future for. That is really it, let me give you a little more info and

Im sure if you dont know anything about futures you will laugh at how simple it

isand if you do know about futures I promise I will be quick.

So the technical version would be like this. A futures contract is a legally

binding agreement to buy or sell a specific instrument at a pre-determined price

at a pre-determined date in the future. For our purposes that is really not the

case. We are going to be Day Trading so we will close all our positions out

before the market close each day. But that is the exact technical definition. There

are two types of futures traders, speculators and hedgers. We will be speculators

as we are playing the markets on a daily basis and are looking to profit from intra

day moves. I know that might sound a little bit confusing or complicated but its

really not. I do apologize for any more advanced traders that are reading this

book as I know you are aware of how all this works. If you are an advanced

trader please feel to skip forward to Chapter 4 which explains my system in

detail. If you are a new trader please read through this book in order, a couple of

times if needed you will then have a very clear view of what we are going to do

and how easy it will turn out to be.

I guess the most important thing I really want to get across about this

system is the fact that it really is super easy. I called it Day Trading 4 Dummies

for a reason. It really is that simple. If you just take your time walk through the

steps one by one and you will be amazed how simple it really can be.

3


4/47

Ok lets close this chapter down here. Again please accept my sincere

thanks for purchasing my book. I still make my living daily by Day Trading but I

have felt for a long time that I wanted to write out my system and help other

people to improve their lives. Please feel free to email me with any questions and

comments you might have. I am always interested in talking trading and learning

anything I can to refine and improve my trading. Please drop me a line here

mailto:RJ @day-trading-4-dummies.com

Lets move on..

4
mailto:[email protected]:[email protected]


5/47

Chapter 2 Overview

So lets get down to the heart of the matter. What I will be teaching you in

this book is how I learned to become a day trader. I started my account with

about $5,000.00 (dont worry you wont need that much) and I annually earn over

$100,000.00 from my trading. I know that sounds like a big number, but its really

quite easy to obtain and you can see some examples of that later in the money

management chapter.

In this book I am going to show you with screen shots, step by step

exactly the system I use to earn this income. The exact tools, my charts,

indicators and trading platform will be revealed. I know some people have asked

me why I would share this information. Well it doesnt matter to me if you want to

use them too. I will continue to trade and continue to make money. Its not like

selling cars and you only need one, or something else like that. As many people

that want to trade can do so and we can ALL make money. The markets really

are that liquid.

I would suggest to you that you print out this book its not really that many

pages and if you print it out you can actually follow along with the screen shots

when it comes time for you to set up your charts and so forth.

So, what are we trading? Well we are trading the S&P E-mini. This is a

futures contract that trades on the CME.

You will read terms like points and ticks among others so Ill try to give you

a little more info in this overview so it might make more sense to you once you

come across them.

5


6/47

The E-mini is traded on a per contract basis. Each contract has a profit or

loss value of $50.00, there are broken down into quarters which we call ticks.

So therefore each tick is worth $12.50. Now remember we are trading futures

contracts so you dont actually purchase a contract for $50.00 you control that

contract. In order to control each contract you need to have a set amount of

margin for each one you wish to control. Basically margin is a good faith deposit

that you keep in your trading account which is really just a way to give the broker

some piece of mind. If for instance you purchased control of 2 contracts and you

lost 4 points you would be in a negative balance of $400.00 (2 contracts x $50.

per contract x 4 points). So if you didnt have any money on deposit with your

broker they would have to chase you for that money and youd have to constantly

be adding money or withdrawing money depending on the money needs of your

account.

So what brokers came up with was a system called margin. You put an

agreed upon amount of money on deposit based on what your broker requires.

With the E-mini I have seen margins from $300.00 to $2,000.00 per contract

traded required. Naturally the less your margin needs the more contracts you can

trade and the more profit you can earn. As an example, if I had a $300.00 dollar

margin requirement and I had $3,000.00 in my account I would be able to trade

as many as 10 contracts. If my margin requirement was $2,000.00 I would only

be able to trade one contract with that same $3,000.00. So for the sake of

argument lets assume I earned 2 points profit on a trade of 10 contracts I would

earn $1,000.00 but if I was only able to trade one contract, that profit would only

be $100.00 Quite a difference I think youd agree.

Please keep in mind if you are starting with only $3,000.00 margin you

would not want to trade 10 contracts, even though technically you could. You

want to make sure you dont risk too much of your margin in case you do get in a

bad trade. Trust me they do happen, even with my system there will be bad

6


7/47

trades. I will cover that more in the money management chapter. The key is not

to make money on every single trade its to make money on most of trades and

NEVER let a loss run against you. I have found that my system is right about

80% of the time I know that sounds high but it is true and you will see that for

yourself. So if I wash two of my good trades against the two bad that leaves me

with 6 positive trades out of ten. That is all I do and all Ive done for the last

number of years and it earns me over 100k each and every year. You could very

well do much better. Everybody has their own threshold of pain for how much

money they risk on a given trade and mine is not very high. I like to be very

conservative. I have shown people my system, that make 5 times what I do, to

each their own. Find the comfort zone for you and stick with it.

I also want to suggest to you at this point you really do make sure you

read the bonus e-books you received when you purchased this book. The 1-2-3

and the Trading Mind books are both great and I actually paid for both of them so

you really are getting some value there for free. Youre welcome.

For those of you that dont know the CME is open for trading daily Monday

to Friday from 9:30 AM EST to 4:15 PM EST. I am usually done with my trading

within the first hour and a half each morning. I have traded in the afternoon and I

know that some people only trade in the afternoons. I just like the fact that I can

be done early in the morning and do other things for the balance of the day. Yes

that is the time frame I use to earn my 100k + each year.

Ok lets move on. Again as with any chapter please email me if you

have any questions youd like answered or clarified.

7


8/47

Chapter 3 - Tools

Well this section is going to be kind of short, I just want to make sure you

have the best possible trading environment. I know that sounds silly but if you

arent set up to trade correctly no matter how good your system might be you

wont do very well.

1. Workstation, its really important you have a computer put aside ONLY for

your day trading. This should not be a big deal with the price of computers

being so cheap these days. The important thing to remember is that you

dont need to have the latest greatest fastest machine for day trading. As a

matter of fact my main trading platform is a used Dell P3 500 with 256

Megs of ram. I actually purchased it for $179.00. Now if a separate

computer is just absolutely out of the question right now you can get by

sharing a machine with other programs but its not advised. This way your

machine will always run as quickly as its able and you wont have to worry

about other programs causing problems and crashing your machine at a

time when you really dont want it to.

2. Monitors. I am a firm believer in using two monitors when day trading. I

know a lot of people dont need it and quite frankly I can get by without the

second screen but I find it makes it easier for me to have it. I basically set

up one monitor to display my charts the second monitor displays my

trading platform. It just makes it cleaner to only have one thing on each

screen. Again a used monitor can be had for less than 75 bucks these

days.

3. Internet Connection, as you are day trading you obviously need to be

connected in order to trade. As the E in E-mini stands for Electronic. I

8


9/47

highly suggest that you have a DSL or Cable connection. You can trade

on dial up, I have done so before but its not the best possible solution.

4. Chart, this is a very important one. All traders use a chart of some kind to

keep an eye on the market they are trading. Its what we use to decide if a

market is moving up or down and at what speed. There are many charts

out there and there are many different ways to set them up. You can pay

as much as $ 100.00 a month for charts from E-signal. The chart I use is

free, yup freeand Ill show you where to find it and how to set it up

correctly in the chapter on the use of the actual system.

5. Platform, this is the software program we use in order to execute our

trades. There are many good programs out there. There are also some

really poor ones. I have used two or three of them. I really like the one I

am using now. Its a $50.00 cost per month but to me well worth it. You

are more than welcome to use whatever platform you like. I will give you

the contact to get a hold of my broker and he will give you a free trial of

the platform I use so you can decide if its what you like. I really strongly

urge you to only use a Platform that is an actual application, dont use a

J ava or web based platform. They are very flakey and dont execute

trades very well. In many cases using one of them will actually cost you

money in the long run.

6. One that many people overlook is to have a notepad at your desk with the

important phone numbers you might need. Well like whom you ask? Well

what happens if you are in a trade and suddenly your power goes out? Or

maybe your net connection goes down? So its very important that you

have a piece of paper with your brokers direct phone line on it, also make

sure you have the number for the customer service department of the

company that provided you with your platform in case you have a software

related issue. I have on more than one occasion called my broker and had

9


10/47

him close out a position for me when I had net issues. Now it does not

happen very much, but even one trade that costs you money is one too

many.

7. This one might sound funny but, make sure you have a comfortable chair

and desk to work at. You will have to spend an hour or two each day in

front of that screen, make sure you are awake, alert and comfortable.

8. Indicators, this is the key to it all there are many indicators out there in

use. I use two simple indicators one is your main trading key, telling you

when to get in. The other more or less confirms when its time to get in,

like insurance and it also gives you a great idea of when the move is

ending and when its time to get out of your position.

9. Heres one that people dont every really give any thought to. My browser

of choice is Firefox as I dont use a live chart (youll see later in the book) I

have to refresh to keep the prices moving. The way I get around this is by

using a great little tool that is free and allows you to set a time frame for

how often you want the page in question to refresh. Its all over the place

so I cant send you to it, but just do a Google search for reloadevery

youll find it. It really makes things super easy.

Thats about it for this section. In a later chapter I will show you how to put all

these pieces together and more importantly where you can get the exact

same tools I use and have been using for years. Were almost there.

10
http://www.firefox.com/http://www.firefox.com/


11/47

Chapter 4 - The System

Ok here we go. In this chapter I am going to walk you through step by step

(with screen shots) exactly how I set up my platform and chart and indicators and

do my trading. I will show you live examples of everything.

Here we go, now open your browser and lets get your chart set up correctly. Go

to www.yahoo.com yup I use a free chart from Yahoo; the trick is in how its

setup. Ok so go to yahoo and click the Finance link, youll see it circled in the

image below.

11
http://www.yahoo.com/http://www.yahoo.com/


12/47

Once youve done that it will take you to a new page (see below)

In the circle on the left hand side you will see a hyperlink to the S&P 500 please

click on the link and you will go to the next page. (see below) click the link circled

Technical Analysis

12


13/47

Once you click the TA (technical analysis) link you will be brought to a page that

looks much like the one below. Lets just look at it for a minute and Ill give you a

bit of an overview as to what some of the items on it mean.

13


14/47

This is a chart that has some default info that you will see when you first open upthe TA link. It is here we set up our chart to show exactly what we want to see

and how we want to see it. I will walk you through step by step the items we need

to click in order to have the chart set up just right.

14


15/47

Now please click the links that have been circled. One will make the chart bigger

so we have a better view of everything we are looking at. That is the one on the

right hand side, top corner. J ust click the capital L. The second link, top corner

left hand side is very important as it sets the chart to a one day view, very

important as we are only day trading and dont care about any time period longer

than one day. Once you click the two above links your chart should look

somewhat like the one below.

15


16/47

You will note the only real difference between this chart and the one above is that

now the volume bars that were at the bottom of the chart on the previous page

are now gone. Now click the circled part of the chart below.

16


17/47

I can see its a bit blurry, but you should still be able to find it without any trouble.

Go to the line that is titled EMA and click the link 20 this will overlay the movingprice average for the last 20 minutes... it should now look like the chart below.

17


18/47

As you can see the moving price link has now added another line to your chart.

Its the red line it basically drifts up and down with the prices average over the

last 20 minute period as the day progresses. Dont worry I will explain how all this

works soon, but right now its very important that you get it all set up correctly

first. Ok the next one is the most important as it actually adds our indicators to

the chart and you will get to see exactly how you will view it through the day while

you are trading.

18


19/47

On the line labeled indicators you must click both the slow stoch and fast

stoch I know, I know if youve traded before you are groaning and saying oh I

know what a stochastic is but I am sure you dont know how to use them the way

I do. Because quite frankly if you did you would not have bought this book as

youd be earning the same kind of income that I am. So please just bear with me

19


20/47

while I finish with the setup info and then I will explain to you exactly how all this

fits together to make you a successful trader. So once you click to the two links

above your chart should now look much like the one below. It is very important

you click the slow stoch link first, this way it will be the first one that shows up

under your price chart info.

Now of course on your screen you will be able to see more than what I have

shown here. You will be able to see the entire top of the chart and of course the

price info down the bottom but for our purposes the above picture will show you

all you need for demonstration purposes. Ok so now you have a chart from the

end of a trading day and you can see what happened, prices went up and down

and the indicators went up and down and what the heck does it all mean? Well

its actually quite simple

20


21/47

I am going to walk you through a market opening, showing you exactly what we

are looking for and what it all means and of course when to get into your trade

and when to get out. Well ok the getting out part is more of a personal preference

thing. I will show you how I trade which is very conservative and profitable. I

know others that have taken my info and used it for much bigger trades and

longer moves but that is not a comfy way to trade for me.

In the money management chapter I will outline exactly for you how I go about

looking after my trades and what I use as an entry and exit point. I guess almost

as importantly I will explain why I use this method.

Ok glad youre still here. So you now have your chart all set up and you are

chomping at the bit to get going so I will get right to it and show you how I use the

info weve set up in the previous pages. If I may suggest one very important thing

to you its to read the whole system plan right through. Then read it at least a

couple more times to really take it all in and make sure you totally understand

what you are looking for. I will give you some tips at the end of the system layout

as to how you can prove to yourself my system works before you spend a single

penny on trading or buying anything else. Once you have the proof that YOUVE

generated yourself you can come back and read the info on how to get in touch

with a great broker I highly recommend.

Look at the chart below this is how my indicators look when the market is live. I

will take you through an entire trading day. The first chart is about ten minutes

after the open. You can see that lines are all very small and just getting ready to

21


22/47

start moving for the day. Please note that I will give you lots of commentary about

each chart. I will also go back to specific charts later and mark them up a bit to

show you exactly what I am talking about when I suggest looking for this or that.

As you can see on the price (top section) the blue line (price) is moving up and

the EMA20 (red line) is also moving up. In the middle section the Slow Stoch is

actually hidden behind the letters on the chart. This does happen some mornings

and its a pain in the butt. But you can still trade that early morning move with

more experience. Please remember I am only showing you these charts as a

random day. After I have walked you through this whole process I encourage you

to do some paper trading on your own with the chart set up the way we talked

about and you can see for yourself exactly what I am referring to in this chapter.

In the chart above well actually every day when the market first opens, you will

just see a bunch of Xs instead of lines on the chart these often give you an idea

22


23/47

of which way the market is going. There is one fundamental rule about the Stoch,

slow and fast. When the red line is below the blue the market tends to move up.

When the red line is above the blue the market tends to move down. So always

think of the Red line as the line that pushes the Blue. Red on top pushes

down Red on bottom pushes up.when the lines cross well that is when we

make our money. Remember that is all we look for, the lines on the Slow Stoch

cross we make our move.

Having said that of course there are a few things to think about and keep in mind.

I will give you the info on those things as well. Ok as I said when the lines on the

Slow Stoch cross we get ready to open a position. There is a little more to it than

that, so let me give you the details that really make this system a money maker.

As you can see in the chart below In the Slow Stoch pane (middle pane) you can

see two lines that are dotted they are the 20 and 80 line.

23


24/47

As you can see above in the middle pane the red line is on top and the pair of

lines are moving down. If you look above at the price chart you will see that as

the Slow Stoch predicted the price is also moving down. Now where the two lines

mentioned the 20 and the 80 come in is predicting how strong the move will be

and when the move will actually happen. I know that might sound slightly

complicated but its really not and Ill give you many more examples with the

charts so you can see better what I am talking about.

Notice above in the middle pane (slow stoch) the pair of lines never gets above

the 80 line (dotted lines) or below the 20 line. What this means is that these

moves are harder to predict and are much more likely to turn around quickly. Soif trading a position that is going down that never made it to the 80 line in the first

place should be considered a less than perfect setup and make sure you have

your limit and stop orders in place (dont worry we will cover all the different types

of orders in a later chapter).

24


25/47

So in a perfect world we would like to see both red and blue lines get up above

the 80 line and when they cross to have the red on top and move back down

through the 80 line that is considered a perfect setup and we would open up a

short position at that point in time. Conversely if both red and blue lines went

below the 20 line, then cross and had the red line on the bottom and moved back

up through the 20 line it would be a perfect place to open a long position. In this

chapter I wont get into the mechanics of how to open or close positions things

like that, I am merely going to share with you exactly how the system works and

what we are looking for.

Dont worry. It works and you will prove it to yourself soon enough

Lets look at another chart.

25


26/47

You will note I have not really said much about the lower pane (fast stoch) thats

because its not really a huge part of the system. I use it more as a confirmation

of my thoughts and when to get in and out. This chart is a good example of that.

If you look at the chart above you will see right about 11:30 that the slow stoch

(middle pane) is pointing up and the red line is clearly on the bottom which

means up, having said that in the lower pane (fast stoch) the pair of lines have

already hit the 80 line which means the upward move is pretty much over and if

you are long it would make sense to think about taking your profit and getting out.

Lets look at the same chart but with some pointers to show how this system

really works

26


27/47


28/47

move up after the little dip and the middle pane continues to show upward. You

can now see at Noon the fast stoch (lower pane) is actually crossing and pointing

downward which means the move has little strength or in fact may be over. Now

look closely at the price and as you can see if you got into the trade right when

the middle pane crossed and decided you werent comfortable with the position

and got out of the trade when the fast stock first dips thinking the move was over

you STILL would have been in profit. That is the beauty of this system. If you

wanted to wait it out a bit and you had more patience or nerves, whatever you

want to call it, you could very well have made an extra point at the top of that

peek before the fast stoch and price both turned downward. Lets look at some

more examples.

This chart is a couple of hours further in the day, take a note of exactly how this

chart is doing exactly what we said it would do. As you can see the middle pane

(slow stoch) the lines never got above the 80 or below the 20 so it shows us that

28


29/47

the moves during this time period will be less easy to spot and trade. Sure

enough looking at the price chart we see all sorts of spikes up and down, but

nothing really strong in either direction, exactly as our indicators are saying it

would be.

Now lets watch another chart and see a move setting up for us.

Look at how about 1:30 (where the line is) the middle pane shows us the market

is moving down, the bottom pane confirms it for us and sure enough look at the

price if you were short at this point you would have made an easy two points.

Remember this is on a less than perfect trading day, wait until you start charting

the markets yourself and see some of the amazing moves this system will show

you. That actually is how many people get started with this system, they paper

trade it for a few weeks and at some point they look back over their notes and

see that they have been right about 80% of the time and they start to add up how

much money the have left on the table by not live trading. So they open their

29


30/47

accounts and start trading. I suggest you do some paper trading once you

have read this book a few times and refer back to it so you totally understand

what you are looking for and you will be shocked how much money is there to be

made on a daily basis.

30


31/47

Have a look at this chart again a little further in the day. You can see the 1:30

move where we would have gone short. You can also see that the slow stoch

(middle pane) has finally gone below the 20 line and as it continues to stay below

it, you can see that the price has continued to drop. You can also see that the

fast stoch (lower pane) can not muster any strength to get up above the 50 line in

the middle of the chart. This quite frankly would have been a super profitable

trade if you were riding a trailing stop of roughly 6 ticks. Again dont worry we will

cover all trade types shortly.

Really what these charts show you is a much less than perfect day. The lines

barely ever get above the 80 or below the 20 yet a trader using our system would

have made money today. If this trader was using our money management

system for entry and exit points and stop placement they would have made a lot

of money (depending on how many contracts were traded of course)

31


32/47

System Recap

So lets do a recap where I will try to put things into a more direct set of

instructions for you to use. This is what you need to do to make sure you have

proven to yourself that this system works. I dont want you to take my word for it;

I want you to prove it to yourself. Once you have done that you will be ready to

take the next step of opening your account and doing some LIVE demo trades. I

will point you to a broker that will give you a demo platform that you can use to

make trades using this system on the live exchange. The only difference

between the demo platform and real one is that on the demo you will be trading

using pretend money. Once youve done that for a few weeks and find yourself

making pretend profits most days you will then feel enough comfort to get that

account open and start making some real money.

So what should you do from here? Well of course read the system chapter a few

times and really get a handle on what you are looking for. I will try to put it in

order for you below.

1. Get up prior to the market open every day you can and set up your chart

exactly as we have outlined in the book.

2. Have a paper and pen handy. You will be making notes throughout the

day.

3. You are going to watch the middle pane on your chart (slow stoch) most

closely.

4. When you see the pair of lines go above the 80 line and drop or below the

20 line and rise while crossing this indicates a place to enter a trade

32


33/47

5. Remember Red on bottom pushes up, Red on top pushes down.

6. Dont get discouraged if it takes you a few days to really see things clearly

the more you watch the market the more youll catch on.

7. So you watch the chart, you see the pair of lines moving up with the red

line on the bottom, both lines (or at least the blue line) crosses the 80 line,

the lines cross putting the Red on top (red pushes down) and they both

move below the 80 line.

8. At this point make a note of the time and of course the price on the top

pane of the chart.

9. Continue to watch the charts middle pane, until you see the pair of lines

cross again putting the red on the bottom (red on bottom pushes up).

10. At this point make a note of the time and again the price on the charts

upper pane. You will then be able to see clearly how many points profit

you would have made.

11. Again please remember that not all moves are strong or long moves.

Sometimes you will see the setup above and the price will move 15 points

other times it will move one point. This is not important right now as you

will learn how to manage these positions later in this book.

Do this paper trading as long as you want to really convince yourself that this

method works. I know it does for me and a lot of other people I have shared it

with. It is right more often than not. If you manage your money correctly and dont

look for the big homerun you can make a very good living as a day trader.

33


34/47

Chapter 5 Money Management

Entry & Exit Point Strategy

First and foremost this is for example purposes only. It is the strategy I use, you

can use it as is or you can adjust for your own comfort zone while trading. Please

remember trading futures is risky and should not be taken lightly. These

strategies are conservative and not for everyone.

Utilizing my DT4D system there are really only TWO important factors that I

watch for.

1. To make sure both Stoch lines cross their threshold (80 before going down &

the 20 before going up). This happening would be considered a perfect setup

and is generally right in predicting the next market move roughly 85%+ of the

time. When this setup happens, I will try to get more than my usual 2 or 3 ticks.

When the above setup occurs I will take my position (long or short) when the

stoch crosses the line regardless of where the EMA is, unless the price has not

crossed the EMA for the entire day. Once I take my position I will set a stop of 2

points. This gives me room should there be a slight reversal before the correct

move develops.

Once the trade moves in my favor I will input a stop to lock in my profit each time

it moves 3 ticks in my favor. So at the 3 tick point, then the 6 tick point, then the 9

tick point...etc...This will allow me to maximize the profit on the move without

worrying about losing any money. This is called a trailing stop.

2. When the indicators do not form a perfect setup, i.e. when only one of the

stoch lines crosses the desired point (80 for down, 20 for up) or when neither line

34


35/47

crosses but both get close. I will assume the move to be weaker and much more

unpredictable.

In this case I will open my position again when the lines cross. At this point I will

set a very tight stop loss of 1 point, as I have seen many times where the lines

actually do reverse and head off in the opposite directions for many points.

The goal on this trade is to grab only a few ticks... if it appears to be waffling for

any length of the time I will take 2 takes and wait to see how the market develops

from there.

At this point lets talk about the type of orders we can and will be trading. There

are four basic types of trades.

1. Limit orders

2. Stop orders

3. Market orders

4. Trailing stop orders

Lets look at each one in a little more detail.

1. Limit orders are exactly as they sound. When you are trading you decide

you want to open a position and go either long or short. When you are

placing a limit order you are in effect telling the market you will purchase

or sell the number of contracts you plan to trade but ONLY if you get the

price you want. One important thing to remember about limits is that if you

dont get the price you really feel comfortable with, dont chase the market,

you could end up chasing all your profit and leaving it on the table. So if

you really want in a position and feel strongly about a move then just stick

to your guns. If you dont get your price dont worry about it, there will be

another trade soon.

35


36/47

2. Stop orders are basically an order you put in behind an open position to

stop a loss you might have from being too large and doing any real

damage to your account balance. For example, lets say you go long at

1150.00 you would then place a stop order below that price (of course you

can develop your own comfort zone of how big a stop) for me I might

place the stop at 1148.50 this is 6 ticks below where I go in to the position.

It allows me to know that the worst I can do is lose 6 ticks... in case the

market moved suddenly against me. Some people set them tighter some

more loosely its a personal thing really.

3. Market orders, pretty straight forward you are putting in a buy or sell order

at whatever the going market price is. I do this when a move is setting up

to be a really strong move and I think there is a lot of points to be had, in a

case like this I dont really care if I give up a tick or two getting in as I feel

there is a lot of movement to be had on the profit side of things. I will also

get out with a market sometimes if I have picked up some quick points and

just want to get out usually I do this when Ive gone well past my profit

goal for any given day.

4. Trailing stops, these are the ones that are the most difficult to learn but by

far the most helpful once you understand them. They are much like the

stop order except as the name says they trail. Well what do they trail?

They trail your open position. In the example above I opened a position at

1150.00 and placed a stop at 1148.50. Now lets assume the price went in

my favor and moved up to 1151.00 I now have a whole point in profit. I

would then move my stop up to trail the open position to 1150.00 so in

this case the very worst I can do is break even as that was my entry point.

Well lets say the price moved another 3 ticks in my favor to 1151.75 I

would now move my stop up another point to 1151.00 I have now locked

in 4 ticks of profit. Which might not sound like much, but if you were

trading just 10 contracts that would be $500.00 do that once a day and

see how much you make a year. I should also point out that with this

system you can pick up 2, 3 or more two tick trades a day. Depends how

36


37/47

long you want to trade. I find I can pick up 2 tick trades before 10:30 most

mornings. Ok back to the stops, so now the market just zooms off in my

favor and ticks up to 1155.00 I am now five points in profit I would move

my stop up to 1154.00 the very worst I could do on this trade is make 4

points profit. Use the example above and assume we were trading 10

contracts; I would have just locked in $2,000.00 worth of profit. I have

done that many times. I know you can too.

Its hard for me to actually show you how to open and close positions using the

above trade type without knowing what platform you plan to use. You can keep

this chapter handy and when you settle on a trading platform you like and want to

use you can read the tutorials they offer on how to do each of the above order

types.

In the tips and tricks section I will give you a link to the broker I use and you can

download his demo platform if you like. If you do that I can also tell you they have

a very good help section and I would be able to answer questions directly related

to that platform of course as I use it daily.

So how much money can you make? I know that no matter what numbers I use

you are going to find it hard to believe. I can only tell you I know its true as I am

doing it daily. I cant determine what type of person you are, will you follow the

system? Do you have the mental makeup to be a trader? There are so many

things that go into how well you will or wont do. I can only tell you that the people

Ive shown this system to that have not done well have not followed the system.

Time and time again, when they ask me why its not working for them and I get

them to show me some of their charts and moves theyve made and sure enough

they have added things to the system or worse yet they are not really watching

the system but rather guessing at what will happen next. I cant control whether

you follow the system to a T or not, but I do know if you do you will make money.

37


38/47

How much? Heres an example;

In keeping with my approach of making a little bit regularly and allow the big runs

to happen on their own I have set a very reasonable but highly profitable set of

goals.

As most users will open their accounts with 3 to 4k (youll get a better deal than

that with my broker, contact info for him is below) I have developed these goals

with that in mind.

*IMPORTANT* I would highly suggest that any new trader, no matter how well

they do in their first few weeks even first month of live trading do NOT trade

more than 4 contracts. This will allow you to make more money than most

"JOBS" pay you and will not put much of your account at risk should you get

caught on the bad side of a trade.

If you have funded your account with 3,000. dollars the margin required for 4

contracts is only 2000 so you do have some leeway in your account. If you follow

the entry and exit strategy that goes along with this profit goal you will be fine

using 4 contracts as our indicators continue to be correct 85% + of the even in

flakey trading days.

So let's lay out a few of the facts we know to be true and then do some math

from there.

Each contract on the E-Mini S&P 500 is worth $ 50.00 each contract is broken

down in the trading pit into 1/4 points. Meaning you can gain or lose in quarter

point increments. So 12.50, 25.00 etc..etc. It's also a given that our broker has

now brought down the commissions for new traders to $ 5.00 per contract, RT

(round trip including fees) so if

38


39/47

using the above suggestion and only trading 4 contracts your commission will

cost you $20.00 for each 4 contract trade position you open and close. That

would be a round trip.

I suggest new traders follow the 6 Tick rule. This is something I developed for

myself and I am having very good success with it. Your goal is to get 6 ticks each

trading day. This can be in any combo available to you. You might get all 6 in one

trade if you catch the start of a strong move. You might take three trades of 2

each to get your six. The point is that this goal is reachable each and every

single day the market is open. The days the market is really flowing nicely you

can quite often make it in one trade, I know I have. But more importantly, MUCH

more importantly on the days the market out and out stinks.. you can still easily

wait it out and grab two 3 tick or three 2 tick trades.

So let's get to the math. 6 ticks will gross you $ 75.00 per contract. For a total of

(using our suggested 4 contracts) $300.00 per day. If you make it all in one trade

you will then gross 300. - 20.00 = $ 280.00 That might not seem like a ton of

money, but compare that to how much you currently earn at your J .O.B. (J ust

Over Broke) I have a feeling it won't be too bad :-)

Now in fairness you will not get 6 ticks in one trade each and every day. You will

quite often, but lets look at the "worse" case scenario. Assume you have to get

only 2 tick trades and you need three of them. Again using 4 contracts each trade

will gross you 100. (4 contracts x 25.00) less your 20.00 in commission you will

be left with a net of $ 80.00 per trade...and as stated you will be doing 3 of them

so 3 x 80.00 = 240.00 that will be per day. You can not be any more conservative

than that. I am betting that 240 a day is still more than most people earn at their

J OBs.

39


40/47

But let's take this to its logical conclusion and give you some really eye opening

stuff. Let's work with our so called "worse" case scenario just to show you the

power of this system.

240 a day, will net you $ 1200.00 each and every week... that is over 4800.00 per

month. Are you making 4800 per month now, for a few hours in front of your

computer screen? I highly doubt it.

Now remember all this started with only 3k in seed money and trading only 4

contracts per trade once you have practiced live for at least one month with

smaller amounts perhaps 2 or 3 contracts.

What happens when you build your account up a bit more and let's say you've

done the above system for 3 months with great success you have no trouble

grabbing those 2 and 3 tick trades. As stated there will be many days you will

ride a three tick trade into two or more points.. but we don't want to count on that,

let's stick taking the worse possible case here. measly little 2 tick trades.

Well after those three months, you might decide that you have some money in

your account and you have proven with your three months of success that you

know how to control your emotion and read the market signals we have shown

you. What you can do now is increase your contracts to 8 simply double what

you have been using. This will still only require 3200.00 hundred in margin which

is not a problem if you've been following our system.

Well the simple act of doubling your contracts to 8 will now rocket your earnings

to $ 9600.00 each and every month. That is a lot of money for a few hours a day

sipping coffee watching your computer screen. So you know what I'm going to

say next...after three more months following the system so now that is 6 months

in total you've traded and made 4k+ for three of them and then 9k+ for the last

three you have some extra money and are super sure of yourself and that you

40


41/47

won't let yourself fall out of the system I would suggest you are ready to double

your contracts again. At this point you will have six months of this profit goal

under your belt, plus you will have at least one month of live practice when you

started and hopefully at least one month of Demo trading under your belt. So we

double the contracts again to 16.

Are you sitting down? Following or simple system and looking for no more than

just 6 ticks per days.. even if you have to pick them up in crummy little 2 tick

trades... with your new found skill and ability to control this system, using 16

contracts per trade you will now be earning $ 19,200.00 each and every month...

What JOB is going to pay you that? Think about this for just a second. We have

taken all the hype out of this, because you know what? The above numbers are

the absolute most conservative I can use. I know from my own experience you

can make much more in a week, but I don't want to get into hype I want to show

how anyone, even the most careful and cautious among us can invest 67.00 for

this E-book seed their account with 3000.00 in trading capital and within an 8

month period be putting over 19,000.00 into their bank account each and every

month.

When you use the system and follow along with this set of goals, in conjunction

with my exit and entry point strategy you can then be on you way to a yearly

income of $230,400.00 I know those numbers sound like hype and it's hard to

believe but it's true.

You can trade all year if you want only looking for 2 tick trades, you can take

summers off and see if you can survive on "only" $ 172,800.00 per nine months,

you make the call thats right for you. I bet Ive got your attention now?

41


42/47

Chapter 6 - Tips & Tricks

Well I know if you read all the info contained in this e-book and apply it you will

make money. How much money you will make depends on you. How well you

can handle the daily pressures of trading is the big one. Trust me it is much

different to play trade than it is to actually pull the trigger on a trade with your own

money on the line. So let me offer you a few tips that have helped me over the

last few years.

1. Make very sure before you open any position that you know exactly what

you want out of the trade. I know that might sound odd, but think about it.

If you open a position with a hard goal in mind, like you want to make atleast two ticks. The odds are in your favor that when those two ticks are

gained you will close the position take that profit and feel good knowing

you reached your goal. On the other hand if you open a position and dont

have a clue what you want to achieve other than to make a profit how do

you know when to get out? Trust me it sounds funny but it really is true,

you will watch the profit or loss pile up and sit there like a deer in the

headlights wondering when to pull the trigger to close the position out.

One of the best things you can do to make your trading successful is to

have a goal each day of what you want to achieve. I like to set my goal for

500 dollars a day. It is quite easy to get, often in the first half hour or so of

the day. Once I reach that goal I shutdown my system and enjoy my life.

Dont stay and trade and give back your profits. Dont assume you can

have a killer day with that early good start. Set a goal and stick to it. It will

make your trading that much easier.

2. Accept you are going to have losses. I honestly believe its not the winning

trades that determine if we will be successful as a trader but rather how

we manage our losses. You have to learn that as painful as it might be

sometimes and as sure as you were that your move was right, sometimes

42


43/47

you will be wrong, or the market will suddenly turn against you. Suck it up,

take it like a grown up and take the loss. Dont let a loss run against you

and kill your account. Take the small hit, regroup and live to trade and

profit another day. Once you have more experience and you see a sudden

reversal that has strength you can often times reverse your position and

turn that small loss into a winning trade. The key is to accept that you will

have losses and not to let them affect you mentally. J ust stick to your

system and more often than not you will be on the right side of the move.

3. In keeping with talking about losses, I was taught something once and it

really stuck with me and I have followed it ever since. When I do have a

losing trade I find that the best thing I can do for my trading at that point is

to get up, leave the computer and do something else for a while. Even if

its only for 15 or twenty minutes. J ust get up smell the roses and accept

its all part of the game. Come back to the computer with a clear head and

ready to go at your system again. Fresh, not with the intent to win back

your loss. Its gone, let it go

4. Try not to stay at your computer too long. By this I mean if you want to

trade all day thats up to you. Personally the beauty of this system is that I

can be done my trading in an hour or so each morning, but if you want to

trade all day thats up toyou. But make sure you dont get mesmerized

sitting staring at the charts and your screen. Take some time to stretch

and eat drink, clear your head. Make sure whenever you are in front of

that machine waiting to make a trade that you are ready to make a trade

because you want to. Not because you are bored or you make a move

that isnt quite right because you are restless and rush a move. Always be

as alert as you can while you are trading. This is one of the biggest

reasons I like the early morning move, get in, get it, get out log out.. the

makings of a great day.

43


44/47

5. Find the platform thats right for you. I have to admit I used three or four

different platforms when I first started trading. You will find one that works

for you, but make sure its because you like it. Not because somebody

else wants you to use it, or because its free. I pay for the one I use now,

its only 50 US a month but to me its money well spent. I like the platform it

executes trades quickly I can do everything I want to from one small

window and I like the look of it. I cant count the number of people I know

that have lost money while trading because they didnt fully understand

how to use their platform or worse they didnt like the one they had but

continued to use it because their broker gave it to them for free. You are

better off paying a little more in commission or margin and find one you

like that will allow you to make enough money that the money you are

paying will be moot. If you do by chance end up liking the platform I use

feel free to ask me any questions about it, I will be happy to help in

anyway I can.

44


45/47

Chapter 7 - Final Thoughts

Well where to go from here? I have a whole bunch of thoughts left that Im

just not 100% sure where they would fit into this manual. I honestly believe

that you now have all the tools needed to actually make your living as a Day

Trader. I know that this is the exact system that I use every day. I hope you

do understand that it really does matter how much your use the demo

account, getting used to making trades. You also will pick up all sorts of little

tidbits while you trade. I have all sorts of little things that I look for when

trading. These are things that I cant really put into a manual as they are

personal feelings and things that no two people will see the same way.

Part of my trading is done by looking at all the indicators that Ive talked

about in the manual and then I get a feel for the market on that particular day.

Little things like how has the market been moving of late? If weve had three

or four up days in a row get ready for some profit taking and you might be

able to ride a great free-fall. Or if weve been in down mode for three or four

days, get ready for the bargain hunting to begin and you can ride an up-swing

for a large number of points. J ust make you use those stops and lock in the

profits and limit the losses. These things are ones that you can only really

learn by trading, even if youre only doing it on your demo account you will

learn little things like the above.

On the subject of the demo account, I cant stress enough how important it is

for you to follow a specific pattern when using it. By a pattern I mean if you

are going to get any actual value out of having the demo you really need to

use it correctly. You can jump in on the demo and trade 50 contracts and

watch all sorts of fake profits but the fact is you will never trade like that when

45


46/47

you are live, so why practice that way? I would suggest the first week (at

least) just execute all sorts of trades, just as many as you can a day. This way

you will really learn all the ins and outs of the platform and how it works.

There is nothing worse than being in a trade and not having a clue what to do

with all those buttons. As stated if you do follow up with my broker and end up

using the same platform as me Id be happy to help you out with any

questions you have, within reason of course. They do have a very good

online tutorial. On the subject of brokers here is the contact info for my guy. If

you want to contact him please do so from this email address

[email protected] and its VERY important you put Day

Trading 4 Dummies Referral in your subject line, this way he will know youre

a customer of mine and will offer you a better deal than most people get. I

know its not the best deal all around but its best the combo Ive seen of

margin, commission, start-up capital requirements and platform, which is why

I use him. I like to call it the 5/5/25 deal. Its actually very good for a new

trader. It stands for $5.00 dollars commission per round trip (all fees included)

$500.00 dollars margin per contract and finally $2,500.00 in start up capital.

That is a very good deal as stated there are better deals around, but for a

new trader that is a very good combination of requirements. That is only for

traders that come via this book, so dont forget to send the email with the info

in the subject line stated above.

I am very excited for you all. I know what a huge difference learning and

perfecting this system has made in my life. Without going into a bunch of

hype and nonsense I do want to say that it really can free you from working

for someone else in that 9-5 grind. I understand that everybody is a bit

different and some people seem to pick up the flow of the market sooner than

others. I just want you to really give yourself a fair chance to succeed. Dont

worry if you arent knocking them out of the park in the first week, or even if it

takes you two or three weeks to really see how things move for you on the

indicators and charts. I actually blew my account up down to zero on two

46
mailto:[email protected]:[email protected]


47/47

different occasions when I was first perfecting this system. I believe Ive taken

the lumps so you dont have to. For obvious reasons I dont want to be putting

a whole bunch of my personal profit/loss info and private personal information

in such a public document, but if you do contact my broker about an account

and platform please feel to confirm with him that Robert J oseph is a real live

active and profitable trader.

Well thats a wrap as they say. I want to thank you again for taking the leap of

faith to purchase my book and please take the time to really read it through a

couple of times to get the hang of it. I always suggest to people to print it out

and spend some time watching the charts and indicators Ive referenced in

the book live so you can actually see it happening before your eyes. I know

that once most people have done that they have a tough time sleeping as

they cant wait to get started and start turning some of that paper profit into

real in their pocket profit.

Take care, happy trading and please dont hesitate to write and give me

feedback, as I said good or bad Im a trader I can take it I love hearing from

the people that are using my system who knows maybe youll be the next

testimonial on my website. You can reach me @ rj@day-trading-4-

dummies.com

Legal Disclaimer; Trading Futures, Options on Futures, and Foreign Exchange involvessubstantial risk of loss and may not be suitable for all investors. You should carefully

consider whether trading is suitable for you in light of your circumstances, knowledge,and financial resources. You may lose all or more of your initial investment. Opinions,market data, and recommendations are subject to change at any time. The informationcontained in this book does not constitute a solicitation to buy or sell any investmentinstrument. It is not to be made available to individuals in a jurisdiction where suchavailability would be contrary to local regulation or law.
mailto:[email protected]:[email protected]:[email protected]:[email protected]

Documents

Day Trading 4 Dummies.pdf