secrets of winning day traders

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1 Secrets of Winning Day Traders © 2011 Dr. Max Vogt and DayTrading Team http://www.DayTradingReport.com IF you got this report through daytradingreport.com (as opposed to ordering it through Amazon) you can share it with associates, friends or other trading colleagues. It must be shared in its original form without any type of modification. This document shall not be reproduced in any other format without the written permission

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Page 1: Secrets of Winning Day Traders

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Secrets of Winning Day Traders © 2011 Dr. Max Vogt and DayTrading Team

http://www.DayTradingReport.com

IF you got this report through daytradingreport.com (as opposed to ordering it through Amazon) you can share it with associates, friends or other trading colleagues. It must be shared in its original form without any type of modification. This document shall not be reproduced in any other format without the written permission

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granted by DayTradingReport.com. If you got this report through Amazon.com you may NOT share the work with anyone else.

Our disclaimer for this work and all materials, information and tips connected to or generated by DayTradingReport.com can be found at http://www.DayTradingReport.com/disclaimer

In brief, that disclaimer states that we make no recommendations and do not give trading advice. This work is for entertainment and education purposes only. ALWAYS consult a professional if you have any questions about a trade or financial decision, and even then, realize that a final decision is inevitably yours and yours alone. For more details go to the disclaimer page cited above.

Acknowledgements:

I’m grateful to the DayTradingReport.com team that assisted regarding this Report. It’s the fruit of lots of conversations and not a few arguments. Yes, Marcie, I know sometimes the way things are stated here sound rude, but it’s only for your own good… so you can succeed at day trading. Day Trading is not like anything else, and most people have to be shaken into that awareness until they finally get it.

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The “Holy Grail” of Trading

If you ever find a trading system that wins 100% of the time, don’t tell me about it, because I’ll know you’re either brand new to trading or off your wheels. If you believe a system or method can win 100% of the time, maybe you can also tell me about the little green men who landed on your rooftop last night.

But as you probably know there are marketers online who either claim outrageous winning percentages - which by the way is not the correct way to judge whether a trading method is good, even though the common-minded person might think it is….

Or they claim to generate vast amounts of money for you without your lifting a finger except to put in your secret code to collect money out of your ATM.

Listen. If such systems actually existed and actually worked, I wouldn’t be sitting here taking the trouble to help you understand the way trading REALLY works and how you can be successful. There wouldn’t be any need to do so.

And even if such a system did exist – or even a system which won 98% or even 95% of the time, sooner or later they wouldn’t, because markets are ALWAYS made up of only 3 categories of opinions… those participants who think the market is going up, those who think it’s going down and those who think it’s going to stay put.

If there WERE a system that won 98% of the time, there’d be no one to trade against because no one would take the losing side.

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That may sound all philosophical etc, but it IS something you need to know about the markets that almost no one seems to understand.

Markets seem like these big institutions that live in expensive buildings, but don’t be fooled. It’s just a bunch of people who have opinions and believe enough in them that they are willing to put their money (or someone else’s) down on the table.

Winning day traders – or heck ALL day traders who have been at this game a while – know that such “magical” systems don’t exist… or better said, something might work 100% of the time for a little while, but like throwing dice that keep coming up “7” sooner or later things will change.

Winning day traders share certain traits, certain beliefs and commitments. Even though they may trade different systems or methods or time frames (one might trade 1 minute charts and another may trade 60 minute or 550 Tick charts or anything else), they still have certain premises they operate out of.

In other words, every successful day trader understands some fundamental truths about the markets and trading and ACTS on those beliefs and understandings.

The thoughts, practices, beliefs and ideas of numerous winning day traders have been researched here and their recommended tips, rules and tricks have been compiled and edited for you, along with some of our own suggestions and ideas.

You can use this book to refer back to again and again.

I want to make a simple point here which I will repeat and you will hear me repeat through all the works of this series and that our team repeats over and over again on daytradingreport.com (we’ll never stop repeating this!).

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Novices or newbies look for “systems” or “methods.” Professionals look to refine their executions of usually very simple methods… and look to improve their mental game.

The above is a fundamental reality that separates the amateurs – who are always seeing the Holy Grail of Trading – from the pros, who are always seeking to refine their skills and refine their execution of existing – and usually very simple – systems.

What you’ll find here may seem very simple… TREAT it as simple… a simple route to success as a trader

The whole idea is to be brief. If every one of these puzzle pieces fro successful traders were to be explored, this would be a 300 page book, and I guarantee you wouldn’t read it.

By carving it down and making it very short, I figure I have a chance of your making it through this little work at least once… I recommend you read through it completely and thoroughly at least once a week. That’s part of why I made it so short.

The way to remember to review this book is to save it to your desktop.

You notice I named it WinnerSecrets. Maybe if you see that on your desktop you’ll remember to read it.

Now here’s what to do You will be best served by first basing your own trading on the

foundation of those who have preceded you and broken the ground on their own blood, sweat and tears.

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If you actually start there (almost no one ever does), you’ll be miles ahead of others and arrive at the winner’s circle faster than by any other means.

There are lots of distractions you’ll encounter.

You will undoubtedly make discoveries applicable to your own trading beyond what is presented here if you persist with a dedicated and focused mindset, faith and purpose, but you can save yourself a massive amount of time if you’ll spend a few hours reading and re-reading this little book.

Why Traders Fail Very few traders become successful.

The vast majority of traders fail and many of them completely lose their account and even more, some lose their entire life savings.

Cynically speaking, the amount estimated to fail depends usually on how aggressively the author is trying to promote his course or software.

But whatever the exact figure of those who fail, it’s clear that most do. And there are specific reasons this happens. In this series of reports on Winning Day Traders, all of the reasons for their failures and the cures for that failure are covered.

Still, many traders are earning more than one million dollars through trading. Just sitting at their houses or on vacation as long as they have a computer and an internet connection. I personally know traders who have this kind of success.

Each trader has to decide on his or her goals for trading. Many traders are happy just to make a nice hassle-free income or even to

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supplement their income, but don’t want to spend a large amount of time each day on the computer.

Some want to make a full time income… and others have a drive to get very rich through trading. All these are possible, but you need to realize that the loftier your goals, the more time, energy, focus and financial exposure you will need to take on.

Regardless of your goals though, the same requirements of mindset, money management skills and knowledge apply, just on different scales.

What follows are some of the core secrets shared by all successful Day Traders, culled from interviews, books, programs and personal conversations I have had with some of the best day traders.

A lot of the rules that are followed by these traders are familiar to anyone who is trading. However, few of them are different from the common beliefs of traders.

One famous trader said: “The most important factor is not what system or method you use, but your discipline.”

We completely agree with this statement and will focus more on that in the reports The Winning Day Trader’s Mind, and The Winning Day Trader’s Plan.

These Are the “Commandments.” I wrote these calling them “commandments” but of course that’s meant ironically. The only true Commandments were the ones given by God to Moses. But these are important too if you wish to be successful as a day trader. So I hope you’ll forgive the presumption, but I wanted to impress on you how important these are.

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Commandment # 1:

Thou Shalt Know Thyself

In the report Trader’s Mind I’ll go into this in a much more detailed way, but the core is this:

1. You need a good attention span for day trading. You need to know what kind of attention span you have and are capable of. Most types of day trading require extreme focus, but not all require that focus to go on for many hours or all day.

2. You need to understand your risk personality. Are you very risk averse or the opposite? Understanding your personality is very important for determining exactly what kind of day trading you’re going to undertake.

3. You need to make sure you are clear headed while you trade.

4. You need to have impulse and emotional control. If you are an impulsive, impetuous person (known in the industry as a “cowboy”), go do something else. Being a “cowboy” will only get you shot down by a better gunslinger.

5. You need to be a person who can follow a plan with discipline (or who can learn how to do so). If you’ve never been able to follow a diet, learn a skill or consistently perform at something you may not be suited to day trading.

The market can look very exciting.

There is clearly a lot of money changing hands every day.

In order to be a successful day trader you need to be able to feel that excitement and get energized by it, while at the same time not succumbing to temptation or driven by emotion.

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This is part of the real difference of trading versus other fields of endeavor.

If you don’t have the ability to stand aside watching the market until your preferred trades or trade setups occur, you’ll never succeed at trading.

If you DO have that kind of hard-nosed attitude and the ability to be patient, calm and focused even while your heart is racing and your mind is tempted to go crazy, you will be miles above and beyond your competition and well on the way to winning.

Commandment #2

Thou Shalt Be a Master at Bailing Out

Just admit and liquidate your position when the market is moving against you. Being “wrong” is one of the best ways of being “right” – that is, of winning!

If a trade is going against you and your trading plan, get out.

If a trade is going against you and your trading plan, get out.

If a trade is going against you and your trading plan, get out.

Now if you don’t have a clear trading plan, be sure to check out another report of mine called The Winning Day Trader’s Plan.

You have to have a plan.

And once that plan is clear and in place, follow it.

When a trade is going against you and your trading plan, get out.

In the years I’ve been trading and talking with or guiding other traders, the biggest mistake I’ve seen traders make is not getting out

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when their stops are violated. This is where you’ll lose more money than any other place, all things being even (and excluding nuclear attacks, meteors hitting the planet, etc.)

Assuming you have established an exact stop in your trade (which might be assuming too much since many traders don’t even know what they are), you must always honor it.

It’s not winning percentages that create winning traders.

Many successful traders have winning percentages of less than 50%.

Some as low as 30%, and one trader I know made a staggering amount of gains (in the 1,000%’s of profits) being right only 1 out of 10 times (yes, that’s right, he lost 90% of the time).

How?

Money management.

Cutting losers short and letting winners run.

Winning traders say that most common failure of the new comers is that they are always unable to admit that they are wrong.

This makes them to hang on the losses incurred living in the hope that market will turn in their favor.

Learn and live by this commandment.

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Commandment # 3

Love Thy Losses

This Commandment is an extension of #2.

Losses are and absolute certainty in trading.

You’re going to be wrong sometimes.

Losses are part of the business, but there’s an even better way to think of them:

When you take losses, it means you are IN THE GAME.

The only way you can win the game is by being IN IT.

Losses should make you smile.

You are up to bat.

A great professional baseball batter might get a hit 1 out of every 3 times at bat and be a league leader.

It’s part of the game.

There are great pitchers out there (the market itself) and your job is to take your best, most informed, most disciplined swings.

Hits are good, and misses also are good, if you’re doing your best.

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Commandment # 4:

Thou Shalt Not Trade Thy Daily Bread

Usually this is stated, “never trade money you can’t afford to lose.”

No one pays attention to that statement. Every new trader thinks they won’t lose so why would they pay attention to that warning? LOL.

Further, no one even knows what it means, so let me clarify this and bring it home. And I mean literally HOME, because if you don’t know it, you could literally lose your home, your car, your business and your entire life savings by making a really bad trading decision.

Don’t think it can’t happen.

When I was doing some combat training we were told the following: “If the other guy pulls out a knife, you ARE going to get cut. Just know that and assume it. It’s critical you don’t get surprised by that, or you will lose your focus and end up dead.”

Now you ARE going to get cut by the market, because it always has its knife out.

You ARE going to lose money at some point and have a big drawdown, if not today, then tomorrow.

If you’re mentally and financially ready for this, it will be a cut that will heal and make you stronger.

If you’re not ready, it can destroy your whole life.

Now THAT is why the statement, “only trade with money you can afford to lose.”

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If you’re not already trading for a living and making a good living, you are NOT prepared to make your “daily bread” from trading.

Keep your day job and trade before you go to work or some other time. But don’t depend on making a living from trading.

Don’t expect to support your family on trading if you haven’t already proved that you can.

Work your way up. Start with demo trades, then trade tiny. Make a very small goal, say $100 a month and work your way up from there. In case you don’t think making an extra $100 a month from trading will make you feel good and allow you to see your progress, you have no pulse.

You need “mental freedom” to trade successfully. If you are trading “your daily bread” – money you need to live on – you can never trade in what Mark Douglas calls a “relaxed state of mind,” which is necessary for trading well.

Trading is challenging enough without “outside” influencing factors coming in to influence your decisions, such as paying your rent or buying groceries!

Never trade with “scared money.”

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Commandment # 5

Thou Shalt Preserve Capital Above All Other Commandments

The only way you can trade is if you have capital in your account.

Start with the premise of keeping your capital, by following the preceding commandments, and you will be able to stay in the game a long time.

Be prepared to reduce your positions if needed.

Keep at least 3 times as much capital in your account as is required by the trade you’re considering.

If you have too much at stake in any trade, you’ll be back to trading “scared money” as we just talked about.

Commandment # 6

Thou Shalt Only Count Hatched Chickens, Not Chickens in the Egg Nor Chickens Perceived or Imagined

In trading, hope is not a strategy.

Well, better said, it is a strategy for getting run over by the market.

It’s fine to wait and let profits run, but not to the point where you think brand new chickens are going to hatch out of the trade.

When you reach areas that offer support or resistance or other indicators of possible market reversals, consider taking off positions or taking yourself out of the trade.

It’s only the chickens that are hatched that show up in your account.

Keep imagination and hope out of your trading as much as you can.

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The market is no place to get creative or think you’ve discovered Nirvana.

The great traders I know take lots of profits as well as lots of losses. At the end of the day they have more profits than losses. This is what makes them end up profitable.

Commandment # 7

Thou Shalt Stick To Thy Plan

Don’t change your opinions during trading sessions

Once you’ve established your trading style and trading plan (see the report The Winning Day Trader’s Plan), stick to it and don’t get teased off of it by conditions, thinking “maybe this is different.”

Every day in the market is unique, just like every snowflake is unique.

However, in the end, when a foot of snow drops on your property, it looks pretty much just exactly like the last time a foot of snow dropped on your property.

Markets are markets are markets.

And although you can’t know at any given moment where the market is headed next, you can deduce a reasonable probability (based on research) that the market is more LIKELY to move in a certain direction with a certain velocity based on your trading system.

All you have going for you is your consistency in executing your trading plan.

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If you don’t follow your trading plan you might win this time but over time you’re going to start hallucinating and thinking you’ll win by breaking your rules consistently.

You won’t.

You’ll end up losing over time and blowing out your account.

Trade the same system, the same way, every single day.

This is how the casinos make all their money, and if you are a trader, it’s how you’ll make all yours.

It’s not all that sexy in the end (I have never thought trading was sexy), but the toys you will ultimately be able to buy if you are a very good trader ARE sexy.

Commandment # 8

Thou Shalt Start Small and Slowly Edge Up

Start with 1 (like 1 futures contract, 1 mini Forex or mini Dow, 100 shares of stock, whatever the equivalent of 1 is in what you trade).

Take your time learning 1. Months or even years if you wish.

Then, when you get really really really good results trading 1, trade 2.

Spend even more time getting good with 2. Learn the ropes of 2, which is 100% bigger than 1.

You can do more with 2 than with 1.

For example, you can take 1 contract off with a small profit and let the other go to see if it goes further.

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Once you have really mastered 2, you can go beyond that if you like, because the same principle applies but you can make it as complex as you like.

Let me just throw this in.

I know plenty of traders in futures who “only” trade 2 contracts and make a very good living with very little exposure or risk in the market.

But hey it’s up to you however big you want to get.

Commandment # 9

Thou Shalt Honor the Blessed Break and Holiday

Every trading day fully engaged in takes something out of you. It blunts your brain. It slows your reflexes.

You need to restore your body, mind and soul.

I don’t care how tough you are.

Top professional boxers may only have 2 matches a year.

The best bodybuilders and weightlifters in the world know the secret. It’s the rest that makes your muscles get bigger and more defined.

If you are totally focused in your trading as you should be, you need to take restorative breaks.

Let’s say you are at 100% focus and efficiency and you are averaging $1,000 a day trading at top form (of course there are many making a lot more and many others making a lot less per day, but this makes for easier math).

This is where it gets important.

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If your efficiency drops to 90% in trading, you’re not likely to lose 10% of your potential results, you are likely to lose 40 – 90% of your results.

Top traders know that when they are only “90% there” or less, they will do much worse or even drop to break even or start losing.

If you are trading and not 100% present and focused, do not trade.

Take a day or a week off.

Come back refreshed. Your results will show it.

A break lets you stand aside from the markets, get a fresh look and new enthusiasm.

When trading every day you will tend to lose your perspective and get too close to your work.

Take breaks.

Commandment # 10

Thou Shalt Think For Thyself (and Not Think As the Herd Does)… Thou Shalt Ignore Thy Neighbor’s Trading Opinions

The only thing I’m going to say here, is that if you follow the analysis of others, you will get the results of others.

Now go do some serious, in-depth due diligence on how those others are doing in their trading and investing.

They are almost ALL losing money.

If you want to be like them, you will lose money too.

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Even the ones who say they are winning are cherry picking their trades.

The dirty little lies and secrets in the trading industry is that only a few people actually make money.

They may or may not tell others about it.

Just be very careful and get proof of product before you try out trading methods, signals or indicators.

Commandment # 11

Thou Shalt Take the Trade Where It Occurs, Not As an After Thought (Nor a Pre-Thought)

You know now to have a trading plan.

When you have that plan, the whole purpose is to follow it.

This might sound stupid, but… take the trades that set up.

Time after time observing other traders, I see the trade they told me they were waiting for set up and… they were still sitting there.

Waiting for…?

Christmas?

A “do over?”

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Commandment # 12

Thou Shalt Trade When the Market Is Active In Order to Avoid Hallucinations

It’s extremely important to have some way of measuring market activity and activity.

On one of the futures we trade I use this simple idea. We trade an oscillating – that is moving UP and DOWN on broad ranges – patterns, so we must have a market that’s going… well… up and down

If the market range during our primary ours is X number of points, we call it an active market.

If it’s less than that we tend to avoid it.

The only thing you can trade is activity.

However you go about defining it (there are many methods), only trade during active market periods and not during inactive market periods.

Commandment # 13

Thou Shalt Focus On One Market or Only a Few and Ignore the “Diversification” Fallacy

Many of us have been told for our whole lives that the key to successful investment is “diversification.”

This follows the concept “never put all your eggs in one basket.”

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However, markets are not eggs, and if you diversify it’s much more likely to confuse rather than help you.

We recommend trading (at least when you are starting out) only ONE market.

Learn it intimately… how it moves, its ranges, its most volatile periods; in sum, its “personality.”

This puts you in good shape to trade that market.

We recommend this because different markets move in different ways. It’s like having a friend you know very well.

You can relate better if you understand someone.

Markets – being nothing but a mass of human psychology – are driven by human emotions and tend to have a personality. Learn it and work with it.

Commandment # 14

Thou Shalt Avoid The Headache of Indecision.

If you’re not sure whether to get into a market or not, sit on your hands.

Don’t trade anything EVER unless you have a strong and clear view on the market at that point and whether price is meeting the requirements of your trading plan.

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Commandment # 23

Thou Shalt Allow Thy Profits to Run... IF

This commandment is best followed when you are trading 2 or more units (contracts, positions, hundreds of shares, etc).

It’s very good to take profits on part of your lots or positions, and then let the others have a chance to take off further.

Sometimes they will run.

We’ve found that there’s a higher probability than not you’ll end up closing the other contracts pretty close to where you closed the first one, but there are those days – which actually frequently account for the reasons many weeks are big winning periods – where you can get a big home runs.

Commandment # 24

Thou Shalt Have Patience, But Not Too Much

A lot is made of having patience in trading and waiting for the proper setups to truly develop.

That’s good but the other side of the commandment is true too.

If you have too much patience and require too much confirmation, more than likely the trade will already be gone by the time you can enter.

And if you have too much patience on exiting a trade, you’re likely to find that the market will retrace and you’ll be exiting way off the tops or bottoms.

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All in all, it’s a matter of your TRADING PLAN which we discuss in another one of these reports.

You’ll receive all there of the Reports over the next few weeks as a subscriber to the newsletter.

Commandment #25

Thou Shalt Be Grateful

This is the most important commandment of all, and I can write this one with no sense of irony, since it will actually – if practiced thoroughly and sincerely – turn your consciousness toward the source of all good things, that is, God.

Above all other things, the most important thing for you to practice is GRATITUDE.

Gratitude for the opportunity to be able to trade the markets.

Gratitude for your wisdom to learn about this wonderful opportunity of trading.

Gratitude for your intelligence, thoughtfulness and freedom to do something which can help you along so much in life.

Gratitude for everything and everyone who has brought you to this place and who will help you along the way.

And gratitude for so many other good things given and offered to you every single day.

You are one of the luckiest people who have ever lived in the history of the world.

And gratitude will serve you fully in your life.

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I do recommend that each day you write down 5 things you are grateful for.

This will bring you closer to your spiritual self.

It will help you realize how lucky you are.

It will help you become a better trader.

And it will help you be a better person in every area of your life.

Good trading to you now and in the future

Dr. Max Vogt

http://www.DayTradingReport.com

[email protected]