The Importance of Risk Management

By Reynaldo Soriano

With the current market conditions, the DOW can drop 200 points in one day and then go up 300 points the next day. Yesterday alone, the DOW dropped 220 points during the first half hour of trading and, while our friend, Ben Bernanke, was speaking, it went back up more than 220 points. The market is so volatile that if you do not have a trading plan nor enough know-how, you will get slaughtered. On the other hand, if you have prepared a trading plan, and know how to manage your risk, you will end up as a consistent winner.

As you would have noticed after doing the “Seven Day Pro Trader Series,” Online Trading Academy is a big believer in risk management because we know its importance. We know from experience that it is one of the key elements of successful trading.

The difference between OTA Grads and non-grads

It is very clear to me that a lot of traders who come to our Power Trading Workshops come to learn “how not to lose money.” One of the reasons why they lose money consistently is because they do not really know what risk management is all about. They do not know what strategies they have to put in place to manage their risk. They do not know that there are six kinds of stop-losses. They do not know how to use these six different kinds of stop-losses. They do not know that risk management is a major element if they really want to survive and make money in the stock market, especially in these volatile markets conditions. Believe me, I have experienced major losses in the past also and I know how important risk management is. I believe that the majority of traders who learn how to trade the hard way via books, CDs, DVDs, and week-end seminars get into a vicious cycle. One of the key issues is “how to” put everything together. Why? Because the authors and week-end seminar leaders will never tell you that trading is one of the hardest professions there is. They will not tell you that you need more than discipline to make money. They will not tell you that trading is not a “get rich quick” scheme. They will not tell you how important risk management is and how to effectively manage your risk. They will not tell you that you have to be your own psychologist, money manager, technical analyst, fundamentalist, and risk manager. All they will tell you is that trading is great and you can easily earn money from trading. All they will tell you is that they have this great system and you can make money with their system. All they will show you are the common charts and patterns that everyday traders use to trade the markets–not how the professionals from big institutions like Goldman Sachs trade. All they will tell you is that if they can make $10,000 to $90,000 in a year, so can you.

Fellas, I want you to understand that these are all marketing techniques and do not believe what others tell you via the media, news, advertising, and the internet.

So, make sure to ALWAYS put your stop losses in place after executing that trade.  Remember to “Plan the Trade and Trade the Plan.” 

Education has been a great part of my existence and growth as a trader, and I have never before seen a company like Online Trading Academy. Wouldn’t you agree? 

Here’s a trade that I did last Tuesday using Support and Resistance and OCO’s

Stock: ADBE
200 shares
Time Frame: 7/14/08 15:15 - 15:25
Strategy: Momentum Trade using Support and Resistance.
Support: $38.53
Entry: $38.58
Stop Loss: $38.48
Exit: $38.88
Profit: $60 in 10 minutes.

If you have a trade that you want to share, e-mail me at rsoriano@tradingacademy.com and I will post it.

IMPORTANT REMINDER:

On July 23, 2008, we are going to have our 2nd Alumni meeting!

Guest Speaker: Ryan Gibson - Traders Accounting
Topic: Tax, structures, etc. (bring all your necessary questions)
When: July 23, 2008
Time: 6pm - 9pm ish
Where: OTA San Jose - 1798 Technology Drive Suite 152
Cost: FREE for Grads Only

Press Release - OTA’s First Alumni Event

Hi All,

Online Trading Academy San Jose had its first Alumni event for our graduants last night and it was a blast.  Brandon Wendell who is a Master Instructor was our special guest gave a lot of advice and valuable information that graduants currently face with their trading.

The topics that were covered were the following:

Volume - The importance of volume

Exit and Entry Points - How to enter and exit almost at the right time using support and resistance. 

The importance of Support and Resistance - Based on supply and demand

The importance of discipline - Discipline starts by creating a detailed, written plan

Next month, we are going to have another special guest speaker - Ryan Gibson.  He’s the vice president of Traders Accounting and will be talking about tax and structures in trading.  So, make sure to come along, bring your questions with you, and take this opportunity that will assist you with your trading.

All the best on behalf of Online Trading Academy San Jose,

Reynaldo Soriano

Citrix Revealed

Hi there,

During my last post, I put in a QUIZ TIME section in regards to Citrix (CTXS).  Did you have the chance to look at it?  If you did, congratulations and tap yourself on the back.  If you didn’t, why didn’t you?  Did you procrastinate?  You have to realize that trading is a skill.  In order to get better with such a skill is through practice and repetition.  Did you know that I haven’t received a single comment in regards to CTXS?  Very interesting actually.

Nevertheless, this is what CTXS did:

Citrix formed a reversal pattern called:  DOUBLE TOP.

When it broke the neckline at $33.70, CTXS dropped almost the same distance from the neckline to the top of the second top.  As of today, CTXS’ low was $31.60.  Note the daily volume of CTXS also.  It will be very interesting to see what CTXS will do tomorrow.

Question for you: 

• Where would you have bought? 

• Where would you have sold?

• Where would you have put your stop loss/es?

• Where would you have put your exit strategies?

• What trading plan would you have created?

I would love to hear your comments!  Please feel free to put your comments at the end of this post!

Also, remember that we are going to have our first alumni meeting on June 25th, 2008 from 6:30 pm - 9 pmish.  We are going to have Brandon Windell as our special guest so, take this opportunity and come along!

Take care and happy trading!

Best wishes,

Reynaldo Soriano

Surprise

Hi All,

I have mentioned on my last post that we are going to have our first Alumni meeting on the 19th of June. 

We are going to change our first Alumni meeting from the 19th of June to the 25th of June.  We apologize for the inconvenience but in actual fact we are going to make the deal for you even sweeter.

How? I have been told today that we are going to have a special guest.  Our special guest is Brandon Wendell, one of our master intructors.  

Since one of the topics that we are going to look at are going to be your trades that perhaps didn’t work out, we are going to analyze these trades and Brandon will go through it in detail with his expertise.

So, I would like to invite you to come along and take this opportunity not to be missed!

WHEN: JUNE 25, 2008

TIME: 6:30 pm - 9 pmish

WHERE: OTA SAN JOSE

1798 Technology Drive, Suite 152 San Jose

COST: FREE for Grads Only!

Call us: 408 539 7000

I look forward to seeing you there!

Best wishes,

Reynaldo

In the moment of NOW!

By Reynaldo Soriano

I would like to share with you one of the key elements of successful trading.  Would you like to know what it is?  Would you like to know what makes successful traders tick?  Would you like to know how successful traders profit consistently especially with these volatile markets?

The secret is: Trading in the moment of NOW, where the past and the future don’t exist! The big question is: HOW?  How can you be in the present moment at all times?

A few years ago I came across an article from Innerworth and they have explained it to a T.  Rather than me explaining it to you from scratch, I am going to share the article with you instead.  Why re-create the wheel if the wheel has been already created, right?

“Existential psychotherapists point out that people experience fear and anxiety when they think about, and regret, their past mistakes, or when they worry about an uncertain future. The antidote: Experience the moment. Focus on the process of living in the here-and-now. Seasoned traders describe a similar experience when they enter “the zone.” There’s a point where a trader isn’t worried about past mistakes or future profits. All one’s attention and energy are focused on the current trade. When they are in this optimal mental state, they achieve a higher level of existence. They are more in touch with their instincts. They see the markets and their trades more clearly, and are intensely aware of their feelings, sensibilities, and judgments. They can review a multitude of details, and can effortlessly identify the key factors that are likely to drive market action. Moving into this higher level of awareness during a trade can greatly increase one’s chances of success. It’s useful to learn how to move into this peak performance state.”

“How does one live in the moment? Perhaps the first step is just intellectually considering the existentialists’ proposition that anxiety is sometimes a matter of focusing on, and mulling over, the past, or worrying about the future. When you consider it, it seems reasonable to think that if one could just forget about the past and avoid thinking about the future, one will live in the present. It seems unrealistic and perhaps a little reckless, however, since it is often prudent to both learn from past mistakes and to make sure you avoid potential adverse events. But again, when you do so, it takes you out of the moment. You start to analyze and remove yourself from the ongoing experience rather than enjoying it. In contrast, trying to stay in the moment will keep you focused on the trade. And by focusing all your energy on the trade of the moment, you will reach that higher level of awareness where you’ll see the market more clearly and be able to run through all possibilities at lightening speed.”

“These concepts sound good in theory, but how does one put these ideas into practice?  Well, first it may all depend on how many past conflicts you have in the back of your mind and your self-esteem.  If you are unsure of your abilities, it’s hard not to worry about the future, especially when you are facing extreme pressure in the midst of a trade.  If you are easily shaken by uncertainty and stress, your mind will tend to wander toward your past mistakes and regrets and you’ll tend to question your ability to control your destiny.  But, if on the other hand, you are especially confident, you are not likely to be troubled by your past, and can more easily live in the moment. That said, it may be extremely difficult for some people to live in the moment for very long, or to stay there and completely cast aside all past regrets or worries about the future.  One can strive to reach this state of existence for a short time, however, at least long enough to evaluate a trade and take decisive action.  The first step is to monitor one’s thoughts and identify instances where one is mulling over the past.  The second step is to actively try to push such thoughts out of one’s awareness.  For example, one may think, “I wish I didn’t lose so much money on my last trade,” or “I’m frustrated that I’ve had so many losing trades.”  One may think these thoughts throughout the day and it’s difficult to just shut them out.  But it is definitely possible to put them aside for about an hour, while you monitor a trade and decide what action to take next.  One may similarly worry about the future: “I wonder if I will keep losing or will I finally make huge gains?” After one is aware of the kinds of thoughts that indicate one is mulling over the past or worrying about the future, such thoughts can be pushed aside temporarily. It may be necessary to yell “stop” or think, “Don’t think about that right now; I can consider these issues later, after I’m done evaluating my trade.” Now, using these strategies won’t put you in that ideal mental state where you are completely in the moment, but it will help you get to a mental state that is close to the ideal. It may take some practice, but you can eventually reach this mental state (and if you have some difficulty, always consider the possibility of seeking out some professional help from a trading coach).”

The best traders are not self-conscious about their mistakes. They don’t regret past mistakes or worry about the future. They live in the moment. You can also live in the moment, if you practice cultivating the proper mindset. When you reach this peak level of experience, you’ll not only be more profitable, you will enjoy trading, and find it to be fulfilling in its own right.”

On June 19, 2008, we are going to have our first Alumni meeting where we are going to look at some trades, talk about current issues and how you can exercise being in the moment of NOW.  So, I invite you to come along on thursdayt, June 19, 2008 from 6:30 pm to 8:30 pm.

To reserve your seat, please call our office at 408 539 7000.

Where: 1798 Technology Drive Suite 152, San Jose 95110

When: Thursday - June 19, 2008

Time: 6:30 pm - 8:30 pm.

Quiz Time!

Attached is a chart of CTXS (Citrix).  See if you can spot the following:

• What type of Reversal Pattern is it forming?
• If this pattern will break its neckline, where will CTXS go down to?
• Where are the resistance and support levels?
• If you are going to trade this stock, what type of plan are you going to create?
• What will be your entry signal, stop signal, and exits?

This is all for now and till next time, Happy Trading!

Best wishes,

Reynaldo Soriano
Online Trading Academy - San Jose
Ph: 408 539 7000 

 

 

Welcome!

Hi there,

Welcome to Online Trading Academy San Jose’s new blog site.  As an exclusive alumni member, we are going to give you more information, send you newsletters, notify you with upcoming events and press releases, and much much more.

We have come up with a new format with our newsletters and in this week’s article:

Putting Online Trading Academy Tools to Work for You

By Sam Seiden

In an Online Trading Academy Class, we teach many tools all week long. These tools are anything from support and resistance to moving averages, oscillators to level II and much more. During the live trading period of the class, we put those tools to work. The key to making these tools work…

Click here to read the rest of the article

 

We look forward to seeing you soon and have a great week-end!

Best wishes,

Online Trading Academy - San Jose