Track 'n Trade Futures End of Day
Orders Trading Example
In this Track 'n Trade Pro trading training video, I want to talk to you about orders.
Alright, so let me come through and talk about how we can make it through ugly markets, so we can get to good markets. We're going to do just a little trading scenario.
This type of market is very ugly. It's very hard to make it through when you're trying to trade. But this type of market is wonderful, right? We love this kind of market! This is the kind of market that makes us a lot of money. The problem is, you don't know when this market is going to start. You have no clue. You don't when the market is going to run like that. Markets do this a lot, then they do this a lot, then they do this, and this and this. You have to be able to know- you have to be able to get through some of these bad spots and know how to trade through them, so that you can get to the good spots that make you back the money.
In this industry we have a lot of little sayings that we use, a lot of little rhymes. One of the rhymes is that we need to cut our losses short, and let our winners run. Cut our losses short, let our winners run. That implies in itself that we're going to have losses, right? If you think that you're going to be able to come in and trade the commodities market and never lose money, it's time for you to stop right now, and go and do something else. You can't trade without having losses. The key is, controlling your losses, so that they are very, very small. When you get into the market and the market starts to move and run on you, you capitalize on that opportunity and make money on the long run; so you pay back the losers.
You may have 2, 3, 4, 5, 6, 7, 10, 12 losers in a row. But if you keep the losers small, it only takes one winner to pay back all the losers, and still give you a nice profit. I hope that you don't have twelve losers in a row, because that would be very discouraging.
Let's go through and have a losing scenario, and let's go through and trade this little spot right through here. That's a tough spot to trade through, but we're going to try to trade through it.
I'm going to use an indicator to help me, I'm going to use the Bulls 'n Bears indicator. The Bulls 'n Bears indicator was designed to help us know when market trends begin. Just like any indicator the Bulls 'n Bears can't tell you how long a market is going to last. An indicator can only tell you when it thinks a market is going to begin or end a trend.
The Bulls 'n Bears is perfect in that regard, it's very good at telling you when a market is going to begin- when a market is going to begin. It's going to give you a little arrow, and it's going to say a bullish market has now begun. But look, it only lasted for three days. Well, the Bulls 'n Bears, at that time- or that point in time, it didn't know that market was going to only last for three days. All it knew is that the market began a bulls run, alright? It gave you the bull signal, it turned that tic to green, and said alright, this might be it, this might be the baby that takes off and goes to the moon; this market has begun a bull run. Well, unfortunately for us, it didn't last very long, it only lasted a three days. The market went back into a neutral time zone.
Well, how do we trade this? How do we know what to do in this case? We don't have any kind of crystal ball, right? We don't know. We have to trade these, we have to take these opportunities if we take this opportunity we have the opportunity of making money, if we're right.
Let's come in here, and we're going to say, okay, the rules for this particular indicator, (you can use these same rules on any indicator) I don't care whether it's the Bulls 'n Bears, whether it's the Stochastics indicator, the Mac-D indicator, I don't care what indicator you're using, you can use these same trading skills in getting into the market.
Now, this is how I do it, this is coming down to this is Lan Turner telling you how he thinks you should do it, or how he does it. Again, I don't want to tell you how you should it. All I'm going to do is show you how- what I think is the best way to do this. Then, you guys can take and learn from it, and add it to your own trading knowledge.
I'm going to come in here, and on this particular indicator, it gives me signals. It gives me two kinds of signals. This is the Bulls 'n Bears, and the Bulls 'n Bears, gives me two kinds of signals. I'm just going to use, again, I'm just going to use this type of indicator to help us understand what's going on. Again, I don't care whether you use the Stochastics, or the Mac-D, or the %R, or the RSI. It doesn't matter to me, but this is how you would enter and exit these types of markets.
We come in, and we're going to look for on the Bulls 'n Bears, we're looking for, in the Bulls 'n Bears the way we get a buy signal is not from the arrows. The arrows on the Bulls 'n Bears trading system are only arrows indicating that the market has changed from bullish to bearish, alright? That's all they tell you. They're not a sell signal. That is not a sell signal in the Bulls 'n Bears. That is an indication that the market has changed over from bullish to bearish. This one is an indication that the market has changed over bearish to bullish. It waits and goes through a neutral position. It goes through a neutral time zone- yellow is a neutral time zone. It doesn't know whether it's going up or down, at this point. It just knows that it's going sideways. It turns the tics yellow. If that market is in a down trend, it turns the tics red. If the market is in an uptrend, it turns them green.
What we're actually looking for is we're looking for a change in color of the tics. We're looking at a change from yellow to green. When we get that, we find that it's also accompanies by the arrow. So we have an arrow that says it has changed over from bearish to bullish, we also have a green tic, a yellow tic followed by a green tic. It's the yellow tic followed by the green tic that is our buy signal, okay? This is our buy signal. A buy signal is a yellow tic followed by a green tic. We also have good buy signals and bad buy signals.
Let's say that this was a Stochastics indicator, and we're not playing with the Bulls 'n Bears, you would have different colors. Let's say you got a Stochastics arrow that said you should buy right now. You still want to use and apply this same rule, okay? We want bullish buy signals, and we want bearish sell signals. Bullish buy signals, bearish sell signals.
What's the difference between a bullish buy signal and a bearish sell signal. Well, let's go back to our tic. Let's draw a tic on the screen. Let's say that this is our open high low close bar, and this is our open and this is our close. Let's say the tic is green, which means that it would be a--followed by..let's see, this is our yellow tic. This is our yellow tic, if I could bring in our close on this one. This is our yellow tic, this is our green tic. Now, we have two scenarios. Here's the one that we got that is real for us, right here, and here's the one that's different. What's different about these two? Both of them have a yellow and a green tic in our mind here. Over here we have a yellow and a green tic. So both of these would be a buy signal. The problem is that this one over here is a bearish buy signal. What do I mean by a bearish buy signal? Bearish buy signal means that the close is lower than the open, alright? Maybe even the close is lower than yesterdays open, or yesterdays close. This would be a bad or a negative buy signal.
Think about Sesame Street- these two things don't go together, you know, that little song. You know, bullish buy signal, these two things go together. Bearish buy signal, these two things, they don't go together, so we don't want to take them. We don't want to take advantage of a bearish buy signal. This one over here is a bullish buy signal. The close is higher than it opened, and the close is higher than yesterdays close, so that's bullish- very bullish. Wonderful, this is great, let's take advantage of this buy signal. Let's get into this market. Okay, well, let's do that.
Think about our rules, bullish buy signals, bearish buy signals, bearish sell signals, and bearish bull signals.
I have a little diagram that outline those, if you would like to have a copy of that little diagram, just send me an email, and I'll send it to you. In fact, here's my email address: firstname.lastname@example.org. If you send me an email, and say, send that bullish buy signal, bearish sell signal diagram, I will send it back to you by email. So just send me an email, and I will send it to you.
Here we go, we're going to go ahead and we're going to take advantage of this. The way we do this, is we do this with the buy order. We're going to buy (1) and we're doing it at the market. Why are we doing it at the market? We could do it market on open, or we could do it at the market. Either one, it doesn't matter, because we're in an End-Of-Day application, right? The market has closed, we're in the evening, but we're going to do this electronically or we're going to call our broker and say, "Broker tomorrow morning, first thing in the morning, get me into this market. I got myself a bullish buy signal and I want to get in. I want to go long!" Okay, beautiful, we'll get in. "Oh, by the way, broker, if I'm wrong and the market turns and comes against me, I don't want to stay in there very long. I want to get right back out, because I might be wrong." Oh, okay, well, where do you want me to get you out? "Hmm..that's the hard part. If I'm wrong, where do I want to get out? How much money do I want to risk? My risk reward ratio on an entry, has to be very small. I want it to be very small." Because what's our little mantra, what's our little saying? It says: keep our losers small, let our winners run. Well, this is where we do that at. This is where we make that decision, okay?
We come in here and I have several places I could put this. I could put it right behind this first tic, which is right here. I could put it behind the first yellow, which is kind of the traditional spot, or I could pull it clear back here. We haven't got what we call the blue light, show up on this order yet. We have not got a blue light signal. The blue light is another placement for our stop loss, where we do a trailing stop. But I never use the blue light system the trailing stop on my entry. It makes my risk reward too large, so I ignore the blue light anyway.
We want to hold this thing tight. Now, this was a large tic here, this was a lot of distance, if I come in here, and I measure that tic from the top to the bottom with my dollar calculator, that's an $850.00 day. That's a lot of movement. Notice that it closed at the top of that. It closed at the top of that. If I put my stop order behind the green tic and it fills at the open, which would probably be somewhere around close to the close of yesterday, right? Or the close of this tic, my open should be somewhere close to there, I would still be risking somewhere around, maybe $500.00 to $600.00. So, that's good! Let's put our stop order right here.
We don't want to put it on top of it, because we don't want to, I mean we don't want to get in and right out immediately. That wouldn't make sense, we have to let the market move a little bit. But we want to hold it close. So these are things that go through my mind when I'm thinking about where to place my initial stop order to protect myself, or to protect my initial nest egg.
So then I step the market forward, and say, oh, Lan, you forgot to open your account. We are in a time machine, we can come back to March 1st, and say let's open our account with $10,000.00. Say Okay. Now we were filled. We were filled on the open, because it was a market on open, so we're filled on the open. Notice it dropped down, it closed a little bit lower. But then it closed higher again, it closed within closed about the same as it did yesterday. Our stop is still a good place, and notice what we got. We got a blue light, saying, this is where you should have your stop order. Well, for me, that's too far back, so I don't want to put my stop right there. So, I'm going to hold it up here. Then, I'll wait for the blue light to catch up to me if the market starts to run. Once the blue light catches up to me, then I'll start moving my stop up with the blue light. You can see how the blue light will that, it will start to catch up to the market, then it maximizes your profit potential. We don't want to do that in the initial beginning, let's hold our stops a little bit tighter to minimize our risk.
As this market moves forward, now, this is not good. We have two inside days. What's an inside day? An inside day is what we, when we're trading an inside day is considered a non-event. It didn't happen, nothing happened that day. If it's an inside day. What is an inside day? Let me come back here, and I'm going to draw with my hand tool. A little faster, it doesn't look as pretty, but it's faster. So, this is my first tic, and this is my second tic, okay? The inside day means that this is the high of the day, this is the low of the day, then we have the high of the day, and this is the low of the day. Notice that this days high and low are inside of the previous day. Nothing really spectacular happened that day, on this day, did it? Nothing spectacular happened, because it's all within the same range of the previous day.
Whenever we're trading and we're looking for a bullish or bearish signal based on one days tic, or one price bar, and it doesn't matter whether we're looking at a 1 minute bar, or a 5 minute bar, or a daily bar, or a monthly or weekly bar. If it's an inside day, it's a non-event, it didn't happen, it's worthless. We don't ever take any signal from an inside day. We totally ignore the signal from an inside day. This was an inside day. But that scares me, this market is not moving very quickly. I have the opportunity of leaving my stop where it's at, or tightening it up. I can tighten it up. I can bring it up to this point. I can say, if you come back against me, I'm getting out.
Now, what's the advantages of doing that? Tightening my stop up? The advantages are: see, whenever you're making a decision in trading, you have an advantage, and you have a disadvantage. You have to weigh the two out. Are you more comfortable with the advantage, or are you more comfortable with the disadvantage? For me, I hate to lose money. I hate to lose money, and what I'm talking about, is my initial capital. The amount of money I have in my bank account. The money that I sit here at this desk everyday and earn hour to hour to hour to hour. I hate to lose that kind of money. That's the kind of money I'm risking right here in this scenario. I'm risking my money. My initial capital. I hate to lose that kind of money.
I always seem to error on tightening those stops up. Sometimes I'll still tighten them up too tight, and I'll get stopped out of the market, and the market will come do something to me like this, where it will come back and it will knock me out of the market, fill my stop order, then take off and go to the moon. I'm thinking, oh, crap! So, that's the disadvantage. The advantage is obvious. If the market turns and starts to some down against us, and goes down this direction, actually, this direction, then we lost a very small amount of money. Which holds true to our saying, which is keep our losses small, and let our profits run. In this regard, we're trying to keep our losses small, so that's the advantage, we're keeping our losses small. The disadvantage is, that we could get filled just as the market takes off. That's the disadvantage.
We have to weigh out where we want to hold our stops. Holding our stops back a little bit further, may give this market the opportunity to drop back, not fill our order, then take off and we make all the money in here. Disadvantages, and advantages.
Let's come in here, and hold our stop a little bit tight. We're going to step forward, and we got stopped out. We got stopped out, with a loss. We got stopped out with a $359.00 loss. But it was a small loss, a small loss. So we're not sweating too bad, alright? This is how we have to play this game, this is how we do it. Then, as we wait for another opportunity to get into the market, we look for an opportunity, here's an opportunity! Okay, yellow followed by a red is a sell opportunity. It's our opportunity to go short the market. It's also accompanied by a bearish arrow; indicating that the market has changed over from bullish, right here, to bearish.
Of course, we went through an ugly little narrow yellow spot. But this is indicating that the market has now gone into a bearish state.
Now, look at that bearish state, look at that bearish signal. Is it a good, is that a good signal? Is that a good sell signal? Yellow followed by a red? It's a sell signal, but it's an ugly one, isn't it? It's a bullish sell signal. These two things don't go together, bullish sell signal don't go together, so we don't take it. We don't want it, we don't want anything to do with it, because it's a bullish sell signal. It closed higher than it opened. It's bullish. It closed higher than it opened, so I wait for a confirmation. I wait for my second opportunity. Oh, good things we didn't get into that market, because this market shot back up and went into a neutral zone, again. Knowing the difference between a bullish sell signal, and a bearish sell signal and a bullish buy signal, and a bearish sell signal is a very powerful thing. You can derive that from the open and close of the markets.
Again, I don't care whether you're using the Stochastics or the RSI, or the Mac-D, the DMI, or whatever is giving you your signal to get into the market, when it gives you the signal, check and see. Oh, is that a bullish signal or is that a bearish signal? Only get into the market on bullish longs, and bearish shorts.
Now, we're going to wait for another opportunity to get into the market. Oh, there's another opportunity to get into the market. Very bullish, very, very bullish. Look at the gap! Of course, we hate markets that gap like this. That's terrible, because that's a big chunk of money. But nonetheless, this is a very bullish buy signal, bullish buy signals. Those two things, they go together. So we want to take advantage of this market and get in.
Let's come down here and we're just going to buy (1) at the market, and we're going to click Okay. Where are we going to place our stop order? Again, we have several places we can place it right behind this one, we can place it behind the yellow, whoo! That's a long way back, how long is that? Let's come in here, and go all the way from here to here. That's a $1,700.00 risk. Wow, that's way more than I want to risk. Let's not do that. Let's come back up here and put it right up underneath this tic. If it turns back and goes back down, I want out. But if it continues higher, I want to get in, and I want to go with it. I have my market order that's going to get me in, but if the market turns and drops lower than yesterdays close, or yesterdays low, I want to get back out.
What are the disadvantages? Again, we always have advantages, and disadvantages, if this market turns and drops likes a rock, we're going to have a very small loss as this market comes against us. The disadvantage is, that this market could fill our stop and take off and go to the moon. We miss out on a profit opportunity.
Let's step forward, and what just happened? It turned and came against us. We got into the market on the market and immediately closed and got us out of the market again. We got out with very small loss.
In the beginning I showed you this market, we know what this market is going to do. We knew this market was going to be an ugly market, right? We knew that it went sideways for quite awhile. The problem is, you don't know when this market is going to take off. You know it does, you remember that it.
I'm tired of this market, I'm not going to take the next signal. Whenever I do that, that's the market that takes off and goes to the moon. Very irritating.
Let's come along, and wait for another opportunity..oh! What the heck is this? One massive gap! Look at the size of that gap, that's a horrible bugger right there. It's how big? Oh, $793.00. But nonetheless, it is a very bullish buy signal. It closed the same as it opened, didn't it? It went up, it had this huge gap, it closed the same as it opened. It's kind of a neutral day on a very bullish tic.
Now, we have the opportunity of taking it, or we can wait, we can wait for a second signal, to see what it does. We can do one or the other. But let's go ahead and take it. Take this in variety.
We're going to come in here and we're going to say Buy (1) at the market. We're not going to risk very much money, because we may be wrong, and we're going to hold our stop back behind the first tic. We'll say Okay, step forward. We got filled on the open, and the market continued higher.
I'm in good shape, I held my stop very close. I mean, that's a really close stop, holding my stop that close. It paid off so far, I haven't gotten stopped out and I wasn't risking very much money, if the market went against me. Advantages, and disadvantages. Advantages, and disadvantages.
As I step forward and this market moves, I'm going to hold my stop, and I can just hold my stop until that, oh, this is a good spot right here. I can move my, I can now move my sell stop with the blue light.
The blue light is a mathematically calculated stop placement order. I would probably say the number one question I get when I'm doing a trading scenario is people always ask, "Lan, where do I place my stop orders?"
Stop orders, you can place in a number of different areas. As I've outlined here, on your entry, you generally have two or three places that you can put back behind areas of support and resistance. When you follow a market and the market starts to run and take off on you.. let's actually talk about a market for a minute.
Let's see how many of you guys are horseback riders? How many of you have ridden a horse before? Probably many of you are familiar with horses. You know a horse, you get up on it's back, it's kind of a great big animal, you have to have a lot of control on this animal to make him to do what you want, otherwise, he's going to toss you. He's going to throw you on your back. You have to be in control, you have to be the boss of the horse. I always think about trading as if it were a horse. When I first get on a horse, let's say I'm in the barn, and I jump up on the back of that horse; I want to have a lot of control on the horse. I have those reins held in my hands, and the reins are what steer the horse. If I pull the reins and I have them really tight and I pull the reins a little bit to the left, that horse, he starts to swinging around to the left. If I pull the reins to the right, he starts to swing around to the right. If I loosen the reins up a little bit, and kick him in the haunches, he starts to move forward. If I pull back on him, he stops. If I pull a little harder, he starts to walk backwards, right? Great, so now, I have a lot of control on the horse. When I get into a market, I think about a market like a horse. When I first make my initial entry in the market, I want to get in and I want to have a lot of control. I want to hold my stop very close and very tight. Just like the horse, those reins when I'm in the barn, I want to hold the reins really tight.
Now, I want to get him out on the pasture, or out on the race track. When we get our horse out on the pasture, and we kick him the haunches really hard, we want him to run really fast, or out on the race track, what do we do without reins? Do we hold them really tight, do we hold them right back and really hold tight on those reins? No, we don't. Why? Because a horses head has to move back and forth and back and forth really fast as he runs, right? Think about a horse, when he runs, his head is bobbing back and forth and back and forth, and he's just huffing, he's going fast, you have to loosen those reins up and give him some room to run, right? If you hold them really tight, he can't run. He stops. But if you want him to turn, it takes a little bit, you have to really woon him around one way, or really pull hard on the reins the other way to try to get him to slow down and make a turn. So you don't have as much control over the horse when he's running really fast. You loosen the reins.
If you think about a market like that, when you first get into a market, you have to have a lot of control. You have to hold that stop really close and tight; so he can't throw you off. He can't kick you off, buck you off and ruin your day. Once the market starts to run, and it started to take off, like this market here; you want to hold the reins back a little bit. You want to hold your stop back, you want to loosen up the market. Let him move, let him breathe, his head has to move back and forth, just like the market. The market takes two steps forward and one step back, two steps forward and one step back. Just like a horses head when he's running. He moves forward and back, and if you hold your reins too tight, or if you hold your stop too close to the market- once the market starts to run, you're going to get stopped out prematurely, or the horse is going to stop and he's going to start walking. Just like in the market, you're going to get stopped out prematurely.
That's what the blue light system does for us, it allows us to know where to place our stop order. Look, it's holding awfully far back at this point, isn't it? It's way back here, now, it's mathematically calculated to start jumping forward. Look at the gap that it's trying to close the gap on. Look at the distance here vs the distance back here, or even back in here. It's mathematically calculated that when this market starts to take off and run, it wants to come up and catch up to it. But it's holding the reins back a little bit too far, so that the market has tendency, or the ability to move back and forth, just like a horse.
As we move that market forward, notice how that blue light system catches up to it. It's going to try to maximize your profit potential.
Of course, what we're trying to example here, is that we went through a very ugly trading scenario. We didn't know when the big trend was going to start, but if we wouldn't have been in the market trying to capture every time the market turned from bullish to bearish, trying to capture the market, we would've missed this opportunity. We would've missed this opportunity altogether. We have to sometimes trade through really ugly stuff, we have to have some losses, if we want to get to the good stuff, and make back the profits that we lost.
Of course, as that market moves forward, you see, I should be moving this stop up. Every day you call your broker, and say, "Broker, I want to move my stop up to 186.14." Okay, great..next day, "I want to move my stop up to 186.63." Okay! You can see how the blue light maximizes your profit potential, moves right up in there, as close as it can to the market to try to capture as much profit. Now that the market starts to weaken up here at the top, see how it's weakening? The blue light has caught all the way up to it, and it's trying to maximize your profit potential. It moves itself right in there, right close to try and save yourself from losing too much money. There, we got stopped out, with a $5,700.00 profit on this trade. Of course, that was a very beautiful example of being able to go through something very ugly, and having some losses to catch a nice run to make us some money.