July 20th, 2011 - Issue #593

In This Issue

1. STOPS: Why Don't We Keep Them
2. Swing trading recommendations newsletter by LEVEX Capital Management Inc.
3. Economic Calendar

1. STOPS: Why Don't We Keep Them

by: Vadym Graifer of RealityTrader.com

Vadym is the author of Techniques of Tape Reading (McGraw Hill 2003), How to Scalp Any Market (2005) and Master Profit Plan (2005). Vadym is a frequent featured speaker at International Trader's Expos and Financial Forum Conferences.

He is the founder of RealityTrader.com, a hands-on training company, working with a global community of individuals to achieve high levels of trading success.

Vad is a professional trader and an international private trading mentor responsible for turning around the trading careers of thousands of trader. He has also published articles and interviews in industry magazines, corporate product newsletters and trading forums.

With everything said and written on the subject of stops, it should be a given that everyone is conditioned to keep them religiously even before they start trading. No matter what source a newer trader turns to, utter importance of stops will be underlined and emphasized up to the degree that keeping them heralded as the ultimate key to success. We all heard adages like "Take care of your losses, profits will take care of themselves."

Do all the stern warnings work? Not really.

Time and again traders blow their stops, widen them in the course of a trade, hold losing position in the false hope for recovery. If this destructive behavior continues despite all the warnings, there must be deeply rooted reasons for this. As with most trading flaws, failure to keep stops roots in fundamental misconceptions about the very nature of the market and trading. Such misconceptions result in incorrect psychological makeup which, in turn, creates behavioral patterns harmful for a trader's performance. In order to re-condition oneself it is necessary to work out fundamental, even philosophical if you will, understanding of the market as an environment in which a trader operates.

Let us list and analyze the misconceptions that cause failure to keep stops.

Right action must result in profit.

This misconception stems from misunderstanding of the very nature of the market as an uncertain environment. Newer trader sees a market as a conglomerate of firm links between reasons and outcomes. In such a conglomerate, every reason results in single possible outcome. The simplest case of such link would be "good news – up, bad news – down". We know it's not true – price reacts to news in a wide variety of ways.

Similarly, an inexperienced trader applying the setup he knows "should work" expects every trade to be a winner, providing that all the components of the setup are right. Have you ever heard complaints like "Everything was exactly like in that book, yet the trade failed"? That is direct result of this misunderstanding. Everything may be right, yet the trade fails – just because markets work in probabilities and not in certainties...

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2. Swing trading recommendations newsletter by LEVEX Capital Management Inc.

Would you like to receive periodic emails such as the one below with possible trade ideas? suggested stops and targets?

The swing trading newsletter is provided by LEVEX Capital Management Inc., a registered commodity trading advisor, which scans 18 different markets on a daily basis and alerts traders for potential set ups.

Below is an example of a recent trade idea from July 6th 2011.

Dec. Corn:

Possible long on a break above 6.170 ( the way I view the chart, we need to see price breaking above this level to get what I call price confirmation, it is quite dangerous to try and pick bottoms/ tops without this price confirmation)

stop 5.690

1st tgt 6.490

Click to view a full email preview.

3. Economic Calendar

Source: Moore Research Center, Inc.

* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.

** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.

*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!