Introduction

We will explore a traders mentality and what shapes a traders skill set in this manual. We will also explore the basic psychology of making a trading decision and what factors inuence a traders decisions before, during, and after making a trading decision.

The purpose of this manual is to train futures traders (Intermediate and Advanced) by giving them the tools required to develop a trading skill set. What is a trading skill set? A persons range of skills and abilities used to make trading decisions. When you talk to top traders about how they make a trading decision they will tell you that they What is a Traders Skill analyze the markets as a whole from macro to micro technicals, sentiment, risk parameters and correlation. They gure out what to trade, where to enter, set?...a persons range of how to exit, and what is the risk of the trade based on the latter criteria.

skills and abilities used to make trading decisions.

For the purposes of this manual we will not get into any basics from here on out and all the information in this manual will be predicated on the assumption that you know the material at the current state. Keep your trading simple and the results will compound ten fold. This statement is easier read that implemented. For example, keep your stops on larger time frame charts below one candle, only exit your entire position (or remainder of) at the rst sign of a trend reversal (more on this in Chapter X), have a trading plan, and get rid of the noise (this can relate to a trader in many different ways. It is your job to gure out what the noise is). As a successful trader you have to know the mentality of other, impulsive, countertrend traders. These traders tend to always be fading moves, looking to the media for trade ideas, and consistently switching their trading style. This bouncing around from scalper to swing trader to short term investor and ultimately a trader who gets stopped out of their position at a loss causes these traders to provide ample liquidity to fuel moves in the correct direction. These traders are institutional,

boutique hedge funds, and your average retail traders. Knowing your sentiment gures will help guide you in the opposite direction of the latter type of trader and help you avoid become on of the heard. Uniquely, what sets you apart from other traders is your ability to constantly take small stops. Stops placement will be your key to success as a trader. The latter trait will allow you to preserve your capital more efciently. How to accomplish this will be discussed more in detail. This manual will cover the psychology of trading as it relates to entering and exiting trades, losing money, gaining prots, and the aftermath and how your last trade will affect your next.

Stop placement will be your key to success as a trader.

After the topic of developing a trading plan is discussed a look at the anatomy of a trade will reveal what the decision points are when you should take a trade. In other words, what will be the trigger that will cause you to open a long or short position? Other topics covered will include: Correlation Time Frames Time Horizons Zone Entries Zone Exits Zone Liquidations Zone Stops Raising Cash All of the factors discussed so far include the determinants of what is a trade. But what is not a trade? Taking a viewpoint of having erratic behavior and experiencing emotional connections to trades, a trader will be inuenced by these forces causing them to take what is NOT a trade. This topic will be discussed further as it is the single most important concept that has to be depleted from your trading mentality. The next portion of this manual will detail the S&P Emini Futures Contracts. To place capital at risk for any endeavor, one should dissect the instrument and learn everything there is to know about it. Knowing what you are trading is a very basic thing (the only basic topic covered in this manual) but many traders have no idea what they are trading and what the

limitations and risks are, including who is on the other side of the trade. Institutional trade desks assign their top traders on instruments such as S&P Eminis , Euro futures, Yen futures, Nasdaq futures, and Crude Oil futures. Learning about these individuals helps your cause as a trader, since they are trading every single day. Developing a rhythm, so to speak, is important to your trading style. For example, how to stay in tune with the components of the S&P futures. What comprises these contracts is one element of how these contracts move. So, watching the top ten components is key to understanding and anticipating a short term move (one of 45 minutes in nature). Again, sentiment will play a key role in your trading decisions. Sentiment includes COT (commitment of traders report), what it is and how to obtain the correct version of it, bull-bear ratios, McClellan Summation Index (denition of and its uses), and options reports. The manual will also cover the movements of the S&P futures. How these contracts move up and down after hitting new intermediate highs and lows will be covered. Sequencing is a term you will get to know as it relates to futures movements. Overnight gaps is a common occurrence of the futures contracts and taking a look at these gaps will uncover great directional moves for your trades.

Your arsenal of information is what sets you apart from other traders and success in trading is easily achieved with a thorough analysis of each of your trades.

All of the topics discussed up to this point are to give you an edge in trading. Your arsenal of information is what sets you apart from other traders and success in trading is easily achieved with a thorough analysis of each of your trades. From this point on the rules of engagement become strictly mechanical as to how to enter/exit a trade and the manual will go over, in extreme detail, from how to set up your charts to how to exit your positions. Studying all of the chapters up to Mechanics Of Trading will make the difference in your trading. We are condent that you can achieve incredible success in trading by consistently performing routine daily research, methodically, to engage in your trades. Good Trading! -Private Trading Group