achieving the traders edge

The Universal Market Trader is the strategy and course that’s designed to trade multiple markets in multiple time frames.. Stick to your method, your trading plan, and you will be succes

The Insider’s Guide to Achieving the Trader’s

Edge

Investing Pro’s give you the hard truth on your trading We have asked our customer base to participate Some of them are long time associates of ours due to the fact that

we started our business in 1996 As you can imagine, we literally have tens of

thousands of people to query in our database Some of them are very active and

successful traders and some are just starting in the business

We ended up with over 1,000 questions that people wanted to ask trading pros about their trading The questions ranged from Forex, futures, stocks, options, day trading,

or swing trading We will discuss the most pertinent and reoccurring questions There are certain categories that come up on a regular basis

The topics that you will learn should make a difference in your trading regardless of what trading system, strategy, or approach you are using A lot of what is going to be discussed is universal to your trading Whether you are struggling, just starting out,

or you have had some success - you are going to benefit from what you learn today

To help answer those questions, an informative collaboration has been brought

together composed of Mark Soberman, Brian Short and Troy Noonan

The Speakers

Mark Soberman is the long time founder and owner of www.NetPicks.com He founded

the company in 1996 and is in his 13th year of operation at the time of this writing (01/2009) He has always focused on active individual investors As you can imagine, in

1996, he was in one of the best bull markets ever and worst bear markets ever

Now, they are in some of the most challenging markets on a global basis We have always been working on systems, approaches, and strategies for people who are looking

to day trade Also people who are very actively working swing trade Typically, it has initially started in options and then moved into stocks, futures, and now Forex Our flagship product is the Universal Market Trader

The Universal Market Trader is the strategy and course that’s designed to trade

multiple markets in multiple time frames It is extremely dynamic across all the

marketing conditions that we have been experiencing over the last 13 years Before that, he took his first trade in 1984 He is in his 25th year of taking trades It took him his first 10 years for him to get the point to where he was trading with profits on a consistent basis That is often common with most traders who have worked

independently and grown their own systems and strategies Part of the reason it took

awhile to make profits is that there are so many challenges It is his hope that his expertise will prevent you from having to make the same mistakes

Soberman's first trade was an options trade that was successful However, he felt it was the worst thing that could have happened Immediately, from the start, he

developed bad habits, and it took him quite some time to learn to break those habits, how to deal with the mental struggles of trading, how to do proper risk management, and to develop his system When he started NetPicks.com, it was finally the light at the end of the tunnel In addition, they became very successful

Brian Short is also a general partner of NetPicks.com He has been involved for about

6 years and has had the opportunity to help and assist with development of some of the strategies that are used at NetPicks.com His trading background extends over 20 years He has always worked in some sort of investment from longer-term 401K

positions, and he spent most of the 1990's using broker recommendations He found that relying on other people to guide your portfolio was good for awhile, but,

admitted, it took a bit of a dive

He is excited to discuss with us his current work with inter-trade trading He has control over his destiny by empowering himself with a method that gives him an edge in the market His results don't mean that he wins every day, but, instead gives him

consistency with his trading plan It has proved to be a personal success that shadows the advice that he imparts

He uses the Universal Market Trader on a daily basis, and it has allowed him to identify some of the stumbling blocks that traders have Relating to his own past experience,

he identifies with these traders and has worked with many of them to become

successful traders

Troy Noonan joins the panel as a former student of mentor Brian Short He was an

actual trader that Short met through the NetPicks.com Universal Market Trader Noonan started trading in the early 1990's when he was still excited to receive his paper charts in the mail every day The internet was still in its infancy and the trading world had not yet become high tech He struck gold trading a pound against a dollar with a futures contract at a time when the pound was falling off a cliff against the dollar

He took his winnings and traveled through Europe and traded along the way He was hooked and that is how trading became a part of his life Eventually he came to know NetPicks.com and became a user of their systems Ultimately he was asked to join the team and now works as a NetPicks.com coach He also moderates a trade room for NetPicks.com and also has the experience of dealing with a lot of traders Noonan has often heard common themes amongst traders that he can identify with because he has lived through those same issues

Question: What are the three biggest mistakes you've made?

Soberman: I think this is a great question because when you are learning and looking

for information, you get sold a lot of claims and systems that insist that you are going

to win 100% of the time, that you will take $1000 and make it 1 million dollars, and other hype sales copy It's easy, as traders in a newcomer's shoes, to fall victim to that kind of ads They are appealing when you are new or struggling with your trading You have no reason to doubt that it can NOT happen The reality is that this is one of the biggest mistakes I've made They are buying into the unrealistic claims that are made about trading

There is no doubt that you can be very successful with your trading That you can ultimately have it become your living However, it does not happen with 100% winners and you are not going to turn $1000 into 1 million dollars in six months These things are not realistic and you are going to save yourself a lot of time ignoring all of that hyped noise that you tend to hear They listen to this instead of just focus on trading systems and strategies where you are going to hear realistic things

What I mean by realistic are win/losses that are above 50%, average gains that are bigger than the average loss that are not succeed every single trading day or every single week However, they are consistently profitable but with equity curves that go

a little up and a little down That is realistic trading There isn't really anything else that's realistic You would save yourself thousands in investments and strategies if you would ignore the ones making the most extreme claims I have never found ones that live up to those claims

To summarize, the biggest mistake I made was buying multiple trainings, etc, that just seemed too good to be true At the time, I really wanted to believe it Another mistake that I made was that once I was on a good approach or strategy, I was never satisfied with the modest win rate that I referred to of 50% Often, I would dump a strategy just because it didn't win every time I always thought there had to be something

better I left some systems that really would have served me well because I was

pursuing some systems looking for the Holy Grail

The final mistake I made was risk control Even when I was on to something good, I used crazy risk I remember with some of my accounts trading 4 or 5 full-size S&P contracts Not minis but full sized with the floor At that time they may have been $40-$50,000

If you are familiar with the leverage, that is a crazy risk When I took a loss and my risk was 8 points, I would start risking 8-10% of trade Back then, when you were training on the floor, the executions were sketchy anyway, and it was a really big mistake Even if my system was good, I was going to fail because I did not have proper risk control

Short: I actually have 4 big mistakes that I have battled with over the years In the

past, I traded for Forex for about 5 years very actively I was into day trading futures markets over the past 3 years The first issue I had was risking way too much on each trade

In the Forex, specifically, it is so tempting with the margins that brokers give you of

100 to 1 (some cases even higher than that) to over-leverage yourself Initially, you take a look at the trading etymology and you look at how much you can make at the Forex specifically, and you think to yourself that you can risk 10-30% In some cases if you get a winning trade, it's probably the worst thing that can ever happen to you It reinforces a habit that is going to become the demise of your trading That demise will come from risking too much

You need to get that under control and, my recommendation is you need to risk a

conservative amount Either 1-3% per trade depending on the method you are using What that does is that it keeps you in the game when you have those series of losing trades Believe I don't care what the method is; you are going to have that series of losing trades

That will define you as a trader - how you react to that sequence and what you do about it Proper risk, however, will keep you in the game

The next big mistake I made is jumping out of a trade before it reaches its full

objective I would have my full target objective and the trade would be progressing nicely to the halfway mark It may have even been to the 75% mark, but, for whatever reason, I would decide to jump out! The problem is that you are not letting the trade play out to its full potential You are risking that full risk That doesn't work in the long run and it took me awhile to realize that I should have let my method play out the way it should and let it reach that full target objective

One of the things we were taught early on as kids is that there is a need to be right In this case, you need to fight that need to be right until the trade progresses in your favor

My third mistake was revenge trades That is where you have a loser and so on the next trade you double up to win back what you lost on the previous trade That is the biggest mistake you can ever make You are actually doubling the amount of risk in that case and double up on that trade So what happens if you lose 2 or 3 trades in a row? You are going to lose your capital at a much faster pace and take yourself out

of the game

My final mistake was to take trades out of my trading plan They were discretionary trades that had no rhyme or reason I would jump on anything that moved in hopes that the market was moving to that direction I guarantee 90% of the time, the market would take that big move up, I would jump on it behind that bar, and it would slam down

lower then it was initially My point is not to jump on those moves without any kind of

a reason to do so Stick to your method, your trading plan, and you will be successful

Noonan: Those are all mistakes I have made and more, but to answer your question, I

think the biggest mistake for me was jumping on a trade system without really giving it its due diligence You can easily see the results that someone posts Maybe it is

credible and logically, you think that you could trade this plan and get the same

results

However, remember that your psychological makeup, as a human being, is not going to operate on the same playing field as your intellect and thinking While you are

rationalizing that you can trade this plan, and logically you can see that it is a

successful plan The mistake you make is that internally, you have not taken control

of that plan without doing the homework and the due diligence With that in mind, I would say my biggest mistake was jumping on top of strategy and trying to trade it Later on, after getting kicked bloody in the markets, I realized that I didn't believe in the system and I didn't do the homework that was necessary to build my belief

structure to where I could be psychologically convinced that the system was going to work

My next biggest mistake was trading with scared money Because of my previous mistake,

I was then trading it in a way where I wasn't even thinking rationally Trading with scared money is that you are going to be taking probable losses and missing the

winners That meant that I wasn't even trading the system by that point Scared money

is lost money - guaranteed

My final biggest mistake is trying to improve on a system that I haven't even done the homework on! That led me to looking at other indicators and trying to find that magic thing that is going to keep me out of the chop Some magic thing that was going to tell

me when to take only winners that were coming and avoid the losses None of that is possible You end up getting caught like a deer in the oncoming headlights of a car and you are still trading scared You end up suffering from analysis paralysis

I had to overcome those mistakes in order to become a successful trader

Soberman: I think if new traders could take down risk control, stick to their trading

plan, avoid unrealistic expectations, and accept loss - then they are probably better off than 80% of the traders out there It seems easy when you are a beginner, and you might think that you would be able to stick to this However, you would be amazed how many people we have talked to are able to stay with their trading plan, and take proper risk control On the psychological side, they don't accept losses as they come and move on to the next trade

Logically, when we talk about it outside of the current market slides, it makes total sense and we are all committed to it When you actually start putting on those trades,

a whole other side happens For example, people are sometimes great at this in Demo Accounts Then, the second real money is on the line, it is amazing how our self

control totally unravels I promise you that every time you break those rules, you probably also have a bank account that is nearing $0

I use the same strategy whether I am trading the DAXs, day trading, or a whole other market altogether We may vary our time frames a little bit, but it doesn't matter what

we are looking at, we always use the exact same methodology that we know will put the odds in our favor on every trade

I believe that you need to have one strategy that you can master for a lifetime You must have the ability to change markets and time frames I can easily bring up a Forex day trading chart or a stock in Google.com on a daily chart Even though they are completely different, the exact same methodology applies

The key to my success is to have simplicity over a strategy, one chart, and one time frame to take signals I learned this early on because I tried to synthesize multiple charts at the same time I found that in real time it was next to impossible to execute the actual trades In some strategies that looked good on paper did execute properly

in real time They were virtually impossible Some trades take these tiny little profits and slip it into commission that you don't normally see when you back test start to eat

up the entire result I don't think you need multiple strategies for each market that you trade

Question: Do you think that you need multiple strategies for each market that you

trade?

Short: As I reflect over the last year, I personally feel that it is key to have a single

strategy that you can use to move from one market to the next I actually did that over the past year when I traded in 3 different markets The Russell was a favorite of mine over the past 2 years, but, as many of you know, there was a changeover from the CME to ICE That particular instrument did not trade well when it switched in 2008 I stopped trading for awhile and started to trade the DOW for a few months and did well with it

Then, I started to look at another market that is called T-Notes or Ten Year Notes That is the market I am currently trading and having some success with The point I want to make is that I could transition between each of those markets using the same method I didn't have to relearn anything I simply put up my chart and the time frame I was interested in looking at that I felt had the best trade profile for me I was

executing trades very quickly once I decided to move between those markets

As a mentor, I always tell my students that you don't want to be slow to make those changes You don't want to make these changes inter-day You want to do that with correct back testing and math analysis The key is to be flexible When markets

change, and they do change, have the ability to have a single method to move between those markets

Troy Noonan: I agree completely I remember when the Russell switched over from the

CME's to the ICE and that was some of the most volatile market swings we have seen in history since September and October Having a market system that was able to self adjust and re-calibrate itself on the fly in real time was amazing We were actually able to benefit from those wild swings Even though it was hard to get away from the Russell, which is a very addictive market, it was comforting to know I didn't need to change anything because I had a system

In all actuality, you are looking at a bar chart with price bars, buyers, and sellers

We don't have to worry about a system where the indicators are constantly lagging and only work on certain conditions in the market We have a system that we can rely on because it self-tunes itself to that immediate current market condition It's based on price movement The indicators just support the signals that it's giving you

To make the switch to T-Notes, that I took along with Brian Short, was a no-brainer because it had the same bars on it, the same indicator set, the same signals to buy and sell, and I can feel confident that the trade I am looking at right now has been self-tuned by the system itself This trade has just as much of a chance of succeeding as any other trade I have used with my method

Question: How do you know the right time to enter or exit a trade?

Soberman: We rely on our methodology to give us dynamic targets and stops that are

tuned to current market conditions In early 2009, we are finding that the volatile nature of late 2008 has kind of toned down Again, if you are trying to trade a system that has fixed targets and fixed risks, for example, the Russell - in the past I had a philosophy to trade 2 points exactly and risk 1.8 or 1.6

That was probably working at the time for the current market conditions most of the time However, in October - November of 2008, it would have not worked at all

Ranges that were usually 10 points a day turned into 30 or 40 It wasn't unusual for the DOW to have an 800 point range If you have a strategy that is trying to take 20 points and risk 18, that is literally a hiccup It could be 5 seconds when the DOW was running 800 point ranges

We are back, a few months later, to more normal ranges They are probably a third of what we saw in the fall of 2008 If your methodology is not dynamic and you cannot adjust to volatility, unfortunately, it will break down on you You will not have long term success and you will land back in the position that you have probably been in many times That is probably why you are reading this

For us, knowing the right time to enter or exit a trade is having a system or

methodology that you have total faith in Also, knowing that whether the trade works

or not, I have a pre-defined point to stop risk, and a target That way, I know I am going

to stay with that trade no matter what I don't expect it to work every single time; however, I know the odds are in my favor if I stick with my methods

Question: How do you discipline yourself to get out of bad trades?

Short: First of all; what is the definition of a bad trade? How do you know, in advance,

that a trade is good or bad? The answer is that you don't know What you can do is rely on your method that you have learned and implement that Along with that, you should do some back testing of that method so that you have the edge that the

methodology is going to have in the market That is the knowledge that you have at the beginning of every trade - that your method gives you an edge It doesn’t matter

whether that's a 65% edge or a 60% edge

I have gone into many trades thinking that it has no chance of winning I put my

thought process into that and think that I know better than the stock market does which way it is going to go Much to my chagrin, that trade usually winds up being the winner Likewise, when I think a trade has the best chance for success and that it’s an easy slam dunk - that is the one that will end up losing!

In the end, none of us have any idea what that next trade result is going to be The key

is to stick to your method

Noonan: To me, the trade you shouldn't be taking is the trade that doesn't fit into your

trade plan It's that discretionary trade that we discussed In my opinion, an ounce of prevention is worth a pound of cure In other words, you need to be disciplined not the take these discretionary trades and not get involved in the first place

Soberman: I think all of us have beaten ourselves up over a bad trade I blame the

market, the trading gods, and I take it personally I never think of it as being a bad trade as long as I took the entry when I was supposed to, I took my stop when I was supposed to, I didn't over-ride the strategy, over think it, or think I was too smart for the market I find that it's almost good news if the trade is bad because I am that much closer to the set of winning trades

The only time I get upset with myself as a trader is when I am responsible for the trade losing The only thing you can control when you have a trade is risk I don't care how much you yell and pray, you are not going to make a difference in where the trade winds up The only control you have is to have targets and records that are

achievable

Question: Do you stick to your trade plan no matter what?

Short: Yes, no matter what We have something called the power of quitting and our

idea is to get in the markets, get out, and get done We don't take every possible trade that you can take during the day We don't try to take Forex 24 hours a day I don't have my system beating me or my pager going off at 2am when the pound/US dollar trade

is setting up When we are done it doesn't matter what follows that I think

everyone's trading plan should include what to do in certain news and market events that are outside normal Still, those are all up to a trading plan

Soberman: I agree that you must stick to your trading plan Also, be slow to change

that plan I have talked to many traders that are switching markets intra-day They think they are sticking with the trade plan but they are not That way, it can be slow

I think I have personally made more changes to my trade plan over the last year and I

am always slow to do it I never do intra-session It's always over a week or two That

is after doing some thorough back testing to make sure that what I think I am switching over to be reinforced with that information

Noonan: I think you should have faith in your trade plan Otherwise, if you can't stick

to it, it's probably a message that you haven't done enough work creating it in the first place The whole trade plan is supposed to be in place after you have done your due diligence and you are convinced that this is a winning trade plan Only then will you be successful Every time I haven't stuck to my trade plan, I ultimately wished that I did The result has always been worse The trade plan was there for a reason and would have produced the better result

Question: What is your money management strategy?

Soberman: When we know our risk on this trade is less than our target, it is critical

for us I believe that you need to have a strategy that wins more than 50% of the time

- minimum There are strategies out there that, in the performance reports, only win 35% - 40% of the time that turn out to be very profitable because they go for very large targets What I have found is that even if those systems are good, the traders are not able to stick to them over time The reason is that you will hit such a large streak of losers that psychologically it becomes really challenging when that large streak of losses hits

In the end, I think you need to be at 60% to mentally hang with it and stick with the plan I think if you can accept 60% or more and stay with it, that you will be 50% of the way there I think the other part is knowing your target is larger than your risk I think it's important to be able to have four trades and lose on 2 and win on 2 and

actually have a positive outcome That is also going to ensure that you stay with the methodology and stay with your trading plan

Question: What is percentage risk per trade?

Short: We recommend, in whatever method you are using, to only risk from 1-3% at the

most if you are a beginning trader Why not have some success and get some confidence with whatever methodology you are looking at? Then, later on, you can escalate it When we talked to traders, we found that traders with bigger sums of capital that they are risking in the market actually risked less on a trade by trade basis than those with smaller capital These are seasoned traders risking only 1% A new trader often does just the opposite with a small account and risks 5-10% It should all be the other way around

Personally, I will risk one contract per $10,000 trading T-notes That keeps my risk in the 2-3% range on each of the trades that I am looking at

Noonan: If you are trying to stick to a 2-3% risk you have to be adequately capitalized

It's hard to find a market where you can trade 1-3% when you have a small account You are going to end up trading a market that is possibly too noisy and has too fast of a time frame It may be hard to achieve that 60+% winning percentage That is something that is a little trickier for smaller sized accounts You may have to take a risk with a smaller account because you really don't have a choice You have to be able to trade

a market that has a winning percentage Perhaps the risk per trade is greater in order

to get that winning percentage

I would say the solution to that is not to over-trade and to have a more patient

perspective Maybe you are only taking one to three trades a day in the beginning You let that percentage work for you over time so that you can slowly build your account

up I think you should pull in the reins and be less aggressive as far as the number of trades that you take each day

In summary, when all is said and done, you have to be comfortable with the risk that you are taking in any given trade Psychologically, if you are not comfortable, you are going to have a hard time letting that system work for you and you are trading with scared money

Question: If you trade Forex, how do you handle or avoid the risk of fast markets? Soberman: This is a big problem area that we identify when doing coaching and

mentoring work Revenge trading is a trap we fall into because we want to make up our previous loss by doubling up with the current trade Sometimes, the bad trade was your fault Then, you feel the need to redeem yourself and your risk control goes out the window

If you haven't already made that mistake, you probably will You will save yourself thousands of dollars if you take this to heart and don't let this happen to you They will probably only work out about 1 out of 5 times