Apologies for the sound quality, this was recorded outside directly into the laptops internal microphone.

Trading over, now I’m back off to watch Wimbledon – we have a tradition where a bunch of us get together somewhere in Europe for the Wimbledon fortnight, and trading takes a bit of a back seat!

Don’t forget, you can get my videos delivered automatically through iTunes – see the link on the right.

“I was wondering what do you recommend I do with a minimum capital of about 1600 dollars? What should I trade?”

Lots of people have this kind of question, so perhaps my reply will be of use to others:

A budget of $1,600 is quite low, but certainly not uncommon. Given that amount, I suspect most people would suggest forex, because it’s easy to open an account with a deposit of that size.

Forex is also easy to trade on massive margin, giving you lots of leverage. If you’re a beginner, that’s a very dangerous thing indeed. Leverage makes it very easy to lose a lot of money very quickly. As traders, our first priority is to preserve capital.

As you probably know, personally I prefer trading US stocks, because I believe they are one of the easiest markets to make consistent profits in.

The sheer number of stocks available, and their predictable nature, means that you can find good high-probability simple trades every single day of the week.

So my recommendation would be to find a way to trade stocks with your budget. A regular account will let you day trade a couple of times a week. If you hold overnight, you can trade as often as you want.

If you can get a CFD account (which depends on where you live), then you can day trade as often as you like. If not, there are other options such as umbrella accounts, which can overcome the 2 day trades per week limit for accounts under $25k.

Having said all that though, your priority should be to learn to trade without risking any real money at all. Make sure you’ve learned the basics, and have a solid strategy ready to trade. Practice that strategy inside out on a simulator, or on paper, and *only* risk real money once you’re consistently profitable.

A lot of traders dismiss paper trading saying it doesn’t accurately represent the emotional and psychological challenges of live trading. That’s true, but that also means if you aren’t profitable paper trading, you have very little chance of being profitable in live trading.

In summary then: Learn the basics, then pick a strategy and practice it on paper until consistently profitable. Then open an account and start trading with that real budget. If you follow those steps in that order, the choice of market will already have been made by the time you get to the opening an account bit.

Hope that helps.

In this context a tick is a trade execution. So instead of dividing your chart based on time periods, you’re dividing on number of trades.

A possible advantage of this method is that you will see a more regular representation of activity during slow and fast periods.

To take an extreme example, in a slow moving market with very few trades occurring, you could potentially have five minute bar representing just a couple of trades. Using a tick chart, the bar would not complete until the required number of trades had passed.

In other words, in a tick chart, all bars are equal. Tick charts smooth out fast and slow periods of trading to give a kind of ‘quantized’ view.

Whether that’s *actually* an advantage or not depends entirely on your trading method though…

Trying to figure out if a tick chart is “better” is a bit like trying to figure out if a 10 minute chart is “better” than a 5 minute chart. They both show the same data, just formatted differently (although you could argue a 5 minute chart shows more data points than a 10 minute chart, but for the sake of illustration, they essentially show the same thing). It’s not the chart itself that matters, it’s how you interpret it and act on that interpretation that counts.

1. The markets, as always, are so full of wonderful trades, sometimes it just doesn’t leave time to post.

2. I ran out of things to say.

That second one is the main issue. My last series of videos reached a natural conclusion with the final Let’s Get Practical film.

Doing more live trading videos isn’t really where I want to go, because they are of little value (they’re all the same after a while) and because they cost a lot in lost revenue while recording them (for various reasons I won’t bore you with).

Doing more content-based videos I think gives more value, but I want to make sure they are genuinely useful. So if you have suggestions for topics you’d like me to cover, do get in touch and let me know.

Anyway, back to trading. As I mentioned, the markets are awesome right now. I keep getting emails asking “Does your strategy still work?” or “Are you still trading?” etc.

Listen: a properly developed strategy that is based on fundamental market mechanics (or “price” as I prefer to call it!) will always work. My strategy, as anyone who’s read my course knows, is based entirely on price, not some wonder-indicator that only works in market that happens to be doing one particular thing – be that going up down or sideways.

As long as prices move, the strategy works. And prices move every day the market is open. All you need do is find the stocks whose prices are moving the most on any given day.

There are various ways of doing that, but here’s a really really simple one you can use right now: Pick 25 Nasdaq 100 stocks that fit in your price range.

In other words, make your daily watch list, a list of 25 stocks that come from the Nasdaq 100 list. Pick stocks that are trading within your price range as defined by your money management strategy. For example, stocks priced between $10 and $30.

It’s hardly scientific, and it’s certainly not the most efficient way of selecting a watch list. But as many people try and over complicate things, it’s as good a way as any of “dumbing down” and actually getting started (on paper, naturally).

Here are three trades from Monday that were Nasdaq 100 component stocks:

AAPL:

Ok, possibly a bad example I know, because it’s a high priced stock. Don’t forget though, with dynamic sizing you can make most stocks fit most budgets. So if you can’t trade 1000 AAPL shares, why not trade 100? It moves so well you can still make a good profit with smaller size.

Mondays trade went something like this (numbers relate to the circles on the chart):

1. Entered a short position.
2. Covered the short for +$0.50 (= $50 @ 100 shares, or $500 @ 1000 shares)
3. Took another short
4. Covered here for +$1.50 (= $150 @ 100 shares, or $1500 @ 1000 shares)

So even trading just 100 shares, there was a straightforward $200 profit to be had. For those who prefer the afternoon session, have a look at that lovely rally in the last couple of hours – easily $2/share to be had there (so another $200 profit if trading just 100 shares).

Right, next one:

AMZN:

1. Took a short
2. Covered for break even
3. Took another short on the break of the very obvious support
4. Covered for +$0.70 (= $70 @ 100 shares, or $700 @ 1000 shares)

And again, a lovely rally in the afternoon session, worth another $1/share without any trouble.

One more…

EBAY:

1. Took a short here
2. Covered here for +$0.20 (=$20 @ 100 shares, or $200 @ 1000 shares)

Ebay is a much lower priced stock, so although the profit per share was much lower than the other two, you could easily trade larger size to make up for it.

So there you have it – three Nasdaq 100 stocks providing simple trades. Now Monday was a particularly easy day to trade, but the point is there are easy trades like this every day – if you look for them.

This works on Windows as well as Macs. You can get a free version if you don’t want to backup too much stuff, or pay a few bucks a month for unlimited space.

Your data is valuable, so if you don’t have a proper backup solution (ie not just an external hard drive but some kind of off-site backup), then I urge you to try this or one of the many alternatives out there. This saved my ass…don’t wait until it’s too late!

In this presentation I talk about the business of trading, and trading as a business. I also try to answer possibly the most commonly asked question of all….

I’ll try not to leave it so long before the next video. In the meantime, I hope you’ve been profiting from these exceptional times.