Podcast

TME 039: Paper Trading

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Today we are going to talk about paper trading.  Before we start I want to say I hate paper trading. Why? Because it is boring.  Now that I got that out of the way let’s talk about paper trading. When I became a new trader I started out paper trading. As I said I hated it because it wasn’t enough action. The money did not mean anything to me.

So, what does paper trading consist of?  Paper trading is not real trading. Paper trading is trading without using real money. In today’s time, there are many stock market simulators that can be used but it is not a requirement. The advance of technology makes paper trading easy without having to put capital at risk. If you want to get the most out of your paper trading then you need to take it seriously. The trading that you do in paper trading should be done exactly like its real money. When paper trading it will be hard to trade with the same emotions that you have when trading real money. You can trade $100,000 like it’s no big deal. If you paper trade right when you switch to real trading the emotions will be the same. If it’s not then risk less you are risking too much.

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TME 038: Trading Pride and Trading Imagination

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Today we want to talk about two topics that could be detrimental to a trader. One is trading pride and the other is trading imagination.

First let me tell you a story of a woman who was having some problems. She went to her pastor and said I need help. The pastor asked her what is the problem? She told the pastor that she was dealing with pride. The pastor said tell me about how you are dealing with pride. She said well every time I walk by a mirror I’m blown away by my beauty. I can’t stop looking at myself. I can’t stop looking at my beauty. The pastor said to her what you described is not pride what you described is imagination.  Now on a serious note how can pride and imagination effect our trading?

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Podcast

TME 37: Seven Ways To Become A Better Trader

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So why do you want to become a better trader. The obvious reason would be to make more money. For some you might want to become a better trader so you can start making money and stop losing money. Whatever the reason we can all get better. Today we want to share ways that will help you become a better trader. Our list is ranked in order of importance the way we see it.

The Market Engineer Top 7 ways to become a better trader List:

#7 Determine Your Goals

Someone has said that if you aim at nothing you will hit it every time. Everyone needs goals. Whether we are talking about trading or everyday life, you need goals.
In trading your number one goal should be to follow your trading plan or system. Your secondary goal should be how much money you make. How much money you make is dependent on your system. To follow your system you must have confidence in your trading system. If you lack confidence then it will be hard to follow your system. In order to have confidence in your system you must test your system.

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Podcast

TME 036: How to be a Trader

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Today we are going to talk about how to be a trader. The brokerage account (where you have your money) will consider you a trader if you buy and sell stocks in a certain way or a certain number of times.  

Today we don’t want to talk about what the brokerage account considers traders. Many people that brokerage firms consider traders are gamblers. They have no clue what they are doing. We want to talk about how to be a good trader.

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Podcast

TME 035: Penny Stocks

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What are penny stocks?

Low priced small cap stocks are known as penny stocks. A penny stock is pretty much anything under five dollars.

Penny Diving

I was watching a video on YouTube or the news I’m not sure which one it was. In the video a girl was looking at her cell phone. She was not watching where she was going. As she was walking she did not realize that she was walking towards a wishing well. She went into the wishing well and got soaking wet. She was diving for pennies.

If you trade penny stocks keep your eyes open or you might be like the girl in the video.

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Podcast

TME 034: Trading Vs Investing

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Today we are going to talk about trading vs investing. On a side note all of our systems are trading systems. They are not investing systems. With that in mind we will try to be as unbiased as possible and show the benefits and drawbacks of both styles without bias.

How To Invest

There are different types of investments but the most popular is mutual funds. Most 401k’s are loaded with mutual funds. In some plans mutual funds are all that the 401k will allow you to invest in unless special permission in granted.

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TME 033: Will Your Broker Make You Broker?

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I was looking at a house the other day. I was looking at it as an investment property. The house had foundation problems. The man who came to look at the house was a foundation repairman. When he got out of the truck my perception of him was that he probably was a man who had been working his whole life. He probably barely gets by. We talked and I asked him if you could make any money renting houses. He said to my shock I have 30. We talked for a while. In fact he has since become a friend. He is somewhat of a mentor to me in the real-estate world. In that initial conversation he said his houses provide 25k per month. This man educated me on money and how he makes money work for him. At one part of our conversation I asked him what he thought about the stock market. He said I got me a broker one time. He said after he had lost about 200k I figured out that a broker will make you broker.

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Podcast

Range Trading

Range trading is a trading strategy that identifies stocks trading in channels. By finding major support and resistance levels with technical analysis, a range trader buys stocks at the lower level of support (bottom of the channel) and sells them near resistance (top of the channel).

I can remember watching the oil market over the course of several weeks. It was going up to a point and then falling back down every morning between 1:00 AM and 3:00 AM. The swings were thousands of dollars every night. I got in at 1:00 am and it went up. Just when it was starting to fall I got out. It worked like clockwork. The problem was that I did not have a system and I eventually gave it all back. That was my first introduction to range trading. We do not use range trading in our trading system but we realize that it is a type of strategy that can be used in trading systems.

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Podcast

TME 028: Risk Management

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What is Risk Management
?

Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Risks can come from different ways uncertainty in financial markets, threats from project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. There are two types of events negative events can be classified as risks while positive events are classified as opportunities. Several risk management standards have been developed including the Project Management Institute, the National Institute of Standards and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.
Everything that we do involves some level of risks.

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TME 027: Volatility

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What is Volatility?

 Volatility defined

A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

INVESTOPEDIA EXPLAINS ‘VOLATILITY’
In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security’s value. A higher volatility means that a security’s value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security’s value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.

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Podcast

TME 026: Short Term Trading

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Today we are going to talk about short term trading. Short term trading can mean different things to different people. We are going to talk about short term trading the way we use it. The day trader would be considered a short term trader but that is not what we want to discuss today. We see short term trading as trades that take weeks to months to catch a trend. We see long term trading as trades that take months to years. We believe that a good trading system should incorporate both styles.

I ran track some in high school. The main reason is because I was forced to if I wanted to play football. I would run the mile and at the time I felt like I was going to die before I finished. It was painful. I always heard that a sprint is different than a mile. A runner has to train different. Now image if someone could train their body to be a long distance runner and a short distance runner all in one person. That person would bring home the gold in a lot of events.

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TME 025: Trading Psychology

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Do you have what it takes to be a trader? When we watch sports sometimes someone comes along that defies what normal people can do. When the game is on the line they rise to the occasion. Some say they have a gut of steel. Look at old videos of Joe Montana or current players like Tom Brady. It seems that when the game is on the line these guys get better.

That’s what it takes in trading.

DEFINITION OF ‘TRADING PSYCHOLOGY’
Trading Psychology is emotions and mental state that dictate success or failure in trading securities. Trading psychology refers to the aspects of an individual’s mental makeup that help determine whether he or she will be successful in buying and selling securities for a profit. Trading psychology is as important as other attributes such as knowledge, experience and skill in determining trading success. Discipline and risk-taking are two of the most critical aspects of trading psychology, since a trader’s implementation of these aspects is critical to the success of his or her trading plan. While fear and greed are the two most commonly known emotions associated with trading psychology, other emotions that drive trading behavior are hope and regret.

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TME 024: Long Term Investing

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Long term investing or long term trading can mean different things to different types of investors or traders. If you are a day trader then a strategy that trades weekly will be long term. Some define long term as holding an asset for an extended period of time. The time could be as little as one year and as long as 30 years.

Advisers usually advise to invest for the long term but the long term is subjective. A buy and hold investor may consider long term 5 to 10 years. While a day trader may consider long term investing 5 to 10 days.

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TME 023: The Stock Market

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What is the Stock Market?

The stock market is a market where shares of public companies are issued and traded. The companies are traded either through exchanges or over the counter markets. The stock market is also known as the equity market. Many time people complain about the stock market but the stock market is one of the most important components of a free market economy. The stock market provides companies with easy access to capital in exchange for giving investors ownership in the company. For the investor the stock market makes it possible to grow small sums of money into large ones. The stock market lets investors in companies participate in gains or losses of the companies whose shares they hold.

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TME 022: Price Action Trading

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Price Action Trading

What is price? When I was young I came to my granddad and I said look at this baseball card it’s worth $5. He said it is only worth what someone is willing to pay for it. The price of something is what someone is willing to pay for it. When you look at a stock quote you see a bid price and an ask price. The bid is what someone will pay. The ask price is what someone will sell it for. The difference is the price.

What is price action trading?

Price action trading is a trading technique that allows a trader to make trading decisions strictly based on price changes. Price action trading relies strictly on price and ignores fundamental analysis. Price Action Trading focuses on recent and past price movements.

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TME 021: Futures Trading

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What Are Futures?

Investopedia defines futures as a financial contract obligating the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price. Futures contracts detail the quality and quantity of the underlying asset; they are standardized to facilitate trading on a futures exchange. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.
Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, a producer of corn could use futures to lock in a certain price and reduce risk (hedge). On the other hand, anybody could speculate on the price movement of corn by going long or short using futures.

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TME 020: Trend Following

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What is Trend Following?

Trend following is a trading strategy that tries to profit from trends in the market. A trend follower makes money when they follow the trend of a particular market. Trend Following can be done by big time banks on Wall Street or by online stock trading of an individual. If you want to learn how to trade by following the trend then trend following is the trading strategy that you want to use.

Stock trading online has grown in popularity over the past decade. People trade but many lose because they do not have a trading system. In this article we will discuss trend following. Once you finish this article you should be able to determine if trend following is a strategy that is right for you.

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TME: 019 Stock Picks

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We hear a lot of people giving their stock picks. Some post their stock picks on the web. Some scream their stock picks on TV. Today we are going to talk about the good and the bad of stock picks.

 Stock Membership Sites

I was in the woods on a cool March morning. The market had just opened. My phone was not getting a very good signal. The email came through that said buy an option for a certain symbol. When I went to buy the option it was much higher than the suggested buy price. There must have been a delay between the time when they sent the email and when I received it. That was my first experience with a stock pick or stock membership website.

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TME: 018 Trading For A Living

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In 2013 Gallup’s American Workplace study 70% of those who participated described themselves as disengaged from their work. So if you are reading this article there is a 70 % chance that you do not like your job. Imagine this. We spend 40 hours per week at work. There are 168 hours in a week 56 of those are for sleeping. That leaves 112 hours. If you spend 40 hours per week working then 35% of your time awake is at work. So shouldn’t we enjoy what we are doing?

If you are reading this then you are at least someone that is interested in trading. Have you ever considered a trading for a living?

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TME 017: Stock Market News

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What is the goal of any business? To make money. When you watch the news we need to understand that they entertain so that they can make money.

Stock market news is no different.

The people reporting on the stock market are in the business of entertaining. It might be a man that screams at you for an hour per day. Those types of shows are just for entertainment. What if the screamers were forced to post their record once per month? How long would they last?

The media in today’s time is in the entertainment business. It could be deflated footballs, bird flue, swine flue, oil spills, or stock market news. Whatever the story might be the media will always make it bigger that it really is.

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TME 016: Oil Prices

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OIL Prices

So the question on many peoples mind today is how much lower will gas prices go. Personally I never thought gas would get below $3.00 a gallon again. Just the other day I saw gas for $1.88 per gallon. It is crazy. So the question was posed to me the other day “is it time to buy oil?” The answer is no. Since I was asked that question oil prices have fallen another 10% or more.

-When will the fall end?

-When should I buy?

-Will Oil ever get back above $100 per barrel?

The answer to these questions no one knows. What we do know is that oil prices are in a downtrend and getting long now is to early.

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TME 015: Margin Trading

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What is Margin Trading? 

When a trader trades using margin they are basically borrowing money to trade. Trading on margin can be very dangerous if you don’t have a good trading plan.

How Margin Trading Works

Margin trading allows a trader to trade more money than you have in your account.

Example:

Account value: $10,000

Available to trade: $20,000

So on this 10,000 account this trader could trade 20,000 in the above scenario.

Let’s say you buy 200 shares of aapl at $100. The values of that purchase would be $20,000.

You have enough in your account to cover $10,000. Let’s say that aapl goes from $100 to $50. How much is left in your account? Answer: $0

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TME 014: Technical Analysis

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DEFINITION OF ‘TECHNICAL ANALYSIS’

A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

We agree with most of Investopedia’s definition of technical analysis except the last part that talks about trying to predict future activity. No one can predict future activity. In our system we do not expect a loss or a gain we just take what the market gives us.

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TME 012: Mutual Funds

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In 2013, an estimated 96 million individual investors owned mutual funds and held 90 percent of total mutual fund assets directly or through retirement plans at year-end. Altogether, 56.7 million households, or 46 percent of all U.S. households, owned mutual funds. Household ownership of mutual funds has remained steady over the past decade. Mutual funds represented a significant component of many U.S. households’ financial holdings in 2013. Among households owning mutual funds, the median amount invested in mutual funds was $100,000.

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TME 009: The 1%

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In this session of The Market Engineer Podcast we will talk about the 1%. Where did they come from, where did they get their money, and why do so many people hate them?

 

 

2-Month Challenge I challenge you to sign up for one of our systems.  You will get 2 months free on any system you choose (the gold has all the systems included). Get an account that lets you paper trade or find an app on your phone, test the system, follow the system, then believe in the system. Do not trade a system that you do not believe in.

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Ride The Wave

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I’m always amazed at how a surfer stays on their board. There are many things a surfer needs to be a good surfer. The good surfer needs a board, good balance, and lack of fear. This is a must for a good surfer, but the number one thing that a surfer needs is a wave. Without a wave there will be no surfing. 

Trading is the same way you need a good system and a lack of fear, but without the trend (wave) there is no trading. 

Be patient the wave (trend) will come.

 

 

2-Month Challenge

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Creature of Habit

I stopped at the gas station the other day and realized that I am a creature of habit. I have filled my car up at this station for years. When I need gas that station is usually where I go. One day a couple of weeks ago I went and the pumps were broken. It was very annoying because it is not the first time it happened. I had to leave and get gas somewhere else. I said I would never go back. The next week I needed gas and whip in there, got out, and started pumping. I then realized that I was not supposed to stop there anymore. I got gas fine and the pumps worked but I realized that I am a creature of habit.

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TME 008: Day Trading

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In this session we will talk about a type of trading style called day trading. Can money be made day trading? Is day trading realistic for the average trader? Do you have the time to day trade? What does it take to day trade?

 

 

2-Month Challenge I challenge you to sign up for one of our systems.  You will get 2 months free on any system you choose (the gold has all the systems included). Get an account that lets you paper trade or find an app on your phone, test the system, follow the system, then believe in the system. Do not trade a system that you do not believe in.

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Stop The Yelling

What happens when we yell? It is a sign of panic. If you were in a burning building and it was on fire then you should yell. If you are at a football game and your team scores then you should yell. If someone yells stop as you cross the street you should stop.  

In trading there should be no yelling. There should be no panic. Why do people listen to stock advisers who yell to get attention? The media knows that more yells equals more sells. That is the reason they yell.

Stop trading on fear and panics and get systematic about your trading.

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Trading is Boring

The Market Engineer

Everyone knows that to be productive its good to have a list it’s good to have goals. Most people like a little spice in life. They like to be a little spontaneous. Everyone knows that there are times when you need to put the list aside and just have fun. Go for a walk with the kids. Play in the sprinkler in the back yard. We need to have fun. Life is different from trading.

Someone has said that good trading should be boring. It should not be a rush. It should not be fun. It should be systematic.

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The Light Bulb Moment

The Market Engineer

 

People hate math. People are scared to death of math. Why? It is because they do not understand it. One day I sat in math class and the teacher wrote equations on the board that I did not understand.  I tried to figure it out and then the light bulb went off. I got it. It all became clear. When it became clear all math became easy to understand.

The same thing happened in trading. I tried to figure it out then one day the light bulb went off. In books they say you have to have a system. I did not understand. In videos they say you have to have a system. I did not understand. Then I developed a system from the math background that I talked of above.  I then followed the system. I tested the system. Then I believed in the system. Belief is the final step. 

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TME 004: Black Box Trading

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Black box trading is a derogatory term that many people use for successful traders. Some people don’t understand systematic trading so they ridicule the systematic trader. Let me give you an example.

A few years ago, when oil ran up to $100 dollars per barrel in 2007/2008 there was an outcry from the politician. What was the cry? The cry was that it’s the speculators driving the price. The word hedge fund was thrown around a lot. That word was considered a bad word by many. When an oil crisis comes or when a crisis like that comes do the politicians ever look at themselves?

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TME 003: Trading Risk

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Today we are going to talk about trading risk. What is trading risk? Risk can be how much you are willing to lose or it could be how much you are willing to put up on a trade. How do we determine how much to buy and where our stops should be? First let’s talk about stops.

Trading Risk: Stops

I have back tested good systems with many data points. When a trader risks more than 2% they are getting in very dangerous territory. Let’s do some examples.

Example:

10% Risk

 

 

 

 

 

 

5% Risk

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