December 6, 2003
Trading for Dummies, Q&A #95
10-Year Treasury Yield, 30-minute Chart
Once you get the basic technical trading principles down, you can trade anything that is liquid and active. Here’s the Yield Chart for the 10-Year Treasury Notes. (You can trade options on US Treasury securities at the CBOE.)
So let’s go through the steps that I’ve hammered home in 90+ lessons on Stock Trading for Dummies.
1) Is the Yield trending up or down? It’s trending down obviously.
2) Do we want to get short or get long? We want to get short, either by buying puts or selling calls.
3) Where’s a good spot to enter a position while limiting our risk? Beneath the closing price reversal UP bar in the morning at 4.264. If the trade goes bad, we will exit the position at 4.283.
4) If the trade goes in our direction, and yield falls to 4.245, we will tighten up the initial stop loss to reduce our risk.
The wrong way to play it would be to attempt to “pick a bottom,” or fade the market; blindly enter short without waiting for a good spot; getting short without setting a stop, etc. The list of errors goes on and on, but people mainly make those three big mistakes.
Traders who know themselves, who have common sense, who are disciplined, and who have the ability to keep it simple will do just fine. Remember that many people in the market are either uneducated or uninformed. And most of the few who are educated and informed waste their time building “scenarios” and end up defeating themselves by trying to outsmart the market.
July 23rd, 2006 at 4:53 pm
hi Chairman Maoxian,
What does it mean by ‘c’ and ‘7′ in your charts? Is ‘c’ the candle you are looking at when making an entry? Have a nice day!
July 24th, 2006 at 8:04 am
Gav: The little blue 7 means NR7 or the narrowest range bar of the last seven … ‘c’ means closing price reversal. For shorts I look to execute beneath up bars or inside bars; in this case the up bar to enter beneath also happened to be a closing price reversal.
July 24th, 2006 at 8:57 am
CM: Thanks! The simple explanation helps. I am reading your trading for dummies again. Good day!
July 24th, 2006 at 9:20 am
Gav: You’re welcome. (I’m slowly transferring the Dummies lessons from the old page to WordPress.)
July 24th, 2006 at 4:16 pm
CM: A quick question. How do you normaly trail your stop when position is moving in your favour? or do you trail your stop at all?
July 24th, 2006 at 4:20 pm
Gav: I don’t monkey with the stop at all while day trading since it takes a lot of mental/emotional effort … the fewer decisions you make per unit of time the better, imho.
August 9th, 2006 at 11:05 pm
Hi Chairman Maoxian,
I am wondering what the gray dots are, looks like they are enforcing the trend, very interesting…thanks,
-LizR
August 10th, 2006 at 7:29 am
LizR: The gray dots simply mark 20 bar lows … I use gray diamonds to mark 20 bar highs.