TRADING GAME TIPS

1. It’s good to have a bias. You can have a fundamental opinion of where prices are heading and still be a technical trader. A bias can be very sensible. For example, when the Fed cut interest rates to under 2 percent, it removed a lot of profit potential from a long Treasury note trade. The potential profit fell to less than the likely risk of a trade. On the other hand, going short Treasury notes doesn’t guarantee a profit because prices can drift sideways for a long time, but you’ll want to trade only small positions long Treasury futures.
2. Try to distinguish between a bias and wishful thinking. The stock market is at very low levels, but a bias to the upside is wishful thinking. It may happen, but prices could still go lower. It’s not the same as interest rates, where they are approaching a bottom of zero. Hopefully, the stock market will never get to the point where it is so low that it can’t go lower.
3. Are you still confused about the use of limit and stop when you’re placing an order?
   A stop order is used in the following situations:
   • When you are long and you are selling at a lower price (usually to exit the trade).
   • When you are short and you are buying at a higher price.
   You will want to buy at a higher price at the point where the trend turns up. Remember that a stop becomes a market order when the price is touched. You must use the word stop in your order. A limit order is used in the following situations:
   • When you are long and you are selling at a higher price (to take profits).
   • When you are short and you are buying at a lower price.
   • When you a trying to buy at a support level or sell at a resistance level.
4. You can combine an MOC order with a price, but all conditions must be met to get an execution.

   • If you’re long IBM at $52 and want to exit if prices close lower, but below a specific price, then you enter SELL IBM 48 STOP MOC. You will be executed at the closing price if it is anywhere below $48. It is unlikely you will get $48 as your price, but you won’t be executed if prices dropped to $46 during the trading session, but closed at $49.
   • If you have no position and you want to buy IBM on an upward breakout above $55 but only if it closes above $55, then if IBM is at 52, BUY IBM 55 STOP MOC.
   • You wouldn’t want to use this order to take profits on your IBM position because you would prefer to get a higher price anytime during the day. If you wait for the close, prices may have fallen back from their highs. If you are long IBM at $48, you would want to place the order SELL IBM 53. That gives you a $5 profit if IBM trades at $53 or higher during the day.