Commodity Chat With Trader Jim! (tm) with Jim Prince
from May 8, 2007

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Hello and good evening! Trader Jim here. . .

Thanks for joining me tonight. I must say that I’m very thrilled about the opportunity of holding tonight’s chat. Several markets have moved very nicely since we last met, so we have a lot to discuss.

For example, May and July Cotton, June Canadian Dollar, June US Dollar Index, July Coffee, and July Lumber futures have all had impressive moves over the last month! July Soybean Meal, July Corn, and June Gold are currently in the process of setting up possible paper trading entries as well.

To top it off, all these markets mentioned above have, at one time or another, been featured in our nightly Premium Alert Service™ (PAS) videos.

If you’ve had a successful paper trade or real money trade in any of these markets (or others), I encourage you to feel free to divulge your trade details to fellow Course Members.

Discussing your market experiences lets others know they are not alone in this business. So please feel free to share your exhilaration, passion, and dedication. It provides others hope and optimism of what’s to come.

I’d like send a big “Thank You” to Ken Roberts. Ken started introducing folks to the World’s Greatest Business over 20 years ago. I was fortunate enough to not only be a student of Ken's, but I also had the great pleasure to work for him for 12+ years. I’m happy to be able to share with you what I’ve learned over the years.

As we begin this evening’s session, remember the reason these monthly chats are conducted is to provide you the opportunity to ask questions and to pick the brain of a 20+ year student of the markets.

It’s not the best use of our limited time here together for me to define basic terms and explain introductory principles taught in your Course materials. (That’s what our Course Counselors are here for. They can be reached at 541-955-2885) This chat is the time for you to use me to help you apply the basics you’re learning and to prepare you for what to expect once you’re out in the market itself (either paper trading or with real money). And if we have some fun and laughter along those lines, so much the better.

NOTE!!! When commenting on one of the WGB strategies or US Charts, please identify WHICH STRATEGY AND/OR MARKET. Also, when relating trading experiences and/or results, please provide details: Futures contracts, options, option strike prices, options AND futures, real money or paper trading, etc. This helps others follow along and learn from your experience too.


tttbradwisch asks:
Hello trader Jim- question Why is it when you find a market that looks promising, you find a option and the market indeed does what you thought it would, but the value of your option drops? Futures seems right simple, options really baffle me. Rich

at 6:14:01 PM
Hi tttbradwisch! There's a lot that goes into the value of an option. Time, intrinsic value, and of course volatility. What you've described will most often happen with options that are out of the money. If you're baffled by options be sure to paper trade more. It should help clear up your concerns.
Sean Orlando asks:
Thanks for the TRade alert on July Cotton!! I made $1000 off a 5100 Put! My question is WHat causes the big price action at the begining of the session and then at the end of the session?? Ive noticed that in a slow market such as Sugar, OJ m Cotton.. this usually happens the first and last 10 minutes of the session, thanks Sean from Orlando

at 6:18:01 PM
Howdy Sean in Orlando. That's pretty typical of most of the markets. The morning enthusiasm starts the day off. Then a lot of participants may get bored because the morning action is finished. So things slow down a bit. Near the end of the session interest is at a high again. So the market may tend to move quite a bit. If you can ever get to Chicago and the Board of Trade I encourage you to do so. Be there for the close of the grain markets. It's very exciting and a perfect example of higher volatility at the close!
jw asks:
Entering a trade, I have a target. For example with July soybeans I entered at 753 on April 13 and had a first target of filling the gap (hitting 704-4) Soybeans moved down pretty well, hitting a low of 725-4. Since then they have bounced between 758 and 725-4. I have been waiting for them to break below and it just isn't happening. How long is it worth waiting? Or should I get out and be happy with the current gain.

at 6:21:36 PM
jw, it really depends on what your plan was before you initiated the trade. If you still feel your target has a chance to get hit then consider staying in the trade. Trading is all about patience. You have to give the market a chance to do its thing. I can't tell you how long to wait. The one thing I would suggest, however, is to be sure to keep a stop in place and protect your positions. That's vitally important!
Kevin asks:
Hello Jim, This may be one of those "Ask a counselor" questions but here goes. I was a student of Ken's about 15 years ago. What has changed and how do I get back into it?

at 6:27:52 PM
Hey Kevin! Welcome back. Here's a brief answer. Well Ken has moved on to other things. You can find out more by going here. About a year ago Ken sold US Charts to CRB. We still have the same core group of great people here to help you with your trading needs. Our strategies are now all primarily based on trading with the trend. We have additional services as well. I'd encourage you to call a Course Counselor Monday through Friday 8:30am to 5:00pm PT at 541-955-2885 for any other needs you might have. Thanks for the question, I hope this little bit helps.
paul Gray asks:
cotton has had some good movement are we looking at a bottom?

at 6:29:41 PM
Not yet, paul Gray! The trend is down and our July Cotton paper trades are still in full force. Remember, the trend is your friend until it ends! I'll only look for a possible trend reversal if and when a 1-2-3 Bottom formation and all the 1-2-3 strategy criteria are met.
tnt trader asks:
looks like cotton is meeting a strong support area of 46ish...would you agree?

at 6:36:47 PM
tnt trader, Good eye. I think there is a lot of support in that general vicinity. It can easily be seen on a Weekly chart. If prices get through this level the next test will be roughly 42ish. Keep watching!
mary c asks:
West Liberty, Ohio What is the most effective way to use stop loss with an option?

at 6:43:08 PM
Hi mary c, you really can't use a stop with an option. But here are a couple of ideas. . . You could keep a "mental stop." Meaning that if prices reach your "stop" point you exit the trade. Or perhaps you can work something out with your broker. In that he/she can set an alert on their computer. If prices trigger the alert perhaps they can get you out of the trade. Either one of these techniques works. But I can't really say if one is better than the other. Hope this helps.
Bama Jack asks:
Hi,Jim I'm a new member to PAS, learing a lots.Always look forward to them.I have three questions.What causes gaps?Like the one today in corn and live cattle last week?Why in Ken's chart book you use only weekley & monthly charts in the top half?And I don't see you useing 50% retactments?

at 6:48:42 PM
Welcome to WGB, Bama Jack! Glad you enjoy the PAS. Gaps are simply caused by the fact there is either more buyers than sellers at a certain price or vice versa. It's really all about supply and demand. If there's more demand in the minds of trader prices can gap up. If there is more supply in the minds of traders then prices can gap down. The reason for not having 50% levels on all of the Weekly and Monthly charts is that the info. is actually posted just below each chart and automatically calculated and updated. I use 50% retracements all the time. My main focus, however, are the daily charts. In fact, I have been all over them in our PAS videos. Take a peek at Dec. and July Corn, July Soybean Meal and June TBonds just to name a few. Thanks for stopping by tonight.
jace asks:
Hi Jim --It's a beautiful night here on the creek in Slippery Rock PA. First thanks for sharing your advice and experience with the training videos and premium alerts. I’ve been in and out of this business several times over the years and you’re helping me stay out of my own way! My question deals with options and deltas. I used to just set $ amount goals for liquidating options, but didn’t have a lot of success. You’ve got me looking at targets and it's working a lot better. I calculate the futures contract move to the target in $ and using the option delta, back into the expected option price move and convert that to pts. This allows me to set a liquidation order with my broker very early in the contract and allows the market to 'come to me'. I’m getting pretty accurate and find that I’m no longer reacting to ‘yesterday’s’ move. Question – is the option delta on any page other than the option search? Could you possibly add it to the merged view of the basic option page and/or

at 6:52:31 PM
Hi jace! Glad to read that you enjoy the PAS and the Weekly Training videos. They are a lot of fun to do. Sounds like you're working your own method and doing well with it. Just be sure to keep on track and stick to your plan! The option delta info. is available on the option search pages and the regular option pages found in the "end of day" view. Be sure to select the "end of day view" (found near the top of the page), or you won't be able to see the delta's. Keep on keepin' on!
deebeetx asks:
I enjoy these chats as well as your training videos. The premium alert service has made all the difference in my papertrading. I wanted to share that since March 16th I have made papertrading profits of $6,703.00. I've learned a lot from the PAS. Thank you, thank you.

at 6:54:34 PM
Great, deebeetx! I'm glad you are also enjoying the videos. Good job and like I mentioned to a fellow Course Member a bit ago. . . continue to keep on track and stick to your plan. It'll make all the difference in the world!
Parkereddie asks:
HI JiM Great Work,when you enter a position will you care if the trend signal rating changes?ie: strong to neutral and then weakest while you are in the position and it has not moved yet.Just Like Live Cattle.Thanks Scott

at 6:56:38 PM
Thanks, Parkereddie! Nope, my primary focus is the Trend Seeker Trend Rating column. I want to know if the trend is rated up, down, or sideways. The Trend Signal Ranking is more for the very short term. I'm interested in a bit longer time frame. Trend Seeker is actually analyzing the prior six months of data. And this seems to work fantastically with our chart patterns.
atlast9 asks:
Hi Jim, I can understand that a sell/stop order is going with the trend. If I am watching a pullback, I don't see how I can use the sell/stop order unless I see that prices have started down. Now price action is Bearish and I can place my stop/sell just below the current price. Seeing it this way leads me to believe that a limit order is going against the trend and puts me in the position of wanting prices to become Bearish immediately after I have been filled. That seems to be asking the market for a lot of good luck

at 7:02:02 PM
Hi atlast. I'm not sure I totally understand what you're trying to say. For market entry I will use a stop order to get in if my entry point is below current prices in a downtrend. If the market is in a downtrend but I want to wait for prices to pull back to a higher level, I use a limit order. This is the only way these orders can be used with this type of price action. Markets pull back or retrace all the time. This is where the beauty of using limit orders comes into play. In an up trending market you're only willing to pay a certain amount. So you need the market to fall back to your level. Anyway, I hope this helps. I'll try to do a training video about order types and usage in the near future. Thanks!

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wink asks:
wink ask, can you use Stops with option?

at 7:04:24 PM
wink, be sure to check my response to mary c at 6:43:08pm.
tradetracker asks:
Jim, I have reviewed the info on the 1, 2, 3 top program that has been offered and think it very exciting. However, I notice in said info that it is the first of a series. Please explain. And, will you be doing this with each of the various formations? Thank You!!!

at 7:09:37 PM
Hi tradetracker, Yes, I'm producing a series of training videos titled Master The Chart Series(tm). The first video CD is about 1-2-3 tops formations. This program is a video CD meaning the videos are actually on a CD in the same format as the Premium Alert and Weekly Training videos. You plug the CD into your CD player on your computer to view. This first CD in the series contains roughly 58 minutes of insights etc. about this powerful trend reversal formation. Why 1-2-3 Tops? Well many traders get into a postion and wrongfully assume the market will go up forever. Of course that's not the case. Knowing that markets don't go up forever provides us an opportunity to get in on the up trend reversal. I feel this formation is so important that I elected to make it the topic of the first video in this series. The next video CD in the series should be available in late June to early July. Thanks for asking.
jw asks:
jw-san diego (again). Thanks Jim for your answer to my previous question. So based on your answer to Paul, if TS says the trend is still going in my direction, I should be patient and wait for my target to be met. I am experiencing both GREED and FEAR in my trading, although it is actually going okay.

at 7:10:53 PM
Sounds like you know what to do, jw! Set greed and fear on the back burner. Use your good ole' common sense. It will do a lot better for you in the long run.
atlast9 asks:
Hello Jim, I haven't seen you mention the use of "Pillaring or Pyramiding" I have noticed, that once a Bid has been filled and prices are going in the desired direction, there are very few formations developed for a Pillar and rarely for Pyramids. The only exception is the possibility of using the Hi Lo strategy when prices are making new highs or new lows. Have you eliminated Pillaring and Pyramiding from your trading plans?

at 7:13:57 PM
atlast9, you are absolutely right. I don't mention either. When I trade I enter my full position at my initial entry. Then I will peel off positions as targets are hit. While pyramiding can be amazing, it can also be amazingly dangerous. I don't recommend anyone pyramid. It can cause a world of hurt in a heart beat.
swede asks:
SWede: I have four oct,. put option s in sugar . what wouldyou sugest I do with these ? liquidate the or keep them.

at 7:17:13 PM
swede, I can't tell you what to do. You must have a plan prior to entering any trade. That plan at the very least should consist of an entry point, stop loss, profit targets, and risk/reward. I can't emphasize this enough. It is vitally important for YOU to have a plan in place before you EVER enter a market. If not, you're guessing and letting your emotions guide you. And that's no way to run a business. Be sure to watch last Friday's Training video titled: Trading Plan. It should help you a lot.
jack asks:
From Jack Hi Jim, I enjoy the chats. In re stops, trailing or otherwise, do you keep a mental stop and watch, or give it to your broker and let him watch? how do you hide it from those exchange traders that seem to love watching stops get hit and then the market takes off again?

at 7:21:13 PM
jack, you can't hide stops. Even if you keep a mental stop to exit at a certain price, if we're honest with ourselves we'll get stopped out. So from that stand point it really doesn't matter if the stop is in place or not. Here's what I mean, if my exit point is hit and I'm keeping a mental stop, I need to get out of the trade...... pure and simple. Most experienced traders know where stops are located -- in fact you do too! They are usually above resistance levels or below support levels. There's no magic to it. Btw, I will generally place a physical stop. Thanks for stopping by tonight.
ChrisM asks:
Hello Trader Jim from Canada. I have been with US Charts for going on 2yrs now and can not stress the importants of patience in learning. I was in June Canadian Dollar with a Call option strike of 0.87 based on a 123bottom. I sold and earned a tidy profit of $530 on 13Apr. Had I kept a trailing stop I would have been able to stay past my 1st target and increased earnings. Still learning - keep your stops.

at 7:25:00 PM
Nice job, ChrisM! You did it perfectly by exiting at your target. Remember, you never know when the market is going to reverse. So take profits at targets when they're provided! If you're trading multiple options then you can hang on for a secondary target -- all the while trailing a stop loss. I think you did great! Don't worry about what might have been. Focus instead on how well you actually did! Nice job!
mavric asks:
Hey trader Jim, Just a question about open interest on options. If you recommend getting out of a trade with about 30 days left, why does the high OI indicate plenty of activity as the option is nearing expiration. I would think there would be all liquidation and no buying...would you explain. Also love the premium alerts and I also appreciate the alert on July cotton...it was my first cash trade. Made a profit, just got stopped out sooner than I would have liked!

at 7:30:25 PM
Howdy mavric, I don't necessarily recommend getting out of an option with 30 days left. What I tell folks is that generally speaking an option will lose time value the fastest the last 30 days. So you need to be aware of this because if your option is out of the money it's going to drop in value faster than one in-the-money. All of this is relative of course because the main factor will be how far the option is in or out-of-the-money. Buying and selling action is also dictated by the relative distance that option is from current futures prices. I hope this helps and thanks for the nice words about the PAS. Nice job on your cotton trade too!
mak_in_va asks:
Hey Jim, the Premium Alert Service is great! Any chance you will discuss paper trading farther-out contract months (90+ days til option expiration) in the service, as opposed to focusing on the closest, most active month? Thanks!

at 7:33:08 PM
Hi mak_in_va! I focus most all of my efforts on the front one or two month contracts. It's where the volume and open interest is located. That said, I've been talking a lot about December Corn and December Eurodollars a lot on the videos. So there is always an exception to my rule of thumb! That doesn't mean you can't venture out. I've just never been a big fan of trading that far out. I like the liquidity of the near-by contracts.
Jean from Montreal asks:
Hi Trader Jim! Today I've liquidated my 8850 call canadian dollar option bought for 450$ on april 11 to pocket 2150$ today, one month later. Thanks.

at 7:37:17 PM
Sweeeeeet, Jean from Montreal! Nice trade! Not bad for a month's work! Now the key for future success is to not get careless. To stay on task and focused on your plan for each trade. It's really all about building good habits. Bruce Lee, the famed martial artist, once said "it's not about being right, it's about perfection!" If we all followed that little gem in our trading businesses we would all do a lot better. So don't try to outsmart the markets and "be right." Do all you can to execute your trade plan to perfection! Once again, nice trade!
JIM asks:
Jim -- thanks to your great tutelage I understand the basics of options and I learn more everyday. My question is: assuming an investor can afford any of the following, what are your thoughts on buying an option 1)in the money versus 2)at the money versus 3)close to the money? Thanks. Jim from Chicago

at 7:38:56 PM
From one Jim to another. . . Jim I generally prefer to purchase options that are at the money or "slightly" in the money. Just my personal tastes. These options will move like a futures contract and the cost is generally not out of line - relatively speaking.
Susan_in_CA asks:
Hey, Jim, I'm a newbie! Pennant Formation on July Corn - you didn't like that the 50% level was just below the breakout point of the formation as it would mean a "formidable level of support". Now did you put this on the alert as an example of what *not* to trade? Kind of an experiment? Why not look at the 50% level being there and just say, no point in trying? Thanks!

at 7:42:45 PM
Well Susan, that's actualy what I did. I mentioned that I wasn't going to trade that puppy myself because of the 50% level location. And on one alert mentioned that this type of analysis is what all traders need to do. To find these potential roadblocks and not to fight them. I have since followed up on both Dec. and July Corn showing folks how prices react to heavy areas of support. That was really the idea in mentioning both of these markets. Thanks for your questions.
Schweetie asks:
Biloxi, MS. Is there any one formation that you find to be more dependable than others?

at 7:44:22 PM
I don't know about more dependable, but I am easily able to find pennant and triangle formations. I guess they are my forte'. I really like them because they are trend continuation patterns, so I'm only going to trade the formation in one direction -- with the trend! Hope this helps.
STAN asks:
In the past few months I have been unable to track the commodities market. I like to trade options, however twice now I have taken the advice of brokers and they have completely wipede out my account. What is your advice as to getting back into trading in both a cautious & profitable manner!

at 7:48:26 PM
Learn to trade for yourself, Stan. If I can be blunt. . . take it upon yourself to take total responsibility for your trading. That way you will not need to rely on anyone else. Learn some techniques that are easy to track and trade, such as those taught in the WGB. Paper trade until you TOTALLY understand the principles and techniques. Then and only when you feel 100% comfortable, consider investing real money. How do you eat an elephant? One bite at a time. You can do it, Stan. Just take it slow!
traumagrl asks:
When you talk about "taking profits and peeling off contract", how many do you start with in order to peel off some of them?

at 7:53:23 PM
Hi traumagrl, Some will trade with two contracts. Others will trade three, five, ten or even twenty. However, focus on what you can do. Build your account slowly. And when you can afford to trade additional contracts consider doing so. Don't rush it though. Remember, the more contracts/options you can trade increases your risk that much more. In other words, while you can make more you can also lose more. I hope this helps.
n5ydp asks:
Hello Jim - I traded in the 90's with some success, got off of my "plan" and lost it all. Now I am back and have been paper trading for 6 months, I feel ready to take the next step but find myself feeling a little "gun shy"... any advise?

at 7:56:15 PM
Keep paper trading, n5ydp! Paper trade, paper trade, paper trade. Eventually you'll "know" when you're ready to move to real money. No one should EVER tell you when to put your hard earned money at risk. Only you know when that time will be. So keep at it and eventually you'll know when the time is right.
Cal asks:
Great work, your alerts are a must for me and are a big help. At first I concentrated on your analysis, now I find myself makeing a plan and then listing to your alerts to validate. my question, often I see a chart pattern, say a channel for example, and you see a pennant or flat top/bottom triangle. Both patterns are there, some time you point both out but often you base your discussions on only one. What if anything leads you to chart one Vs the other to make your trade decisions as entry points can be somewhat in variance.

at 8:00:21 PM
Good question Cal. It's really just the way I've trained myself. I see something that stands out -- to me. Some will see a channel when I see a pennant. I see the pennant usually because of narrowing price action. It tends to stand out more to me. Now it doesn't necessarily mean I'm right. It's just what I see. I like the fact that you're analyzing the markets before watching the alerts. That's a great way to improve your market education. Congrats!
mak_in_va asks:
Hi Jim, really enjoying the Premium Alert Service... I have picked up a bunch of techniques that I've added to my trading style that, at best, I wouldn't have developed on my own until after making many more trades. Also, wanted to share successes (w/ real money) in both Corn and Cotton! Combined w/ a manageable loss in Wheat, where my plan had me out at a safe, pre-defined point, my net is still pretty far to the plus side! And I'm basically just acting on what you all have taught in the course materials and videos, so many thanks!

at 8:01:08 PM
AWESOME, mak_in_va! That's what it's all about!
Bonita Joe asks:
Jim, I like your trading style and am trying to "copy" it, however, it seems a person almost needs to on the screen 100% of the time. Tough to do when my day job interfears with my true desire of trading full time. As a result, I have been more of a long term trader with options, even though I make more when trading futures. Don't get me wrong, it has been all profitable and am happy, but your style is really "more...... fun?" Bonita Joe

at 8:03:54 PM
Not at all Bonita Joe. You definitely don't need to watch the screen all day. It's all about setting your trade parameters and then letting the market do its thing. Trade parameters are entry, stop loss, and profit target orders. Once they are in place, it's up to the market to do its thing. The key, however, is to find what works for you, and it sounds like you've done so.
traderphil asks:
Hey Trader Jim! Team US Chart Company continues to do a wonderful job in providing state-of-the art commodity trading education to us normal folks who are learning a new full or part-time vocation. The Premium Alert Service has made all the difference in the world for me. Here’s my question- The July Japanese Yen is beginning to pull back to the previous support level of the Pennant Formation which will soon be resistance if prices continue to climb. I was short this market and got stopped out with a small profit and I am looking to re-enter it. Is it best to wait for prices to pull back to the bottom of the pennant or can a paper trade be initiated at the price level of the original breakout…which in this case would be around .8400?

at 8:09:57 PM
Hey traderphil! A pull back to resistance of the bottom of the pennant could provide a nice potential paper trading entry point. I think the pull back will be in the same general ball park as the original entry. However, it will depend on how long it takes the market to retrace to that level -- if at all. I'm waiting for a possible retracement to the bottom of the pennant as mentioned on the PAS. Thanks for the nice words.
craig asks:
In response to Stan, I started trading with your help in Jan. 2007. I have only gone with the trades as I have seen them on your premium alerts. Not once have I gone with my broker's recommendations. I started with $7500 and now have $25,000 in my account.....all thanks to Jim....listen to him not your broker.

at 8:12:16 PM
Wow, craig! That's awesome! While I appreciate your kudos it's really not about me. It's about you and you learning to analyze the charts and follow your very own trade plan. I can't do that for you, so all credit goes to you! Very nice job! And as I've mentioned to others..... stay on task!
wink asks:
wimpee here, Jim can you go thougth the steps of paper trading in your next video. thanks

at 8:14:40 PM
Hi wimpee, paper trading will actually be the topic of one of my Master The Chart Video CD's. This topic needs a lot more time than a 5 or 10 minute weekly video. So I'll be spending roughly an hour or so discussing how to paper trade and the exact steps necessary. Look for this video CD sometime within the next couple of months.
Smokin Joe asks:
Hi Jim, I've enjoyed learning from you, thanks. If a trader starts out with a set amount of money to trade with, would it be a bad idea to commit all of the capital at one time on 2 or 3 different trades at the same time when starting his business? Do you think keeping some capital in reserve is a better plan?

at 8:16:44 PM
Thanks for joining us this evening, Smokin Joe. I would not recommend tying up all of your capital. I think it's wise and prudent to keep some in reserve. No need to be greedy. Stay within yourself and trade responsibly. In other words, take it slow and easy.
tttbradwisch asks:
By the way TJim- you teach very well and put your actual feelings of a market and how it is- which really helps opens our eyes to what to watch out for or be at least forwarned! THanks bunches.tttbradwisch

at 8:17:26 PM
You bet, tttbradwisch! Thanks for the nice words. Glad I'm able to help.

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NJPete asks:
Hey Jim & Crew, I’ve been trading with Ken & US Charts sense the early 90’s and I have to say the changes you’ve incorporated into the charts are fantastic! Each weeknight I switch back and forth between Trend Seeker & the Chart Selection page. I love Trend Seeker but it would be nice if the front months could be highlighted or somehow marked on the Chart Selection page. Just a thought. Keep up the great work. NJPete

at 8:21:34 PM
Hey NJPete, Glad you like US Charts and Trend Seeker. I'll pass along your request to our trusty programmers.
Well that's it for this month. Keep in mind, that you're not alone in your trading journey. US Charts Online, myself, and our wonderful Course Counselors (541-955-2885) are here to help you become the best you can be. On that note, be sure to check out our weekly video trading lessons at: US Charts Online. This is a fantastic teaching tool and free to all WGB Members and Online Chart subscribers!

Finally, make sure you have a plan prior to entering any trade and use stops to protect your trading capital. As a trader your capital is THE most valuable asset you have!

Plan your trade and trade your plan!

My next chat will be on Tuesday, June 5, 2007. God Bless and I look forward to seeing you then!
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