You have questions … and SteadyTrade hosts Tim Bohen and Stephen Johnson have answers.

In today’s episode, the mighty duo tackle four pressing trading questions from listeners. Listen in for their take on VWAP, backtesting, getting out of a trading slump, and more.

Traders of all levels can benefit from the answers to these listener questions!

Now, on to the questions…

Randy: How do you use VWAP as an indicator — and how do you set it up on a screener?

STP answer: VWAP, which is short for volume-weighted average price, is a popular technical indicator with traders. It shows where the most volume is in a stock and displays as a basic line on a stock chart. It’s simple to read: If the price is above the line, it’s above VWAP. Below the line, it’s below VWAP.  

So what’s the benefit of VWAP? Basically, it’s a good way to determine whether the action around a stock is bullish or bearish.

You’ll learn some great tips for how to use the VWAP, how traders are currently putting it to creative use, and how to screen for VWAP most effectively on StocksToTrade or any software!  

Paula: As a fairly new Tim Sykes’ Trading Challenge student, Paula is curious about how to maximize the program. Both Tim and Stephen are former Sykes students, so what’s their advice for making the most of the Challenge and actually getting started trading?

STP response: Since both Tim and Stephen were once Trading Challenge students, they have a lot of anecdotal advice to share.

Stephen talks about how it’s all about “learning, practicing, and repeating” to reinforce the lessons, noting that “the more times you fail, the closer you are to success.”  

Both Tim and Stephen address some of the biggest goals for any new trader: figuring out what stocks to trade and learning how to to create a great watchlist. They offer tips from their own experience on how to build better watchlists, how to graduate from paper trading to intelligent live trading, and why you should NEVER copy another trader.

Jeff: What is backtesting? Also, Jeff wants to know if the hosts have any advice … He’s been trading for about four months with a small account. And while he started strong, he’s now down by 50%. Any tips?

STP response: Backtesting is ‘cool’ according to Tim, but not much more. To the uninitiated, this is where you pretend to travel back in time and try your hand at a trade that’s already happened. He talks about backtesting issues, including the fact that most penny stocks will crash and that backtesting can trick you into a false sense of security.

Our hosts cover better real-time alternatives like paper trading and looking at actual stock charts.

They also offer helpful tips for getting out of a trading slump, including reducing your positions and sticking to paper trading for the short term. As Tim puts it, “don’t let your account grind down into oblivion when you’re in a slump!”

Chris: How can we convince Stephen to play long, since he trades long plays as shorts all the time? Also, can you talk about restrictions on pattern day trading (PDT) and margin accounts?

STP response: According to Stephen, here’s the real question: “How can Stephen be intelligent when cutting losses in shorts?” He and Tim critique his recent trades and evaluate whether Stephen should be playing long or short. You may be surprised by their thoughts!

To address the second part of the question, Tim and Stephen talk about trading accounts, including the difference between cash and margin:

• Cash account: You can only trade with what’s in your account.
• Margin account: You can trade two, four, or even 10 times your worth, leveraging up.

They get into the advantages and disadvantages of each, including how losses can mount quickly with margin accounts and how cash accounts are great in terms of responsibility but don’t typically offer traders the opportunity to sell short.

ROAN Update!

Be sure to listen in to hear the latest in Stephen’s ongoing ROAN trade saga!

Got a Question?

Do you have your own trading-related question?

If we choose your question to answer on air, you can win a SteadyTrade mystery gift box! So don’t be shy … send questions via the SteadyTrade website, YouTube, or by email.

Thanks for tuning in to the SteadyTrade podcast. Stay tuned for weekly episodes featuring the hottest topics for aspiring traders!

How awesome do you think this episode is? Leave us an iTunes review!