Quote from short&naked:
There seem to be a lot of beginners on ET posting stories about their failure to becoming traders. If you build on a few basic rules it really isn't that hard:
1. Don't try to be an innovator... keep it simple!
2. Start with a strategy that blends investing and trading (i.e. stay away from intra-day trading).
3. Don't fight the trend, ever!
Think about it, if a stock or commodity has been trending for a while, there will be much more momentum in the direction of the trend, increasing your chances for a good entry point if you follow that direction. Fighting a trend is a recipe for disaster.
4. Use only basic indicators (stochs work well for trending stocks) and the main MAs/EMAs (200, 65, 50, 20). I have also found that 150 works very well on strongly trending stocks.
5. Become friends with trailing stops. Once your trade moves into profitable territory, seal off your profit with a TS. It is always better to walk away with a small profit (or no profit) than a loss.
And in case I didn't mention it: Keep it simple!
short&naked
I am sure that your intent in posting the above was good, but your advice is very wrong. Very often, it is better to take a loss then to restrict yourself from achieving your intended profit target. Trailing stops can be useful, but don't set them randomly. Stops should be placed on logical areas.. not just where ever makes the trader feel happy. If you can identify a retracement figure which if reached after going into profit represents a high probability for loss, then a trailing stop there would be logical and justified.
And do be an innovator. Not necessarily in the tools you use (although that can also be a great thing), but at least in the way in which you use them.
Intraday trading can be very profitable if done right. You are right about it not being the best way to start out - it isn't for most. Combining it with a long term investment strategy is very wise, but intraday trading can still be very profitable on its own.
There is nothing wrong with fighting the trend. Counter-trend trading can be very profitable if you know how. A stocks strength in a direction does not necessarily grow over time as it maintains that direction. It is very possible that new traders will not enter with the same bias as the trend, or will deem the trend to be overextended, therefore weakening the trend as it progresses.
I actually agree with the advice about basic indicators. Price alone can do wonderful things. That's not to say that more "complex" indicators cannot be useful.
As for those of you saying that your strategies cannot be back-tested.. you are wrong. If your strategy has a strict set of rules which are used systematically, then it can be back-tested.. you just don't how to do it.
By the way, I realize that my tone in this reply is rather blunt. The usual reaction to such a post is "this guy is insulting me". I just want to point out that insulting any of you is not my intent in any way. I am merely stating the factors in a direct manner. I am hoping that you guys can respect the value of direct honesty.
