Advice to new a trader

qlai said:
Coaching group I am a part of got a homework assignment. We are two give an advice to a hypothetical new trader regarding two of the most likely problems they will encounter. It’s intended to benefit the person dispensing the advice, not the other way around.

#1 Inability to accept/take initial loss.
Loosing in a trade seems so final and irreversible. You start extrapolating … if I loose X every trade, I will be down Y by the end of the month and out of money by the end of the year.
Also, due to mean reverting nature of the markets, loosing trades always seem to come back and even turn into would be gains!
Advice: Taking losses is part of the job description for a pro trader! Losses are an integral part of trading, they must not be avoided! They must be accepted to be considered a professional trader.
Inability to take a pre-determined loss, will lead to taking much bigger loss eventually or sitting in a draw-down watching opportunities pass by. But the biggest issue is - you will never be able to size up because you can’t trust yourself to take that initial loss!
Condition yourself to accept the pre-determined loss prior to taking the trade. If you have the edge, losses are just expenses of doing business. If you don’t have the edge, losses are your insurance premiums for surviving long enough to gain the edge.

#2 FOMO
As a new trader, it’s difficult to understand context in which you are trading. Some days require to be more aggressive, some more patient, some to be inactive. Because day traders have limited window of opportunity - usually around the open -
you will often experience urgency to take a trade because, if you miss this one, you may be sitting on your hands all day or try to force trades. Related to this is taking entries pre-maturely. It’s difficult to see your would be trade work without you.
Advice:
Condition yourself to seek perfection with your signals. Expect the stock to do exactly what you expect it to do. If it doesn’t, let it go! This was not your money to take. If you take the perfect signal which does not work out (because it’s still a game of probabilities, not certainties), you can accept it. But if you take a sub-par signal and it results in a loss (see#1 above), you will fill like an idiot.
Have a maximum number of signals to take per your trading window. This number must be small enough to make you very selective and patient. Accept the fact that you may not trade at all that day. Let go of “missed” opportunities.
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Inability to take a loss and FOMO-ing comes from not having a trading process/not having confidence in your trading process/not knowing the shortcomings of your trading process. If you have a process you can greatly reduce the influence of those feelings on you. A trading process includes the preparation of your mind for the highly intensive intellectual and psychological game that is trading. It includes having tested and refined a trading system for different market conditions and time horizons, even better - having chosen one that best suits your preferences and natural tendencies. It includes knowing the expectancy of that chosen system and the possible draw down periods as numbers of trades, as time passed and in dollar amount. Having accepted those at their scientifically tested and proven scale you then have to have worked on gaining experience in the markets with as little psychological damage imposed on you as possible - the best way is to trade demo for a prolonged period of time and after that trade with as little money as possible - amounts that would not hurt you financially but would still be meaningful enough to push some buttons in you and urge you to improve yourself. After all of this you need do persevere enough time for luck(law of large numbers) to work its way towards you.
 
deaddog said:
And where do I mention "Ad libing it while under stress"
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Hello deaddog,

I agree with you man.

A trader has to have a Plan that covers every mental and trading decisions, and stick to that plan for 1 year and see what happens.

The plan needs to cover:

1. What to do after X losses in a row.
2. What to do about drawdown.
3. When to stop trading this trading plan and start trading another trading plan.
4. How much money to lose trading this trading plan.
x
x
xxx. Done with plan.
 
Psychology is pretty much a nonsense concept across the board.

A stand up comedian doesn't get comfortable on stage by studying comedian psychology and getting a coach.

A comedian that is comfortable on stage is comfortable exactly because they have already bombed many times and have already been on stage so many times.

"Psychology" in this context is a delusional mental model that you can somehow cheat/hack this process.

We make this mistake in practically every context. As if Michael Jordan was just so clutch in the NBA naturally. As if he hadn't been thrown the ball to take the last shot in a game since he was a little kid and in the NBA you were seeing the results of hundreds of last shots he had already taken because he was never not the best player on the court.
 
nrstrader said:
Psychology is pretty much a nonsense concept across the board.

A stand up comedian doesn't get comfortable on stage by studying comedian psychology and getting a coach.

A comedian that is comfortable on stage is comfortable exactly because they have already bombed many times and have already been on stage so many times.

"Psychology" in this context is a delusional mental model that you can somehow cheat/hack this process.

We make this mistake in practically every context. As if Michael Jordan was just so clutch in the NBA naturally. As if he hadn't been thrown the ball to take the last shot in a game since he was a little kid and in the NBA you were seeing the results of hundreds of last shots he had already taken because he was never not the best player on the court.
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Interesting perspective.

Although, all the pro athletes have a roster of coaches.
 
David's faith said:
Say you can code. Where do you start out? Which software and which datafeed. I am curiois as I do not have the toolset beyond Python skills.
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Not exactly sure what you're asking here. Are you taking about live trading/execution? If so, then CQG/TT/Rithmic is good enough.

If you're talking about sources of historical data, this is a good resource:
https://quantpedia.com/links-tools/?category=historical-data

BTW, you should definitely separate execution and data. Yes, they can come from the same provider, but it's a good idea to use 2 or 3 different market data providers. Let's say you're executing primarily via Rithmic and their market data starts having problems. Well, that's no problem because most likely their execution platform will still work, so you just use CQG or TT market data and continue executing via Rithmic.

Oh yeah, avoid Interactive Brokers like the plague. It's sub-garbage. Their code is all Java shit from the 90's. Last time I checked they turn off their servers in the middle of the trading session (around midnight) every day and they've been doing that for 20+ years as if that's a perfectly normal thing to do. No, it's because their system is Java shit from the 90's. You gotta understand that they're supposedly a multi-billion dollar company but yet they don't even have a single server colocated at CME Aurora. That's how insanely sub-garbage they are.
 
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