Good methods in today's market

L

LokiSkywalker

I'm just starting to trade (I didn't pick the best possible time, did I? :), and would like advice from more experienced traders about today's market conditions.

I've been reading as much as I can, and papertrading through a 20 minute delayed demo of TradeCast. So far, my papertrading is poor because I have no real strategy I am testing, and can't read the Level II well enough yet. I'm not too worried about that, since I'm not trying too hard until I can decide on a good strategy to commit to and experiment with.

However, my reading has been somewhat disappointing me in that regard -- much of the technical advice I've read has so far been about breakouts, which don't seem to work nearly as consistently or well anymore. Decimalization has also rendered most of the books I have somewhat obsolete, since most equities no longer move by 1/8 for a reasonable move, 1/16 for a small move, etc., but instead go through penny levels.

I'm glad I found a forum that seems to be frequented by professionals, and not just snake-oil salesmen and wannabes. What advice can any of you give me on what kinds of strategies work well in today's market? I'm not asking for your exact techniques (though it seems to me that people are sometimes too frugal with their methods -- though some methods may lose their value with popularity, as far as I can tell this is not necessarily true for others, especially if only a few hundred people pick them up and try them consistently, which seems to be by far the largest number of afficionados that any method posted on a board like this could develop... but I digress :). I'm just curious about what kinds of things I should pursue further -- swing trading? Intra-day trading on support/resistance? More complex indicators/developing my own mathematical formulas? Choosing NASDAQ or NYSE, or both? Trading breakouts or fading gaps? Checking on news? A combination? Something I haven't thought of?

Or is it time for me to look into options or futures -- are those securities easier to trade profitably than equities nowdays?

I'd love to get some hard-earned wisdom from you more experienced folks before I have to pay for it with all of my own money :)


-Loki
 
You are going to get a lot of advice.

The simple techniques will always work to some degree - support/resistance, trend lines, etc. Tape reading will always work for those who master it. Stop losses and money management will keep you in the game.

<i>More complex indicators/developing my own mathematical formulas?</i>
Try to keep it simple. Almost always, added complexity is not the answer.

The decision between stocks and futures is up to you. They each have their merits. You also have to decide your time frame and find what suits you the best. imo, stay away from options.

At least you know that you don't know anything - some people have to lose a lot of money before they learn that lesson.
 
I noticed you used the word experiment in your first couple of paragraphs. That threw up red flags in my head. This told me that you are not sitting beside a pro copying their technique.

Let those that are already trading experiment. You need to already know how to trade successfully before you even open up an account. Sit beside someone, have them show you how to trade.

You could just start trading, and there is no doubt in my mind that you will be successful, .....if you spend enough time and capital. When you reach the point that your are consistantly making money, you will find that you are doing the same thing the successful trader two seats down is doing.

This is a hard hard hard business, but there are ways to be a winner, find what is working and copy it!
 
Hi...I'm new to elitetrader myself,however I have been involved with charting for about 17 years and actual trading for about 5,so I feel I can give you some suggestions from experience. I can't give you much advice about trading stocks,because I have mostly concentrated on the S&P for the last 10 years. First, I would recommend a book. It's called Market Wizards by Jack D. Schwager. You need to read this book. It will help you to understand that your trading "Method" is the least thing to be worried about. To quote Linda Rashke "Trading is just a numbers game,that's all it is. You get a little bit of an edge in your favor,a little bit of an arbitrage,a little bit of a price pattern. Anything that gives you that edge. But you have to have that edge. And then it is just a numbers game. You crank that out;you say I've got to do 100 trades,with 65 percent winners and 35 percent losers. That's my average loss. You have to get that consistency going. If you're consistently losing, then maybe it's time you get a different pattern,a different edge or an arbitrage. So you have to look at the long-term scheme of things". As far as to what type of trading you should pursue,that really depends on you. I personally trade the S&P emini on 100 tick bars. Alot of traders like the Nasdaq e-mini. I personally would suggest one of those markets rather than stocks for 2 reasons. You have much more liquidity and you pay less taxes on profits. I noticed you didn't seem to be to impressed with "breakout" trading from what you've read, so far. I personally prefer this type of signal,especialy when combined with a good volume indicator. I guess the last piece of advice I could give you is "PAPER TRADE" until you are confident your method will work. If you can't make money on paper,your sure not going to in the real arena. It's been an honour to leave you my "first" post. Hope this helps.:)
 
follow your instincts, just like all of us else.

no one ever listens to advise.

when you actually see that stock, which you did all that research on, and charting and mathematical analysis on, and you come to the markets wide eyed and bushy tailed expecting that you are just in front of the curve, just before that stock explodes, and you place your order, expecting to be proven true, only to find yourself jiggled out, or losing, or seeing fundamental recent market news trash that stock, then you'll know the wisdom of the first line of my reply.

also, stare at the level twos for a week, and sample your ideas with 50 shares on ISLD or 10 shares, given that this market environment is horrendous... Perhaps even do 100 shares, depending upon your ticket cost.

Or, simply get licensed, interview and join up with one of the professional firms, that can take a newby and grind out an experienced opinionated mildly successful trader.

Cheers
 
Hi...me again. I thought you might appreciate a sample chart from an "experienced":p trader. Just click on the attachment link. You'll
notice 3 arrows pointing down. These are the "breakout" trades I
was telling you I liked. You'll notice there's an obvious difference in volume when the price breaks through support. This helps me decide whether or not to take the trade. If there's low volume I'll usually pass. Also,you'll notice the third signal didn't fair so well. That's why it's VERY important to use STOPS and cut your losses. Hope you find this helpful and Good Luck!
 

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Originally posted by LokiSkywalker
I'm just starting to trade (I didn't pick the best possible time, did I? :), and would like advice from more experienced traders about today's market conditions...

Or is it time for me to look into options or futures -- are those securities easier to trade profitably than equities nowdays?

I'd love to get some hard-earned wisdom from you more experienced folks before I have to pay for it with all of my own money :)

-Loki
More...

Hi Loki,

You should get some good responses here because there are some good traders here.

I strongly suggest to any newbie (not an offensive word) to sit side-by-side with a trader already successful and making a living via their trading.

This type of learning situation CANNOT be beat. It is how I learned.

Yet...if you don't have the opportunity to sit side-by-side with a successful trader...forget paper trading or delayed simulators.

Instead, find some good strategies (long setups and short setups)...EASY TO FOLLOW...and trade with a small capital.

This is probably...arguably...the second best method for learning how to be a successful trader.

Next...post a trade journal here at EliteTrader for all to see and scrutinize. The critisism (good and bad) will make your learning curve less expensive. Also, post graphs with annotations because charts speak a thousand words.

As for Equities (stocks) versus Futures. My personal experience is that trading stocks is much harder than trading the Emini Futures or the Big Futures or QQQ. I personally trade the Eminis, Big Futures and QQQ.

Some will argue that the difficulty is the other way around. Thus, I guess it boils down to what strategies a trader is using and what type of personality they have.

Stocks are just way too stressful for me (been there...done that).

One of the first things I learned was to keep it simple.

I've uploaded a chart of my trades today so that you can see that it doesn't take a rocket scientist to make money in today's trading environment.

Also, if you decide to trade the Eminis...something I notice early last year was that many of my strategies that work well for the NQ have less probability for success when applied to ES and vice versa.

More importantly, strategies I've used successfully with Equities...I don't dare use them for trading the Eminis.

Good luck and I look forward to seeing you post a trade journal here. If you do decide to post a trade journal but not here...let us know and post a link to the website.

The chart that I uploaded is a 3min interval chart. My favorite intervals are Daily, 30min, 10min, 3min and 1min (confirmation).

I usually get 3-5 trade signals per day.
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Note (edited in): That last short position...normally I would hold 1/2 (exiting 1/2 at the first bounce after the price fell back below the 50eMA..the red line).

Thus, the remaining 1/2 is exited at the second bounce (more often than not a stronger counter-thrust than the first bounce).

Yet, today I decided to exit ALL at the first counter-thrust because I was too tired after staying up late last night with friends.
________________________

Nihaba Ashi
 

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Thank you all for your replies. I've received a lot of "it's not the strategy that counts, it's the money management and psychology" advice in the past, too. It's in all of my reading, as well. I'm very aware of this, and also know that I will not know what any of it *really* means until I start to trade with money. But I am very cognizant of that aspect of trading, and will pay careful attention to it.

I would like to know more about the specific 'edge' that I should focus on. I also know that there are many effective styles, and the one I should pursue depends on my temperament, but I'm looking to filter out the less effective methodologies that I shouldn't even examine in detail for now. I want to know what methods aren't as effective as they used to be (like Level II scalping, for example), and what still works, or works better, now that the 10 year bull is dead (and yes, I believe it is dead. A new bull market may well arise, but what is happening today is not just a 'glitch', and the runs of the past probably won't return for some time. But enough of my market forecasts :)).

So if anyone has some specific methodologies they trade successfully or think I should look at, let me know.


Thanks for your posts, Breakout! Anyone else want to comment on the benefits/drawbacks of trading the e-minis?

pitufo -- you say I should sit by a trader's side. Is it possible to accomplish this without paying hefty fees? I don't think I want to be a prop trader, since they tend to be forced into a firm's style, and I want to develop my own style. Plus, that always comes with a ~$1000 training fee, right? Although I can afford it, I'd much rather not spend such a chunk of capital if it can be avoided.

I will be living in the LA area soon, if anyone would be kind enough to meet me and chat :) I don't want to pay to be mentored if I can avoid it (again, because of the large fees involved), but I would love to get to know some people who know what they are doing!
 
Thanks, Nihaba! When I start trading, I'll be sure to put a journal up!

What do others think about futures vs. stocks? So far, I've been studying stocks exclusively. Should I read something to get up to speed on futures patterns? This will disrupt my plans quite a bit, but I'm willing to take the advice of my betters ;)

Isn't it true that while futures are easier in a way, because you're only studing one chart and learn to read it well, stocks are more likely to make very large semi-predictable runs (percentage-wise)?
 
Originally posted by LokiSkywalker
...I will be living in the LA area soon, if anyone would be kind enough to meet me and chat :) I don't want to pay to be mentored if I can avoid it (again, because of the large fees involved), but I would love to get to know some people who know what they are doing!
More...

I never met anyone from a prop firm eventhough several posters here at EliteTrader trade at prop firms.

Hopefully, you can find someone that trades successfully from home or has a little office somewhere and will let you come by and watch him or her trade.

Offer to always buy them lunch or something. Most traders I know that trade successfully from home would never let anybody invade their private space to watch them trade.

Therefore, you'll have a tough task in finding someone willing to teach for lunch or barter exchange...if you do find someone that won't charge...they have a kind heart.

Take care and good night.

Nihaba Ashi
 
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