how to decide on trading method, time frame and instrument

[NoDoji]

Quote from Gubinec:

Be ready to deal with the frustration and anger that comes upon you when price retreats and takes out your stop.

Gub, this is easily avoided by quickly canceling the stop order if price gets too close to it.

In the event Alphav chooses a swing trading time frame, I recommend automating the stop cancellation process because the whole reason for swing trading is to avoid having to deal with all that messy trade management crap day in and day out.

The most popular trading methods are trend-following (TF) and reversion-to-mean (RTM). If you're willing to put the requisite 10,000 hours of screen time into reading the pros and cons of each of these methods as put forth by members of Elite Trader, you will learn that when utilizing a trend-following method, more than 90% of small traders lose!! They just lose!!! When utilizing a reversion-to-mean method, more than 90% of small traders lose!! They just lose!!!

The most popular trading time frames are intraday using a 5-min price footprint and interday using a daily price footprint. The easiest way to find out which method best suits your personality is to place a strong rubber band on your wrist, pull it at least 3 inches from your skin and release it. Make note of how that feels. Wait 5 minutes, then do the same thing 10 times in a row. Make note of how that feels. If the single-snap was more enjoyable, you'll likely find swing trading off a daily chart more to your liking; if the multi-snap session was more enjoyable, you'll likely find intraday trading off a 5-min chart to be a good fit.

There is much long-running debate about whether it's better to trade stocks or futures, with a good bit of sub-debating about whether it's better to trade several stocks/futures or just one or two stocks/futures.

None of this is really important. What's important is to limit risk. The best way to limit risk is to combine an instrument with a position size in such a way that your risk is limited to what you would lose in a worst-case scenario.

Since the risk on short positions are unlimited, NEVER TRADE ANYTHING TO THE SHORT SIDE, BECAUSE YOU COULD LOSE YOUR ASS!

The key to limiting risk is to a) trade only to the long side, and b) trade things that, should they drop to $0, only place 2% of your trading capital at risk with a given position size on.

Alphav, since you good-naturedly (or maybe not) put up with my silliness, here are some good resources:

http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm

http://www.hardrightedge.com/

The Master Swing Trader - Alan Farley

http://www.youtube.com/user/BrooksPriceAction

http://www.brookspriceaction.com/

Reading Price Charts Bar By Bar - Al Brooks

 

[xiaodre]

I guess most people begin at the beginning: how much money have you put in your account will tell you what you are allowed to trade and what you cannot (or should not, but should not doesn't really matter).

 

[oldtime]

why don't you ask something easy? Like how to pick a woman to marry? Everyone knows she picked you long before you approached her. You don't decide on a "trading method, time frame and instrument" it chooses you.

I like to trade wheat, cattle and swiss francs preferably a few profitable times a day when it's convenient. But due to the fact that the market doesn't give a shit what I'm cut out for and what makes me happy I'm forced to trade all kinds of instruments and time frames and methods I don't like.

But it's nice to dream. Let me know what you come up with that you think will make you happy.

Courage, patience and flexibility are the three qualities a trader needs, and it doesn't sound like you have even one.

 

[ammo]

Quote from alphav6O3q:

just had a myers briggs test...apparently i am an INTP

like your 1st post,says "i dont have a clue"..if you have never fished,would you spend 5k on a boat or 400 on a fishing rod,you would probably think that was foolish or not even consider it..apply the same logic here,wait til you have some sense of the market compared to your abilities and then consider, a great 1st year trader may break even in his acct ,he would be in the 5% beacket ,and all the hours spent doing that were for free

 

[oldtime]

Quote from ammo:

like your 1st post,says "i dont have a clue"..if you have never fished,would you spend 5k on a boat or 400 on a fishing rod,you would probably think that was foolish or not even consider it..apply the same logic here,wait til you have some sense of the market compared to your abilities and then consider, a great 1st year trader may break even in his acct ,he would be in the 5% beacket ,and all the hours spent doing that were for free

check out my Ebay site. I have 400 thousand dollars worth of ultra lite Bluegill and Crappie rods for sale. I just had my personality done and apparently all I am good for is heavy duty catfishing.

 

[FrankSlaughtery]

Quote from NoDoji:



Since the risk on short positions are unlimited, NEVER TRADE ANYTHING TO THE SHORT SIDE, BECAUSE YOU COULD LOSE YOUR ASS!

The key to limiting risk is to a) trade only to the long side, and b) trade things that, should they drop to $0, only place 2% of your trading capital at risk with a given position size on.

isn't the opposite true at least for ES? what happens if you're long and a black swan (earthquake, terrorist attack, etc) causes the ES to drop 10% and completely blows thru your stop? if it drops 100 points you just lost 100 x 50 x number of cars against what is prob 5 or 10k in equity although some are more conservative? in this case you're in debt to your clearing firm.

i agree i wouldn't want to be caught short CL if Israel attacked iran or vice versa.

not trying to be critical b/c i haven't disagreed w/ anything you've said nodoji and think you're one of the better et'ers out there.

 

[NoDoji]

Quote from FrankSlaughtery:

not trying to be critical b/c i haven't disagreed w/ anything you've said nodoji and think you're one of the better et'ers out there.

Sorry, should've highlighted and underlined this part of my post:

Quote from NoDoji:

Alphav, since you good-naturedly (or maybe not) put up with my silliness

 

[RCG Trader]

Quote from alphav6O3q:

Hii

I am new to trading and am trying to establish a method of trading as well as the instrument of choice. Due to various restrictions, it seems to me that swing/position trading with equities would be a good method for me to follow.

However, after reading some books from a lot of knowledgeable people, it seems the trading method has to be well alligned with my psyche. However I dont know how to decide whether this method alligns with my pschological makeup.

Is there any resource (books, websites etc) which helped you decide what type of trading method and time frame to follow? I would love to know any suggestion on what books to read.

Or do people generally just experiment with multiple methods to find out what suits them?

Thanks

Start with FX.
Open an account with Oanda.
Fund it with 1 dollar. Yes, you heard me.
Get another charting platform. Amibroker is very good.
Learn about momentum.
Learn about divergence.
Build a signal generator.
After you have that, learn ACD.
If you are a volume trader, learn about volume bars, or learn about how volume always leads price.

After you have done your homework, you will have answered many of your questions. Make your money, and remember to pay it forward.

 

[oldtime]

Quote from RCG Trader:

Start with FX.
Open an account with Oanda.
Fund it with 1 dollar. Yes, you heard me.
Get another charting platform. Amibroker is very good.
Learn about momentum.
Learn about divergence.
Build a signal generator.
After you have that, learn ACD.
If you are a volume trader, learn about volume bars, or learn about how volume always leads price.

After you have done your homework, you will have answered many of your questions. Make your money, and remember to pay it forward.

no kidding, when I started FX wasn't available. Now it's the place where everybody should start. I know nothing of Oanda and have never traded with them, but I know you can open an experimental educational account with them far below the minimum you will need if you ever get serious.

Trading is trading is trading. If you adhere to the classic principles, you may over time just be spinning your wheels in forex, but see an opportunity to use the same method in corn or google which could be profitable.

Better someone should ask questions first and lose money second than the other way around, but you are correct, many of these questions will be much more knowledgeable if they first follow your advice.

After many years of trading I took some time off and when I returned the changes were at first overwhelming. After losing my ass for a while I hibernated in forex and found it is a very good place to start small and get your bearings. Plus, if you ever make a lot of money and get flat you're going to need it anyway to protect your profits.

otherwise, as they say, +1, very good advice.

 

[N54_Fan]

Quote from NoDoji:

Gub, this is easily avoided by quickly canceling the stop order if price gets too close to it.

In the event Alphav chooses a swing trading time frame, I recommend automating the stop cancellation process because the whole reason for swing trading is to avoid having to deal with all that messy trade management crap day in and day out.

The most popular trading methods are trend-following (TF) and reversion-to-mean (RTM). If you're willing to put the requisite 10,000 hours of screen time into reading the pros and cons of each of these methods as put forth by members of Elite Trader, you will learn that when utilizing a trend-following method, more than 90% of small traders lose!! They just lose!!! When utilizing a reversion-to-mean method, more than 90% of small traders lose!! They just lose!!!

The most popular trading time frames are intraday using a 5-min price footprint and interday using a daily price footprint. The easiest way to find out which method best suits your personality is to place a strong rubber band on your wrist, pull it at least 3 inches from your skin and release it. Make note of how that feels. Wait 5 minutes, then do the same thing 10 times in a row. Make note of how that feels. If the single-snap was more enjoyable, you'll likely find swing trading off a daily chart more to your liking; if the multi-snap session was more enjoyable, you'll likely find intraday trading off a 5-min chart to be a good fit.

There is much long-running debate about whether it's better to trade stocks or futures, with a good bit of sub-debating about whether it's better to trade several stocks/futures or just one or two stocks/futures.

None of this is really important. What's important is to limit risk. The best way to limit risk is to combine an instrument with a position size in such a way that your risk is limited to what you would lose in a worst-case scenario.

Since the risk on short positions are unlimited, NEVER TRADE ANYTHING TO THE SHORT SIDE, BECAUSE YOU COULD LOSE YOUR ASS!

The key to limiting risk is to a) trade only to the long side, and b) trade things that, should they drop to $0, only place 2% of your trading capital at risk with a given position size on.

Alphav, since you good-naturedly (or maybe not) put up with my silliness, here are some good resources:

http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm

http://www.hardrightedge.com/

The Master Swing Trader - Alan Farley

http://www.youtube.com/user/BrooksPriceAction

http://www.brookspriceaction.com/

Reading Price Charts Bar By Bar - Al Brooks

Although I think NoDoji is trying to give useful/constructive information I think I will have to disagree with much of what NoDoji has said.

Trading is a FULL CONTACT sport like Hockey. You MUST learn to skate backwards to be successful. Therefore, you MUST learn to short just as much as go long. The losses on shorts and longs are BOTH potentially catastrophic if poor risk management is involved. Sure an earning report or war could break out causing the stock price to rise rapidly or oil price to soar on your short position but thats part of the game. Don't put all your eggs in one basket. The same can be said for a long position,...BP and RIG owners know what I mean when the news of the recent oil spill hit. Also, I actually think it's easier to short and in many cases you make money faster shorting. Prices tend to take the stairs up and the elevator down....meaning they rise slowly and fall rapidly.

I would agree that 2% is what is mentioned as max risk per trade in most trading circles....HOWEVER, you are better off in most trading with 0.5-1% per trade. 2% in my opinion should only be used with systems that ROUTINELY see the highest win rates. Despite the fact that win rate does not effect profitability it does effect draw down as does amount you risk per trade. So in the interest of limiting draw down most people with <60% win rate should limit risk to 1% or less. If you do a Monte Carlo simulation on these numbers you will see what i mean. Most people would consider 30% or more draw down as something they are not willing to endure and the best way to limit this risk is either get a higher win rate on your system or risk less per trade.

As for what trading method or time frame,...I will give my congratulations to the one that started this thread!!!!!!!!!!!! You are already WAAAYY AHEAD OF THE GAME if you are already thinking in these terms. I say that because most do not even consider psychology as an issue in trading and you are thinking about your personality and what may "suit" you best. Again, you are ahead...this shows that you at least understand there is NO HOLY GRAIL and that the closest thing to it would be a system we design to suit our own needs and personality and beliefs.

I know many here do not like listening to Dr Van Tharpe but he has helped me tremendously in becoming profitable. He is a psychologist that helps many traders but he does not trade himself. I suggest you read "Supertrader" by him and take his personality quiz on his site. This will not answer all your questions but will steer you in the right direction better than any of us on here can.

Good Luck