Is this a decent 'self study' plan?

J

JamesBlonde

Hi there,

From scanning this forum I have had a rethink in terms of my path to finally trading.

I have drawn up a list of books I must read and things I must do before I spend a penny in the markets.

I don't know why, but options is what I have decided to focus on. FX on the other hand, seems easily accessible, but seems it would require a lot of my time to monitor - and I intend to continue full-time work

So, my study plan:

1. Study Khan Academy videos on options (done)
2. Read The Rookie's Guide to Options, by Mark Wolfinger (half-way through)
3. Purchase and study of either McMillan or Natenberg (I hear these two recommended the most, will decide later)
4. Read 'The Intelligent Investor' - a classic they say so I decided to read it (only read about 100 pages so far)
5. Identify options/fx brokers with excellent platform and competitive commissions/spreads (if FX, possibly spread bet since it is tax free in UK)

Now this is where I am stuck, and need advice/recommendations ...stock picking, fundamental analysis, and technical analysis. If I pursue Options, I want to know when the get into a trade, and be confident with I have the tools to pick the right stocks. The technical should lend itself to fx if I ever decide to dabble in this market.

Does this seem like a reasonable study plan? I welcome recommendations.


Many thanks

James
 
You should have a reason to choose options. You should have a view that it's a market that you will succeed in.

Why not commodity futures or trading baseball cards?
 
James, reading is a great idea. You are on the right track. Read those, and keep on reading, in the broad-based way that you are doing.

I'm an options trader, so my bias is toward week trading or month trading, not day trading. I think the Rookie's Guide is the very best intro to options--I wish it had been around when I started. McMillan is a great second book to read and will be your bible. His other book, McMillan on Options, is also very useful.

There are plenty of good ideas on CXO Advisory. It costs to join, but it's worth it. (I have nothing to do with them--I don't know them, and have no financial interest in them.)

From reading, and from trading in a small way, you'll have to determine what is most comfortable for you. You'll gravitate toward something: day trading, swing trading, longer term (most options trading is in days to months), directional versus volatility trading, trends versus contrarian, etc. Find a couple of systems that you believe in (through some kind of back testing or extensive paper trading, not because of someone else's claims) and that are not too correlated with one another. You have to backtest everything yourself. It's unbelievable how many false claims are out there. This paragraph sounds like it should take a couple of months, but may require a few or even several years to find a few systems that both have an edge and suit your personality. It is not always as easy as it sounds.

If you think you may be interested in trend trading, I recommend the Way of the Turtle by Faith--not to find a system, but to understand the personality required for this type of trading.

Van Tharp is a good read. All trading requires a system that covers entries, exits, stops (if you are going to use them), money management, and an understanding that changing any one of these elements affects the others.

Start by trading small. You'll get beat up a bit at first--that's ok. When your trading is not working, do not add indicators or make it more complicated. Instead, try to figure out how to simplify it. That is usually what works best.

IB is the cheapest for most techniques.

Finally, do not take the advice on this forum too seriously. ET is filled with people who offer nothing but discouragement and sniping. There are exceptions, of course. What I mean is, it is important not to let these people tell you that "it can't be done." It can be done, but it will take some effort, which you seem willing to make.
 
drcha said:
Finally, do not take the advice on this forum too seriously. ET is filled with people who offer nothing but discouragement and sniping. There are exceptions, of course. What I mean is, it is important not to let these people tell you that "it can't be done." It can be done, but it will take some effort, which you seem willing to make.
More...
Sad, but true.

I agree with most drcha posted,

I may add, be cautious of those that offer assistance but themselves are not profitable. aka "unqualified". "The blind leading the blind".

The problem in most forums is mis-information.

I suggest you continue your self study, avoid any "courses", at best you will learn terminology, pattern recognition, etc... This can all be found in books and www.investopedia.com [highly recommend studying this site for basic information/familiarity]

Before you run, you must learn to walk. Options are a derivative, prior to trading options you should learn how to trade the underlying first. i.e. Stocks & Index fund/etf's... Futures are a leveraged version of the these. Futures trading can wait as well.

Most all books, courses and "guru's" focus on entries, indicators, oscillators, patterns and generic strategies. (Indicators, MA cross over systems etc..) Good to be familiar with, not going to make you profitable.

What they all neglect to discuss is Risk and Money Management. Once you have a basic understanding, seek out knowledge in this area.

Disclaimer: I am pro TA, Price & Volume, but not of indicators, MA cross etc... [mostly swing trading / long term position trading - occasionally trade volatility events - time permitting]

When you believe you are ready to trade I suggest:

1, Swing trading before attempting Day Trading. (if Day trading at all), much easier for most to make money trading longer time frames. - But that is for you to decide for yourself

2, Sim > small size > increase size SLOWLY

3, Trading with trend is infinitely safer than countertrend, Countertrend trading should be reserved only for the experienced.

Regarding fundamentals vs. technical - I prefer a combination of the two. TA for entry, fundamental for long term bias.

Rule of thumb: Longer the time frame more weight given to fundamentals. shorter the time frame, [day trading/scalping] more weight given to TA. Fundamentals are not that important intra-day. Intra-day volatility is more News related, FOMC, unemployment, earnings, geo-political events, etc....

Earnings Calendar as an example of volatility events. Usually 08:30 EST pre market is a common announcement time, 14:00 FOMC statement,
http://www.forexfactory.com/calendar.php

I posted a reading list under a previous nick for reference.
http://www.elitetrader.com/et/index.php?posts/3553213/

As I mentioned, everyone has a different opinion. Determine what fits YOUR psychology. Be cautious from whom you take advice. Mine included!

Avoid snake oil and self professed internet guru's and you should be OK.
[Ask yourself, if they are profitable trading why do they need my $99/month, $499/course etc...]

There are hundreds of ways to make money in the market, but a thousand ways to lose it all as well... Don't rush, the markets will always be there. Avoid the online snake oil, internet guru's and you may have a chance.
 
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From No Bias, most excellent advice:

1, Swing trading before attempting Day Trading. (if Day trading at all), much easier for most to make money trading longer time frames. - But that is for you to decide for yourself

2, Sim > small size > increase size SLOWLY
 
If you want to trade options, do some research into money managers who trade options as their primary means of generating returns for their clients. One free source of such information is Autumngold.com. There you will be able to see performance results and typically a brief description of the trading strategy employed.

Remember, this is a marathon, not a sprint, so don't be in a hurry to trade.
 
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