Questions a new trader should ask

[ziyan]

Hi everyone,
Had a string of fantastic and helpful responses from my last thread. My sincere thanks & appreciation go out to the contributors.
Here's my situation: I started last week at a prop firm on a shoestring with no prior experience at all except book knowledge of technical analysis. Had my ass handed to me from Wednesday to Friday while I bought the tops & sold the bottoms. I am constantly over-trading and slowly erroding my account. This coming week, I plan to trade VERY conservatively, probably around 20-50 shares a pop to limit my losses, and avoid panicked over-trading.
As a new trader with literally no experience daytrading, I hear a lot about "finding an edge." How should I begin to find this edge? What questions should I be asking to be a better trader?
Thank you all very much for your help.

 

[intradaybill]

Let's be specific people. What are you trading? What is your capitalization? What are you objectives in terms of profits? These will help people answer your question about finding an edge.

 

[1a2b3cppp]

"edge" is the most overused term here on ET.

It's like, anyone asks a question, and the reply is some "guru" talking about an "edge."

All an edge means is the thing that makes you profitable. Here are some examples of edges:

- having a holy grail indicator or an indicator that has a winning expectancy (hint: none of the commercially available indicators, or indicators you will read about online, fit this criteria). In this case, your indicator is your edge.

- having a huge account size so that you can keep averaging down into your position no matter how far it goes against you and eventually exit for a profit. In this case, your account size is your edge

How did you get hired at a prop firm with no experience?

If you're over trading, one way to limit this is by scaling back on your timeline. For example, if you're trading a 5 minute chart and trading 20 times a day, and you deem that to be too much, try trading the same strategy on a 30 minute chart instead. Take the same signals, but you will get fewer of them. Note that this kind of scaling out is only applicable to certain types of trading and may not work for the way you trade.

 

[clearinghouse]

Quote from ziyan:

Hi everyone,
Had a string of fantastic and helpful responses from my last thread. My sincere thanks & appreciation go out to the contributors.
Here's my situation: I started last week at a prop firm on a shoestring with no prior experience at all except book knowledge of technical analysis. Had my ass handed to me from Wednesday to Friday while I bought the tops & sold the bottoms. I am constantly over-trading and slowly erroding my account. This coming week, I plan to trade VERY conservatively, probably around 20-50 shares a pop to limit my losses, and avoid panicked over-trading.
As a new trader with literally no experience daytrading, I hear a lot about "finding an edge." How should I begin to find this edge? What questions should I be asking to be a better trader?
Thank you all very much for your help.

It helps to be paranoid in that you should ask yourself some basic questions, like "Why is the person on the other side of the trade trading with me and is he wrong with respect to my criteria for what I believe to be an efficient price?" I kind of find that to be the fundamental question of all of my trading.

Generally speaking, you should see yourself as the fish at the poker table. Ask yourself why the sharks even want to deal with you at the price you want to transact at.

 

[intradaybill]

Quote from 1a2b3cppp:

having a huge account size so that you can keep averaging down into your position no matter how far it goes against you and eventually exit for a profit. In this case, your account size is your edge

+1

Major edge.

 

[Visaria]

Quote from 1a2b3cppp:


- having a huge account size so that you can keep averaging down into your position no matter how far it goes against you and eventually exit for a profit. In this case, your account size is your edge

May well be the worst advice ever.

How about exiting at a small loss and reversing?

 

[lindq]

Quote from Visaria:


How about exiting at a small loss and reversing?

Or...how about exiting at a small loss and entering again on yet further weakness?

Or...how about entering half now, and half on further weakness?

Or...how about entering half now, and half on a show of strength?

Golly Aunt Bea, there are so many ways to do this, how am I ever to decide? :eek:

 

[intradaybill]

Quote from lindq:

Or...how about exiting at a small loss and entering again on yet further weakness?

Golly, there are so many ways to do this. :eek:

The difference between 1a2b3cppp and visaria is that the former knows what he is talking about. This is why I have the other one on ignore.

Let us suppose you have a lot of stock and I go long. You sell me the shares and then you want to kick me out and make the profit. You sell some more to drive the price down.

Now, if I take the loss and reverse, you start buying again to kick me out again, with my money, ad infinitum.

Instead, I let you sell, sell, sell and I buy, buy buy, until you are out of shares. Then I buy more, buy more, buy more, until I find other suckers to unload.

This is the edge. But again, what do you know people? What do you know...

 

[thunderbolttr]

A good starting place to find an edge in the current market conditions the last couple of years is to take a traditional technical analysis strategy from a trading book, wait a little while for traders get trapped, and then go the opposite direction.

 

[1a2b3cppp]

Quote from Visaria:

May well be the worst advice ever.

It wasn't advice, it was a possible edge.

How about exiting at a small loss and reversing?

Assuming you can predict direction, that is fine.

Otherwise, you'll end up chasing price, buying tops and selling bottoms.

In other words, say you buy and then price goes down and you are thinking "time to take a small loss and reverse." What makes you think price will continue to go in the new direction after you reverse?