Questions a new trader should ask

Quote from ziyan:

I hear a lot about "finding an edge." How should I begin to find this edge?
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If you have a knive in a cabinet, I bet it has an edge.

A man may cut himself even if he found an edge.

Is having an edge enough?
 
Quote from Visaria:

May well be the worst advice ever.

How about exiting at a small loss and reversing?
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Bad advice , yes. But I wouldn't necessarily reverse.

Trading is like riding a bicycle, easy once you know how, but it may be more difficult to learn then it is to learn to ride a bicycle.

Someone said his prop shop was throwing him to the wolves. That, sadly, might be quite accurate.
 
Quote from piezoe:

Bad advice , yes. But I wouldn't necessarily reverse.

Trading is like riding a bicycle, easy once you know how, but it may be more difficult to learn then it is to learn to ride a bicycle.

Someone said his prop shop was throwing him to the wolves. That, sadly, might be quite accurate.
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I was just presenting the "exit and reverse " as an option, not necessarily "the thing to do".
 
Exit and reverse only works if your fundamental reasons for choosing a direction have changed.

I would bet that it usually results in trend chasing, however, such as in this attached pic:

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Quote from 1a2b3cppp:

Cuz they don't do it right.

Of course, being able to correctly predict direction means you don't have to average down; you can go all in in the correct direction from the beginning, which is going to result in significantly higher profits which will come much quicker, too, because you don't have to wait for the market to reverse and go in your direction before your position becomes profitable.

Clearly, predicting direction is the superior strategy... I've just never met anyone who could do it.
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The main problem with this "strategy" is you always end up with much bigger positions that are against you. The ones that work right away (which are usually the best trades) end up being tiny compared to the ones that are averaged down and losers.

Then the one trade that never comes back does huge damage to the account.

Like I said...this strategy is a recipe for disaster. I have seen many guys blow out doing it this way.

All it takes is one averaged down trade to keep going against you and you're finished.
 
Thanks to everyone for the replies. The discussions on this thread has given me a lot to think about, especially the importance of being flexible.
To Dustin and piezoe: I sort of wish that the firm could do more to formally train me and show me the ropes, but I thought this trial by fire deal is how a lot of traders start? Is this assumption wrong? If so, I'd be grateful for a nudge in the right direction.
1a2b3cppp: It's hilarious (and sad) how closely that graphic matches my initial trading pattern. I'm assuming one way to avoid that is to do my homework the night before and keeping my head about me & waiting for setups on trading day. Is there anything you'd like to add or explain? A walkthrough on pre-trade research and application methodology would be thoroughly helpful.
Again, I'm sincerely appreciative to all the contributors and the sage advice given so far on this thread.
Thanks for all your support!
 
Quote from EPrado:

The main problem with this "strategy" is you always end up with much bigger positions that are against you. The ones that work right away (which are usually the best trades) end up being tiny compared to the ones that are averaged down and losers.

Then the one trade that never comes back does huge damage to the account.

Like I said...this strategy is a recipe for disaster. I have seen many guys blow out doing it this way.

All it takes is one averaged down trade to keep going against you and you're finished.
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With proper entries and position sizing none of these are issues.

Sometimes you might have to wait a while (weeks, months) for the trade to come back up to your target profit, but you should never be in a situation where you run the risk of blowing out. And if you're hedging, then you're still making money on your hedges while you wait for your drawn down position to come back up.

If you do this at the right time (read: you get lucky) you can hold the huge postition that you have from averaging down for a long ride. A portion of my account is from averaging down into weighted ETFs during the 2008 "recession". I held the resulting position, thousands of shares, until mid 2010/early 2011.

Right now, as I mention in my thread in the Journal forum, I am holding 1,800 shares of SPY with an average cost of $132.70. I'm drawn down -$9,000 right now on that position and I have another order to be filled for 1,400 more shares at $124.10. I'm in no danger at all of blowing my account. I'm up a little over $4,000 on a hedge.

My entire strategy is based around the fact that I cannot predict direction. I know price will go down, and I know price will go up, and I know that these don't happen in straight lines, so when price eventually goes in my direction I will make money. I manage risk correctly and I cannot blow out.

Of course, if I could predict direction, I'd be making much, much more money. Oh well.
 
this advice is completly wrong

- 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

what if u did that on the old GM stock, TWA, WCOM, SUNW, ENRN the list goes and goes, sure way to blow up the account. The basic math behind the premise does not add up, any thrid grader can tell u that, and further more anyone who tries that didn't make the money trading
 
Quote from 1765hillwood:

this advice is completly wrong

- 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

what if u did that on the old GM stock, TWA, WCOM, SUNW, ENRN the list goes and goes, sure way to blow up the account. The basic math behind the premise does not add up, any thrid grader can tell u that, and further more anyone who tries that didn't make the money trading
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Choose you instrument carefully.

Still though, a large account size is an edge.
 
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