Questions from a non-trader

C

Cohiba

Hello all.

First let me begin by saying I am NOT a trader. I am however very interested in the markets and would some day like to pursue a career as a swing/ position trader. I am currently trying to educate myself and find out if I really am cut out for this profession. I feel fortunate to have stumbled across this site. It has provided me with a wealth of information over the past month or so. That said on to my questions.

1st) I am curious as to what indexes and/ or indicators you look at nightly. I currently am looking at the daily, weekly and 30 minute candle charts for the DOW, NASDAQ, S&P 500, S&P Futures and the Volatility Index. Are there any other that I should be looking at as well (sectors, etc?). I have yet to really decide on a trading methodology. I have recently been looking for cup and handle breakouts and stocks that have had a strong trend that have pulled back to their 20 day MA. I imagine the type of method you trade would also dictate what you would look at nightly. Am I correct in this assumption?

2nd) I realize this isn't a swing trading question but still I am curious. I have heard several prop traders talk about "haircuts" and "bullets". I have looked all over this site for an explanation of what this is. Could someone explain these to me?

3rd) What is a realistic return to expect while swing trading. I realize that becoming profitable isn't something that occurs overnight and that this is a loaded question with probably as many answers as traders. What I am looking for is feedback from traders that have gotten past the learning curve and hit their stride as traders. I am young now and could easily live on 30-40k a year. Would this be possible with a 50k account?

4th) I have a basic understanding of the shorting process. I am curious to learn more about the inner workings of borrowing stocks (ie who do I borrow them from? the clearing house? an individual that has given permission to loan the stock?). Could you recommend a website or book that gives a detailed explanation of this?

Thank you in advance for answering these. I realize they are probably very basic for a lot of you, but I would really appreciate any feedback you could give.

Cohiba
 
Cochiba,
I came from swing-trading enviroment at my former B/D job, I learned the most from tradingmarkets.com and hardrightedge.com....both really good sites. Probbly the best thing to do is check out Alan Farley's books, as well as Jeff Cooper's and Mark Boucher. Another site that comes to mind is TeachMeToTrade.com, they have an excellent swingtrading newsletter, and I think you can do a trial with them, I know I did....good luck, hope this helped.
 
"I am young now and could easily live on 30-40k a year. Would this be possible with a 50k account? "

very unlikely that a trader starting out could do this.imho you would be lucky to make any money in first year unless you get education at bright or someplace similar.
 
Originally posted by vhehn

very unlikely that a trader starting out could do this.imho you would be lucky to make any money in first year unless you get education at bright or someplace similar.
More...

Vhen,

I am afraid I didn't make myself clear here. I am not planning on living off my trading for the first year and a half. I have saved up 100k of discretionary income. I plan on using 50k of this for living expenses and 50k for trading capital. With this being the case, do you still feel I should begin with more? It would not be an issue for me to work another year and save up another 50k to increase my trading stake to 100k. If I do decide to become a trader the last thing I want to do is fail due to undercapitalization. I suppose I should have asked what would be a good amount to begin trading with under these circumstances. Obviously my goal is to make more then 30 to 40K in the future. This is just the amount I can live on currently.

360,

Thank you for the suggestions. I am very familiar with Farley's book and the hardrightedge.com site. I look forward to checking out your other suggestions.
 
Cohiba, look at the top right corner (Search)...type in any haircut, bullet, conversion, etc. you are interested in. And voila!
 
Originally posted by Cohiba

I am not planning on living off my trading for the first year and a half. I have saved up 100k of discretionary income. I plan on using 50k of this for living expenses and 50k for trading capital.
More...

You should be fine, keep your bets small, 100 shares, learn what you can, and don't pick up your size until your net positive for a couple of weeks, then move up slowly.
 
>I am curious as to what indexes and/ or indicators you look at nightly.
I follow the S&P 500 and NASDAQ 100 indexes. I have a scanning workspace set up with a monthly, weekly, daily, and 60 minute chart all on one screen. Then, I manually flip one by one through the component of the S&P 500, Naz 100, Dow 30, and any other stocks I have added to my “universe”. (About 800-1,000 stocks) This scan takes about 1-2 hours, and yields about 25 stocks worth taking a second look at. When I scan, I’m going flip flip flip... I know what patterns I am looking for, so the process is very quick, I spend about 5-7 seconds on each chart. (Imagine going through a deck of cards looking for the 7 of spades.) Then I take this first cut and begin to look much more carefully. From the 25 I narrow it down to about 10, and these are the stocks I will be watching to trade the next day.
>I have yet to really decide on a trading methodology.
This is key! Spend a lot of time experimenting, look at all different kinds of patterns and styles. Find the style that suits your personality. There is often a balance, high accuracy rate and small risk to reward, or lower accuracy and larger rick to reward. Focus on finding the style that fits you and sticking to your plan will be so much easier.

> What is a realistic return to expect while swing trading.
10-20% a month.

> I have a basic understanding of the shorting process. Could you recommend a website or book that gives a detailed explanation of this?
Good basic explanation here.....
http://invest-faq.com/articles/trade-short.html

Good Luck and Good Trading!
-Bo Yoder
bo@realitytrader.com
 
> What is a realistic return to expect while swing trading.

If you are in the top 10% of traders

10-20% a month.

If you are in the other 90%

less than 5% month.
 
Wow! There are some great responses in here. Thank you so much for taking the time to answer my questions. This is excactly the sort of feedback that I was looking for.

Good trading to all of you!

Cohiba
 
Hi Cohiba,

I have been learning about ( and participating in ) online trading for approx. 1.5 years , concentrating on EDAT trading over the last 6 months.

I will not consider going fulltime until I have mastered the key areas as follows:

1 - Decision Support Tools.
2 - Entry / Exit Tools.

Refining both of these will depend on the type of trading style that you personally feel most comfortable with and have a passion for.

Risk Management Techniques and achieving a Positive Expectancy System , I believe,can only be mastered by active participation.According to several resources that I have studied - in order to achieve a a Positive Expectancy System for Daytrading(scalping and momentum) it is necessary to execute in the region of 200+ trades per month.Hence,when starting out it is very important to get low commission trades ( 1 cent per share ) and start with 100 share lots,incrementing in steps to 500 - to 1000 max, once the skills have been mastered.By the time you get to scalping with 1000 lot shares you will have a very good understanding of what active Daytrading really involves.Do not get caught up in the hype and jump into Active Daytrading without learning the basics.After all,you can see from some of the posts on this site what you are up against.

I have been using Datek Direct ( with Medved Quotetracker-free) but their fee of $9.99 is too expensive for the learning process.I have opened an account with Interactive Brokers ( IB ) to avail of their 1 cent commission rate.You will find some threads re: IB on this site.

In relation to educational material I have found the following to be very good :

1) David S. Nassar's Home Study Course for $200.
This is a must for the price.
Also has 2 books available -
Rules of the Trade being excellent.

http://www.marketwise.com

2) Active Trader Mag - very good educational material covering a broad range of topics.Some free downloads at:

http://www.activetradermag.com/backissues.htm

See the July 00 issue download for shorting info.

3) Van K Tharp & Brian June's book:

Financial Freedom through Electronic Day Trading

Very good on Business/Trading Model and Psychological issues.

4) Ken Calhoun of Daytrading University.

http://www.daytradinguniversity.com

I personally think that Ken Calhoun is a real professional.He holds free live seminars - all with very relevant topics.No BS.
He runs the whole setup himself and is dedicated to teaching willing students - for very reasonable fees I might add.
Some good free info on his site( e- book,etc ).He also offers an online multimedia course - full breakdown given- with some of the lessons posted for free.Advanced Videos for Scalping in the 200 to 1000 share lot,and also Winning Chart Patterns video.I have just ordered these 2 videos for a special price of $197 - well worth it.

By summing up I think that any courses offered for thousands of dollars are a rip off.From my list above it is quite clear that there is no shortage of genuine information and training at very reasonable prices.Gaining knowledge is one thing - learning how to apply that knowledge effectively is another.The only person who can make it happen is yourself.Passion,dedication and hard work will get you to where you want to be.Do not be led astray or influenced too much by others( including myself ) - understanding yourself will be the real key to success.It took me a long time to understand this and finally I am beginning to get an overall picture of exactly what goes on in the professional world of EDAT trading.The rewards can be high - but the journey will not be easy.Be prepared to suffer losses -but stick to strict money management rules and discipline, and you will succeed.Preservation of capital is vital - as you can't trade without it.So never enter a trade until all of the signs are right - charts,leading indicators,Level II and Time & Sales - and even then,be prepared to get out as soon as your pre-defined risk level has been hit.Look for momentum and go with the trend.Once you are making consistent positive returns ,then,and only then look at advanced trading tactics like scalping 1000 + share lots.
Trading involves some speculation,but there is no need to gamble.
Learning to read the imbalance in supply and demand and then reacting swiftly "Before" the price changes is the key to making successful short term trades.Most people(Dumb Money) wait to see a change in price before they react - too late - the professionals(Smart Money) are either selling into strength or buying up weakness.This sounds simple,but believe me it is very difficult and can only be learned through active participation and strict guidelines as mentioned above.I would expect it to take in the region of 2-3 years after starting fulltime EDAT trading to get to this level.The only way I would believe any different is to see a record of trading journals with all details for monthly trades and average returns.I have no doubt that there are a few out there that succeed at a faster pace - but I would reckon that they are very few.Be patient - the stock market is not going anywhere.It will still be there when we are gone.Learn - Trade - Learn -Trade.
Notice that "Learn" comes first.

Ok,I think I have said enough.I would be obliged if some of our Professional Traders could post in relation to my brief description of what EDAT trading involves.A lot of us want to really make it to the top and would greatly appreciate genuine helpful information.

Good Trading All

Regards,

Irishman
:)
 
You must log in or register to reply here.
Back
Top