Questions from a non-trader

... it's funny how people who post sensible and intelligent questions don't get replies like "...you'll get killed..." as seen in some threads.... :p

T/A Bo, trading is great, better than sex, and sex is better after a good trading day, you'll see.:D

One thing I noticed is a lot of traders spend a lot of time and efforts on trading strategies, and not enough on money management.
No matter how many strategies a trader want to learn/try, it's the money management that will give him the time to do it.


Cheers! :)
 
Originally posted by dojibear
One thing I noticed is a lot of traders spend a lot of time and efforts on trading strategies, and not enough on money management.
No matter how many strategies a trader want to learn/try, it's the money management that will give him the time to do it.
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Doji,

I am so glad that you mentioned this. The main reason I feel behind the curve on finding a methodology or strategy is because I am constantly getting sidetracked by my study of money management and discipline. I have made between 30 and 40 multi month "trades" in the past 4 years. Some have been good and some have been very bad. But the one thing that has kept me from loosing big money was a strict adherence to a predetermined stop. Granted there have been times when I have lost more due to a big gap down, but I always have been able to say "enough, I am wrong" and get out ASAP. I am curious now that you have raised this point as to how most traders deal with a large gap down at the open. Most recently PSFT comes to mind. I have always sold right at the open when things opened bleakly against me and past my mental stop or my trailing stop. I assume this is the best plan. Sure some may bounce back but I do not feel it is ever worth the risk. Comments?

Cohiba
 
... sorry, my earlier post was for Cohiba, and not T/A Bo... :(


Cohiba,
Being caught in a gap that goes against you is different for a daytrader than for a swing/position trader. Being a 'swinger', I think your stop loss is much farther than for a daytrader. If the stock gaps and your stop is blown up into pieces, than out you go, no question asked... however, go to a book store, look for Oliver Velez's book 'Tools and Tactics for the Master Day Trader' , he has a chapter on being caught in a bad gap.... I think he waits for the first 30 min. to see if the gap closed.

But when I said money management, I meant a 'business' plan, i.e. you limit yourself to a max of loss per period of time. e.g. for a daytrader : I have 50K to trade, and give myself 10 month to 'learn'. So, 50K / 10 mth = 5K per month / 4 = 1250$ per week that I could loose. This means that if by Tuesday I already lost 1200$, I stop trading for the rest of the week (the 50$ will go to the beers). This will allow me at least 10 months to learn to trade (and 10 months is not a lot).
For a swing trader, if is a bit different because of the holding period of different, but you got the idea. :)



Cheers!! :cool:
 
Cohiba:

In all truth the reason why you have received constructive criticism or advice while others have been the target of much antagonism is because you have a realistic plan for learning...Most people fail at trading not so much because they are terrible at trading(although some obviously do), but because they cannot support their lifestyle, cover their overhead, etc, etc...At the beginning, there are several months where you will probably end up pretty much scratch save for some commissions and costs, but a scratch month when compared to a steady income is almost akin to -3500, -5000, -7500, etc, etc...Few people who are accustomed to a nice steady paycheck are ready for that sudden loss of income which is why I think your 50k/50k is a very good plan...

As many others have said, start small, achieve consistency and then start gradually up the scale...Since you seem practical about this, do not even measure yourself in $$$ signs for the first few months, think only in terms of how much of a specific trade did you capture...Did you follow all the rules and did you maximize your participation while the odds were in your favor...Once you have your focus on making good trades and managing the good and the bad, you will develop a solid habit of thinking in terms of trades and not $$$ while the market is open...
 
Originally posted by metooxx


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.
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Why only a couple of weeks? Depending on the amount of trades taken, the results may simply not be statistically significant.

I find it interesting that new traders expect to come to the market, make a few trades and learn on the fly. The more experienced amongst us are well aware of the consequences of doing this (perhaps some of have experienced this for ourselves).

(Not referring to Cohiba here - he (?) seems to be taking quite a thorough approach.)

I would suggest to any 'newbie' reading this to accumulate as much knowledge about markets, methodologies, psychology etc as they can and formulate some idea of the requirements of successful trading - and then decide whether or not to pay that price.
If a person should decide that he will commit to becoming a trader my next piece of advice would be to simply watch the markets for the next three to six months, perhaps longer. If this seems like to long a time, I would question the person's commitment to being a trader.

Ed Seykota (perhaps one of _THE_ most quoted traders in history) said something like that if a person wants to learn to trade he should go down to the beach and move his hands in time with the waves. After some time he would have a feel for how the waves move. This sounds very simplistic but I believe it has enormous relevance to trading, ie having a feel for your particular market of choice.

The keener observers out there might notice that this is my first post and hence question by what authority I give advice. (A pattern I've noticed on these boards.) To those I would simply say that beginning my trading career didn't coincide with the day I joined ET.
 
Good post daniel_m

I tend to agree with you.

Myself,I have made a personal commitment to becoming a fulltime EDAT trader.I could go fulltime trading at the moment,but having learned from scratch,starting about 1.5 year ago,there is no way in the world I will start fulltime until I have mastered all the necessary skills.After months of study and part time participation in the markets I finally have a good understanding of how the professionals run their trading businesses in relation to the mechanics and emotions involved.

Like you said,a lot of newcomers tend to believe that there is some easy money to be made in the markets.Far from it,as you provably well know.As the saying goes - no gain without the pain.

I would like to see some more serious discussion on the correct approach to trading as a business,instead of the right systems and strategies to use.As you well know,systems and strategies are only part of the overall plan,and I believe that this is the reason that so many people fail to make it to the top 5%.

Does anybody ever post links to an "actual trading business" !
Now that is something that I would gladly part with my hard earned cash for - instead of handing over £000's for some course or service that will show me how to read Level 2 correctly,etc,etc
,etc.I believe that no matter what course or service that one subscribes to,the real secret is to understanding yourself,your abilities and then setting realistic goals to achieve your desired results.Really - there is no other way - I would consider any other approach to trading as non professional,and as you well know,if you don't think and act like the professionals then your success will be very limited.However,we are all aware of the tremendous benefits that await us - self independence,self fulfillment,and really a better life all round.Peolpe tend to be too focused on the monetary gains - which of course is a must - but I think that if that is all that a person has to focus on - look out.

Good trading all.

Regards,

Irishman.

:)
 
Originally posted by daniel_m


Why only a couple of weeks? Depending on the amount of trades taken, the results may simply not be statistically significant.
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I agree, my underlying assumption @ two weeks positive was a statistically significant number of trades.
 
I apologize for not being more active in this thread that I started to gain knowledge. I was called out of town on business with little warning and just now am having a chance to look at your posts.

I am finding all of your comments quite encouraging. I still feel like I have a long journey ahead of me but it is good to know that experienced traders feel I am on the right track. I hope other aspiring traders have gotten as much out of your replies as I have. I feel fortunate to have learned the importance of money management early in my studies. Discipline is another key; that is why I have been playing small lots on a longer term basis. It is so easy to convince yourself you are disciplined with your stops and money management when you are paper trading. I find that even a few thousand dollars on the line puts the "book smart illusion" of discipline that i had to the test. It is amazing how easy it is for someone new to the markets to toss all of their rules and stops out the window when real money is at stake. I just now feel like I am able to control my emotions on these small trades and focus on the position itself. I am sure I will have more question over the coming weeks as I digest everyones comments and recommendations. Have a safe weekend and good trading to all you!

Cohiba
 
First off, good luck in your venture into trading.

Since we come from the various stock exchange trading floors (where traders have been profitable for decades), we have quite a different approach to trading (as compared with the retail traders).

Basic education is essential, knowing that this is all simply a "game" played by "liars, cheaters, and thieves" - that there is no book, chart, system, or anything else that will make you any money. We try to teach our traders from the "get-go" that they need to understand the game, the players, and all the rest from the inside.

I will tell you in all certainty that no one can teach you to trade...we at Bright Trading have to teach people "about" trading, and "how" it is done by professionals....this can either help you get good, or scare you away from trading altogether (either way, I think you may be helped).

You really need to be frightully honest with yourself (it seems that you are pretty pragmatic already, and don't have out of reach expectations, which is a definite plus for you).

Feel free to call with any questions about your pursuits (don't fear a recruiting speech, since you say you are not ready to "go pro" yet) :-)
 
Originally posted by Don Bright




Basic education is essential, knowing that this is all simply a "game" played by "liars, cheaters, and thieves" - that there is no book, chart, system, or anything else that will make you any money. We try to teach our traders from the "get-go" that they need to understand the game, the players, and all the rest from the inside.

I will tell you in all certainty that no one can teach you to trade...
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i'll have to say that that is one of the absolutely truest things i remember having read on boards in a long long time...

cheers and have a good weekend
 
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