Quote from Robert Weinstein:
blox87,
Some of this has been said (either here or many other places in ET) and some you may know so you may be able to skip a few but here is a game plan that I would tell a friend of mine.
1. Read the following books
a. Trading in the zone - Douglas
b. Art of War - Sun Tsu
c. New Market Timing Techniques: Innovative Studies in Market Rhythm & Price Exhaustion by Demark
d. the books by Ari Kiev
e. Audio book, the new psycho cybernetics by Kennedy
f. Turtle Trading by Covel
That lays the foundation and you should find a method that fits your personality. You run a business so you have the ability to trade or at least the odds are vastly more in your favor than the average person trying to make a go of it. Not unlike the average person who is trying any business most do not make it. Once you have proven yourself in one the odds are much better you can do it again in another.
I would say that futures do hold a big advantage to stocks if you day/swing trading. They are taxed at 60/40 in terms of long/short term capital gains. I think that is were the advantage for many ends though. I trade both futures and stocks (my best trade this month was the bond futs) but I think stocks will offer many more chances to find your setups simply due to the number of stocks out there.
If futures is what you want to do then start there. There is no rule that says you cant change later.
You need an edge and you have to find one that you can backtest. don't automate your backtesting. manually backtest the trades one by one. You should plan on looking for at least 100 trades that fit what you want (not just a 100 in total but 100 of what you want in a setup). After finding 100 trades and recording the results and feeling like you found an edge (not as hard as it seems as the markets unlike what so many college teachers that can't beat the S&P think and say are not that efficient and fear and greed still rule the day)
Write down your rules of entry and exit. These rules include everything from closing it out at a profit to closing out at a loss and why. You ONLY trade by your set of rules and your rules include everything. If your power goes out in your house you have a rule to deal with it. If the price moves against you, moves your way, if the item is halted, if a 747 loses an engine and it lands on your dog house outside you have a rule for it. (basically this is done with a rule that says if you have to leave the computer you do X). You can have no surprises. None, none, none. if the item gets halted and opens up your way or against you what do you do??? no thinking while in the trade because you did the thinking before you entered the trade.
Your next step after finding your setup (as in ONE setup) is to practice it SIM trading. If you can not sim trade because "its too boring" or "doesn't feel real", "can't hold my attention" then your not here to make money your here for the rush of the trade and your in a world of trouble. Pilots use Sims, Astronauts use sims, Submarine sailors use use (I know I was one) and the reason is clear.
After you sim traded and your making money and doing the same trade over and over and over until your able to do it by feeling the heat differences in red and green bars on the LCD monitor your ready to move to real money. (hint, it will take a lot longer than you think and you will feel ready long before you should trade). you need to be able to make 20 trades without violating any of your rules and not have anything come up that you didn't have a rule for. If you do then start back at one.
Now you have your confidence. No problem putting on that first trade and keep it small. one lot / contract until you can make 10 trades without a mistake (not a loss as a loss is not a mistake if you followed your rules but without a mistake in your rules). After that go another 10 with one size larger and rinse and repeat.
By now you know this one setup and trade like you know your own face. Also if you followed this simple path your also making money and should give a little to some Vet organization as it makes a great tax deduction.
If your not happy with your one setup because you want to make more money (to give to the vets) then make sure the next setup is similar in methods as your first. What you don't want to do is start blending trades in the middle of the action and totally mess it up. If you can automate it so your emotions stay out of it all the more better.
This brings us to the next important step. Who to use for a broker. I would suggest Tradestation if your doing futures as you can automate the process seamlessly with them and or interactive brokers with Ninja trader for the automation part. I have no doubts that there are better brokers out there but I can only say I what I use and they are as good as any to start out with. All in all the best to start out with is probably Tradestation. good support and the prices are close to any you will find and cheaper than most.
Once you get rolling join a chat room with traders and listen to what they are trading, why and the results. this will increase your learning speed greatly. I am in a chat and you can join us when you reach that point or there are many others that are as good.
Like any business, plan on giving it at least a year and if you think of it like opening a casino (not a player but an operator) I think you will be miles ahead of the game.
I probably forgot a few things but this will give you some to think about.
Best of luck
Robert
