I'm reposting some of my previous ET quotes here. That way when I get questions from Noobs, I can direct them to one forum for my previous answers. I'll add some excerpts from a few PM too.
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So you want to be a Stock Trader?
- Thread starter 2manywhiners
- Start date
WizeTrade http://www.elitetrader.com/vb/showthread.php?s=&postid=901378#post901378
Quote from 2manywhiners:
Hello DoxazoAdonai. Please send me $3,995. In return I will give you a software program that helps you make a decision on whether or not to buy a stock, just follow the signs. Red light to sell or avoid buying a stock, Green light to buy a stock or hold.
How does it know whether to buy or sell?
Glad you asked, it uses moving averages and current/previous prices, as well as open & closing prices, all weighted over volume.
Uh huh... Well isn't all that information free on at least a dozen different websites, or even on free software?
Yes, yes it is. So send us $3,995 right now and don't forget the monthly data feed charges as well. Those are only about $500 - yes, five hundred dollars a year. Do you want to search for stocks that fit your trading criteria? Well sorry, you'll have to buy another software program from us to do just that - WIZEFINDER. Oh yeah!
Doesn't Yahoo! offer a free stock screener [that actually has more search options than your program] to help find securities that meet your criteria?
Yes, yes it does. So if you act now you'll receive your copy of WizeTrade and a years worth of fees for only FOUR THOUSAND DOLLARS [USD].
BUT WAIT, there's more! Act within the next thirty seconds and we'll discount our software to $1,495. That's a savings of over TWO THOUSAND DOLLARS! [USD]. And you'll also receive a FREE! collection of kitchen knives hand made by hardworking oompaloompas - oops, I mean elves - at the north pole, just in time for Christmas [free items not guaranteed to arrive before Christmas 2007] And when you do finally get your kitchen knives, you'll want to use them to cut your wrist open to the point your hand is nearly detached from your arm. BECAUSE YOU JUST WASTED OVER TWO THOUSAND DOLLARS [USD] ON AN INFOMERCIAL PIECE OF CRAP SOFTWARE THAT DOESN'T WORK AT ALL!!!
Please people, do a little research before you throw your life savings away. I know all of that hard-earned money is burning a hole in your bank account, so buy a new car or put a down payment on a vacation home, just don't give it to me. But, if you insist I'll gladly take it. Unfortunately for you, so will everyone else on Wall Street.
If it seems too good to be true (or too easy, in the case of WizeTrade) then it is. Run like hell while you still have shoes on your feet, and a shirt on your back!
Poker and the Beginning Trader http://www.elitetrader.com/vb/showthread.php?s=&postid=907533#post907533
Quote from 2manywhiners:
bigger fish - game/theory forum doesn't sound like a bad idea. This post probably should have been broken into at least a couple dozen different posts.
Now, I've been playing poker for quite a while (sometime mid 90's, I started with a weekly 7stud game 'til I saw Rounders, now it's strictly Texas or Omaha, if I can find an Omaha game) There are a lot of different views here about what poker is and isn't and how it relates to trading, so here's my 2 cents.
Poker IS gambling, there is a tremendous amount of luck involved. However, Poker IS also a game of skill. Meaning that skilled players WILL win over the long run. I have won more (many more) times than I have lost, however losing still happens. Mostly for me it comes in the form of a bad beat and rarely a bad read (I don't play online, finding fear in an opponent's face when you can't see his face renders a lot of my skill useless) So, most of the time I lose, it's because someone got lucky. When I win, it's because I have superior skills to those I play against. Now, in my opinion poker and trading do have a lot in common, but so does fly fishing and baseball (I can think of at least a dozen things they have in common) A good trader could play very good technical poker, but end up losing more often than winning. That's because traders think in numbers. Good poker players read the emotions of a technical player, especially if he has calculated pre-determined entry & exits for specific types of hands, 20 hands or less and he's just become a Level 2 screen
(example: I once beat a technical player heads up and played nothing but losing hands. I threw away pocket pairs, Anna Kournikova, QJ suited, etc. I only played crappy starting hands, and I NEVER won a hand after 5th street, he left the table after 20 minutes of heads up play. I read him like the book that he was. I folded when he had anything bigger than a pair, and put him all in when he didn't. Granted I had a chip stack 3 or 4 times the size of his, and I just pushed him around, but that's because I had been doing it the entire evening. The point is his technical game was at a disadvantage because poker isn't about what you have, the only hand that matters is what your opponent has, and how you play your hand based on his/hers.)
Technical poker players are probably better suited (pardon the pun) for 7 card stud, it allows you to see the statistical probability of everyone's hand, thereby allowing you to analyze your own probability of winning. I personally don't play 7stud very much at all. First, because not too many others do either, but second, its not much fun and it feels kind of like work. The one thing from this forum I do agree with though, is people who equate poker to gambling or trading to gambling are most likely losing both.
Favorite movie qoutes that apply to trading http://www.elitetrader.com/vb/showthread.php?s=&postid=995438#post995438
Quote from 2manywhiners:
"Every battle is won before it is ever fought. Sun-tzu, The Art of War." Wall Street
"If something's worth doing, it's worth doing for money." Wall Street
"Me, I want what's coming to me."
"What's coming to you Tony?"
"The World chico... and everything in it..." Scarface
"There is no spoon..." The Matrix (know what's real)
"Temet Nosce" "Know Thyself" The Matrix
"Try Not. Do or Do Not. There is no Try." Star Wars Episode V: The Empire Strikes Back
"You remember lesson about balance, Daniel-san? Lesson not just Karate, lesson for Whole Life." The Karate Kid
"Revenge is a dish best served cold." Man on Fire
Jules quote from Pulp Fiction isn't actually Ezekiel 25:17. It was combined with Psalm 23 and heavily edited by Tarantino.
Paper Trading Vs The Real Deal http://www.elitetrader.com/vb/showthread.php?s=&postid=1037043#post1037043
Quote from 2manywhiners:
I'd liken it to reading a military field manual before leaving for war, then arriving in the actual war zone.
Mentally preparing for war by reading a field manual, while sitting in your favorite recliner drinker a beer and grilling brawts, is still probably closer to reality than paper trading is (in order to learn, not testing new strategies or learning new platforms)
Paper trading usually creates a false sense of insight into the market and, shortly after going live, many new traders don't understand why they're losing money. Many also fail to realize that they're trading on emotions that they didn't use on paper.
My solution? Trade very small lots, or less than 10% of your trading capital, for at least your first few weeks or months. Sure, broker fees may eat you up (try per share instead of per trade; and if you plan on starting out with more than 10-20 trades per day, you're probably already in trouble), but at least you can more accurately estimate what your expectations should be, and how viable your strategy is. If your trading 1/10 of what your strategy would have you trade, then multiply all of your losses and gains x10, then calculate the adjustment of your broker fees. Real Money, Real Trading, Real Expectations, Less Risk, Same (or at least similar) Emotions.
You can learn more in two weeks, using this method, than you would in two months of paper trading. Good luck.
Paper Trading Vs The Real Deal http://www.elitetrader.com/vb/showthread.php?s=&postid=1038196#post1038196
Quote from 2manywhiners:
one more take:
Ever played online poker? (I'm not relating trading to poker, that's a whole other forum) Well, I have played three types of online poker; free simulated money no-limit & limit, very small limit, and high stakes no-limit. I'm sure a lot of people on ET have played all three types as well, and already know what I'm getting at.
Those who don't, well, it's like this; the simulated money poker games are absolutely ridiculous. I played these for a while before opening a cash account, and what I had learned about online poker was that no one played very well, everyone just kept raising and re-raising, no one left the hands when they were supposed to (except for me) and eventually I started doing similar things because: a) I often mucked the better hand after someone raised repeatedly, and b) I tried to slow play good hands by simply calling and not raising. Well, after playing by the "rules" and losing regularly, I decided to just play real aggressive, and in return I won (simulated money) more often.
When the time came to open a cash account I started off with small limit games (like $0.50 & $1.00) and I was absolutely amazed at how conservative MOST of the players were. Was $5 really a lot of money? Well, the first week I stuck with the tried and true simulated money method of "raise first and re-raise later, then go all-in" but to no avail. I lost $25. Whoa. Big money right? Well, that's what I thought, but apparently any amount of money in online poker causes people to play differently. I have since played in online high stakes no-limit cash games and tournaments, and I found that most players still play with the same strategies as the $0.05 limit players (granted, they have superior skills to the lesser players, but they follow the same poker fundamentals)
Lying in bed last night, it dawned on me. Simulated Trading isn't any different from Simulated (money) Poker, they both operate the same way as their "real" money counterparts, but the logistics and the emotional effect on their trading (or playing) style varies to an incalculable degree.
I'm not saying beginners should open an account and start trading $20,000 the first day. They shouldn't (neither should you... learn the platform intimately first) but they should start trading a portion of their capital relatively quickly, if for no other reason than to avoid the false confidence that is inherent with paper trading.
A guy I know very well once told me that he had a better day than I did, because he made over $500 on paper, and I was up only $10 at the end of the day (after fees) with real money. Now, I understand his rationalization, had he been in the market, with live money, he would have been up at least $450 right? I made 4 figures that week (this was on a Friday, I think) but even if my week had been $50, his rationalization would have still been wrong. (side note) I eventually mentored him after he finally did go live, but only because he literally begged me. He had six REALLY rough months after going live and he just kept saying over and over, "I never had a down week on paper... this is wrong, something is wrong with the market..." he eventually did "get it" but not until after he had lost some money. Had he started LIVE with a small portion of money, he wouldn't have had the rough period he did, because he never would have made the $10,000 per month on paper. Would he have been better off in the long run? I dunno. But I do think so, mostly because the effect of paper trading successfully had really skewed his psyche. Take from this what you will, I'm sure he's not the only person with a story like his...
Need help daytrading QQQQ http://www.elitetrader.com/vb/showthread.php?s=&postid=1096805#post1096805
Quote from 2manywhiners:
Exactly. Well said jho.
A lot of people try overcomplicate things because to a beginner the Markets tend to seem extremely complicated. In reality it all becomes much easier when we incorporate common sense into our trading strategies. A wise man told me that, no matter what you trade, the secret to success in the market is simply good risk management. Cut losses short, wait out the winners.
Is 0.20 an ideal stop loss? No, not if your target movement, or the probable movement, is 0.10. If the target were say 0.5, then 0.2 could be acceptable, however it depends on many different variables when it comes to where a stop should be placed. A stop at 0.4 would easily allow for a higher winning trade percentage than a stop at 0.1. Keep in mind though that a single loss at 0.4 would equal the same $$$ amount of four losses at 0.1. However, extra commissions and fees must also be accounted for with the use of tighter stops, as there will likely be a greater number of executed trades in a shorter or similar time frame. Also keep in mind that larger targets and wider stops often equate to significantly longer trade times.
Risk management is more than just a necessary consideration in trading, it should be incorporated into the very basis of any good trading strategy.
Need help daytrading QQQQ
Quote from 2manywhiners:
I played paintbrush with a chart (for the first time in a while) to help you (unet1604 and any other beginner/inexperienced traders) understand chart pattern entries. Note: most of my exits (from long or short) are gut feeling or trailing stop based, so I won't really try to explain them here.
I don't trade the first portion of the open, which means the first 5-15 minutes, and these candles are 10min charts. So being an experienced trader, I'm looking at different screens than these, but I recommend newbies look at longer candles for longer periods of time. Be sure you know where the move is going before you try to follow. Don't try to short the very tips of tops, or buy the very bottoms. Be patient. Be humble. Take your time. Don't overtrade.
1. Note the Gap open here. Gaps up then falls. First clue this may be a shorting day. I'm in fairly early on this action, but in keeping with my advice of using longer bars and longer time-frame day trades for beginners, I'll be using these specific charts as I would have you do so. First 3 candles = lower lows, lower highs. Prepare for short setups. The entry basis for circle 1 is in the latter half of the circle. The second time of the day you've seen lower lows and highs. Commence shorting somewhere near the bottom right corner of circle 1. Bank. (Note: check out the volume bar at the bottom, see anything significant that occurred in volume's relation to price?)
2. Here is where overtrading will most likely come for beginners. You got in fairly early on a decent move. $$$. If you're looking to give some of it back, trading around this time after a move like you were just in is definitely one way to do it. In circle 2 you'll find chart patterns supporting a theory that an uptrend or reversal is in motion, but you'll also find patterns that say a new downtrend is starting. You may never hit a stop in this area, then again you're not hitting any targets either. Even though it is gradually an upward movement, it's not going anywhere fast, let's look somewhere else, or simply go do whatever else it is you do. Second guessing, some extra un-needed trades, throw in a bit of boredom, and there goes 1/4 of your morning profits. You should have been up somewhere around 0.9% after that mid-morning move. Don't throw it away because of boredom.
3. Fresh new trading day. A quick gap down is followed by a nice solid upward trend. If you're experienced with the open (if you're still reading this, you're probably not) you got in around the third candle. Decent move. If you're not, you waited till candle 4 or 5. You found a solid trend, higher highs (excluding gap and open) and higher lows, give it a go. Damn, got stopped out? Yes, but don't fret, myself and many others bought too. This is what stops are for. No one wins all the time.
4. Don't get bent after the last trade went against you, stick it out, but don't trade for revenge. Experience is already shorting this before it is hitting lower lows, you should wait for it to get close, and you should be in by at least the last bar in circle 4. Side Note: if you're using trailing stops, there are several points on the chart where you're hitting them. Don't fret or worry. Wait for one candle (two 5 or a 10) or a few minutes of T&S. If you don't see a solid reversal, jump back in. Don't worry about fees, if you're trading small size with p/share pricing, a dollar or three for a stop is better than losing an extra ten without it.
5. A similar example of Circle 3, I'm probably long, but like I said before, beginner = patience.
6. The higher highs and higher lows (excl. open) looked nice, but after a reversal and 20-30 minutes of lower highs and eventually lower lows, get over the last trade and go short. Some trailing stops may be hit, follow Circle 4's advice and jump back in after identifying a continuance. Nothing too fast and no big sexy moves here, just clearly defined reversal points all day.
7. I like Circle 7. Eventually it'll be a good day, but first the market will play with your patience and conviction. I (experience) found a nice move after the open, but you (doing what you should as a beginner) waited until the move was puttering on fumes to go long. Stops hit fairly quickly. We then find a choppy trend which will eventually turn into...
8. Lower Highs. After the morning move, lower lows are still a ways out. Identifying a trend doesn't have to involve both higher highs and higher lows or vice versa. I (experience) have found two solid trends, you found one. Don't wait too long. 8 could have easily turned back choppy at noon, and if you're waiting too long you're missing the significant moves and hitting several stops along the way. In this instance you've found (at least) a 1.1% move.
9. Don't stay in the market too close to the end of the day. Those extra pennies aren't worth the small price movement. If your day-trading, be out by at least 10 minutes before close.
10. Based on what has occurred the past four days, today will start as a short based on a week long trend. Experience is short at the first sign of the open retracement. Beginners follow later, as this is safer anyway, after spotting lower highs and low.
11. You've hit a trailing stop loss order (or at least with a retracement like this you should have) The new reversal turned back down quick, this is why after hitting trailing stops you watch T&S. Ticking down, down, down, further down the spiral it goes. Don't wait for the next candle here, it's worth risking another stop for a super-quick move like this. Don't be scared of stops, know and respect they're purpose, but keep following the trends when they're moving quickly.
12. & 13. I'm shorting again somewhere in here, but I'll probably get stopped out past circle 13. At this point in the day, I've captured big moves at least twice already. Here is another good example of circle 2, check out the choppiness of the uptrend, green-red, red-green. Nothing clearly defined at the time, even though it is a trend, it's choppin along. You could follow that uptrend till close, but you'll be hitting several trailing stop loss points along the way. Your choice, but I was probably out for the rest of the day after the stops following 13.