The 'Mother of All Advice' list!

[learner2007]

The forums on ET are full of advice coming from all levels of traders. For the new trader, or even the 'Lost in the world of trading' trader, I thought if might be convenient for those traders to have a central list of advice to read through for their trading education.

To those who often provide advice in their threads, if you could just add a line or two that you feel might be enlightening to new or even older traders based on your experience, in total it could very well prove to be of significant educational value to some.Your pet piece of advice, something you just posted in another thread, or in a previous thread to someone seeking advice would be welcome.

True, if this thread works out (doubtful!), there will be both good, and maybe not so good advice(like mine!). We can just hope the reader can differentiate between the two. While there is advice on ET covering everything from trading to how to bake cookies , I guess it would be best to limit postings to advice on trading, TA, stocks, futures, forex, psychology. Please post anything, how to cure not pulling the trigger, a point in TA that you've found useful, a pitfall to avoid in trading futures, anything you would consider to be of value to others.

I'll start it off by copying some things I recently posted.

Thank you for any contributions you may make to the list in trying to help others.

 

[learner2007]

Why are retail traders always so concerned and interested in the results of hedge funds,
institutional investors, market makers, Buffett, hft, quants, other retail traders etc.?
They are playing a different game on the same board/chart, under different conditions, with different restrictions and rules. Comparing oneself to anyone else is really irrelevant, and it will not identify your position on the trader's/investor's totem pole. Trading to the best of your ability is all that counts.This is a DIY business.

 

[learner2007]

My problem was breaking the habit of trying to find a way to trade every price movement under the sun. Took me a while to go from 10000 set ups in my plan to just 10!!

 

[learner2007]

galvinlee888 said:
The purpose of this thread is to see how those PA expect react to any price action without knowing the next bar

What you are doing is trying to force an answer from those who use PA/TA based on a situation that you have selected, rather than one that the trader would actually select based on his analysis and plan. The purpose of TA, and its success, is to identify situations which will work out in the vast majority of cases, and not to analyse any given situation. What will happen next based on the price movement of 1 bar is not TA. The setups that PA/TA people trade on are based on movements within trends, and 1 bar does not make a trend. So you are not asking a realistic question that a TA trader could answer based on TA. When a TA trader picks a stock to trade he does so only when he recognizes a setup (being his edge) that he knows is most likely to work out. When I was a technical analyst at a major international broker I had to add a TA comment to any stock report that the security analyst wrote. Those were forced opinions, such as you're asking for. But for the last 40 years as an individual TA trader, I would never,ever analyze a stock/contract based on anything other than what can be read. And, in TA, 1 bar can't really be read, can it? So you are really misunderstanding how PA/TA is to be properly used.Guessing what the next bar will be is just guessing, and not the analysis of supply and demand.

And I think this is the very same reason that many say PA/TA doesn't work. They try to apply TA to any stock/contract that pops up in the news etc., and then see on the chart what's not really there or bend the trend lines to fit the news, rather than picking a stock based solely on the TA indication that they see on the chart. TA will work the majority of the time in given situations, but not in any given situation.

 

[learner2007]

ironchef said:
they just need TA to figure out what to do. I cannot do it for every stocks.

Try this: DO NOT try to apply TA (or what it is you use) to all or any given charts. Doing so will cause you to see what's not there. Instead, consider only those charts where the TA indication jumps out at you like something in a 3D movie.

 

[learner2007]

There's a right way to trade, a wrong way to trade, and there's my way to trade!

 

[learner2007]

I often read and hear traders say how they find that exiting a trade skillfully is more difficult than executing a good entry. I imagine that for most traders the desire for profits reduces the amount of analysis done at the entry, and the 'Let your profits run' saying causes hesitation to exit. And 'Letting your profits run' has its hidden costs.
There is a saying that the entry is a skill and the exit is an art. I believe that to be just the opposite.

Early on I believe that I gave equal emphasis on the entry and the exit. However I soon changed that to 99.9% on the entry and .1% on the exit. By no means though does that mean that the exit is done on a whim. Simply, with a poor or mistaken entry you have an instant problem. A correct entry should turn into a profitable position very shortly, of course.
On the other side of the trade, even a terrible exit only results in reduced profits. However that need not be the case. In those days there were no intraday charts with which to find the earliest indications to exit. And many of the traditional exit indications on daily charts took too long to complete and reduced performance. Initially, scaling out seemed to be the best answer, and for various reasons it is an excellent tactic. However, further detailed research found fairly simply and excellent tactics for exiting that did not require the precision or time needed for a good entry.

So, early on in my trading education, having a different viewpoint regarding the exit of trades would have saved me a lot of time and would have increased my performance.

 

[777]

Find a truly winning trader who you can learn from- in person, if possible. Mentors help.

As you grow, seek the wisdom of more than master.

Work hard and smart.

Be in relationships. Be around the right people: People whose behaviors are better than yours.

Stay away from the wrong people. Be aware of treachery, deceit and scams.

Be skeptical but learn to listen.

Be a good person. Be good to people.

 

[ironchef]

ironchef said:
they just need TA to figure out what to do. I cannot do it for every stocks.

Try this: DO NOT try to apply TA (or what it is you use) to all or any given charts. Doing so will cause you to see what's not there. Instead, consider only those charts where the TA indication jumps out at you like something in a 3D movie.

I really appreciate your comments. They answered some of my troubling questions.

Thank you.

 

[Xela]

Thanks for starting such an interesting and potentially promising thread.

There are so many different types of traders (and aspiring traders) here that it's impossible to offer anything of universal appropriateness, but here - for what it's worth - is a small handful of suggestions for anyone struggling, as my contribution ...


1. Be careful by whom you choose to be guided: there are "generations" of aspiring traders, struggling traders and failed traders out there (and some of them "in here", too) who have tried to learn to trade by relying on forum and Youtube "information", a lot of which is actually misinformation.

Well-recommended, well-established, mainstream, orthodox trading textbooks published by well-recommended, well-established, mainstream, orthodox publishers really do have some important advantages over forum and Youtube "information" in that there's a very high chance that before seeing the light of day, their content was at least peer-reviewed and in some way quality controlled.

Sure, there are a few pretty bad textbooks too (including a very few really well-known ones), but trading successfully depends on knowing how to get the odds in your favour, and so does learning successfully how to trade. In a field of endeavour in which the overall success-rates are so very low, it pays at least to try to do what you can, regarding source-materials, to avoid the odds being even further stacked against you than they need to be.


2. Avoid trading without having a genuine edge: this necessitates being able to tell, and with a really high degree of confidence, when you do have a genuine edge, and that in turn necessitates learning and understanding some stuff about probability and statistics, and those are really tricky and counter-intuitive subjects, which nobody was born understanding.

So, don't try and trade with real money before you've read something like Michael Harris's Profitability and Systematic Trading (it doesn't have to be that book specifically, there are plenty of others that give very similar information). Somehow you have to acquire both the understanding and the skill-set before you start ... otherwise you'll end up believing all kinds of nonsense such as "the higher the win-rate, the better", and/or "indicators predict directional price-movements and can 'confirm' each others' 'signals', so it's better in principle to use many rather than few" (both of which are pretty widespread and horribly misguided beliefs).


3. Don't try to learn only "as you go along" (hoping that getting started quickly on a demo account will somehow clarify the theory for you - it won't).

The difference between a trader with three years' experience and one with one month's experience repeated 36 times over is that the first tried to develop some real understanding of the theory before trying to put it into practice, rather than naively hoping it would be possible to do both at the same time.

(I know that some people here don't agree with me on this point. I think that for most people's purposes, most of the time, they're mistaken.)


4. Don't confuse entry-methods with "trading systems": the two are radically different.

Knowing when to enter a trade in a given direction, with the odds in your favour, is a good but very small part of being able to make steady profits from trading.


5. Enter long in uptrends and short in downtrends. Something more specific, here: especially if floundering, try to learn to look for good long entries during an uptrend and good short entries in a downtrend. It's certainly not the only way to trade, but it's not a bad one, and for most people it's probably a skill more easily mastered than many.


6. Understand these three things about indicators: (i) if using them, make sure that you're using indicators that somehow help you to identify both "trend" and "potential entries" clearly for your own purposes, and be aware that there are ways of using indicators to do both, and that these are two different functions (both of which can also be done without using indicators, by the way); (ii) also, don't imagine that "technical analysis" is another way of saying "indicators": there are many aspects of TA that have nothing to do with indicators at all - and some of them are more important; (iii) also, don't rely on indicators to "predict" for you without understanding exactly what they're measuring, and why, and how they're constructed, and how they're displaying their information to you.

Enough from me ...