Forex or futures. If Forex, get a reliable broker not a chop shop.
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what financial instrument should a newbie start with?
- Thread starter orange399
- Start date
I found financial data was the main component to establishing confidence in my Multicharts trading systems, but I'd been trading for a long time and started in large cap stocks swing trading mostly on news and mystical quantitative conjecture.
Do that first, and learn what produces value. When you know that, the chart just confirms what's happening and only with automatons do you stand any chance of being profitable, at least that's how I felt.
It's highly possible you aren't a newb, but maybe not, so I'll tell you it is ridiculous to go straight to forex and futures, but everyone can pick their own poison until they're immune, and you aren't yet. Try trading stocks on your own, but don't get overly concerned with predicting turnarounds. Only buy stocks with positive earnings is as easy a rule of thumb as it gets.
Do that first, and learn what produces value. When you know that, the chart just confirms what's happening and only with automatons do you stand any chance of being profitable, at least that's how I felt.
It's highly possible you aren't a newb, but maybe not, so I'll tell you it is ridiculous to go straight to forex and futures, but everyone can pick their own poison until they're immune, and you aren't yet. Try trading stocks on your own, but don't get overly concerned with predicting turnarounds. Only buy stocks with positive earnings is as easy a rule of thumb as it gets.
TD Ameritrade has some commission free ETF's that you can trade. That'll allow you to start with any amount and no disadvantage for a small account.
Read a lot of books like Alexandre Elder's "Trading for a Living."
Trading is a much bigger endeavor than I realized when I started. I failed for the first 5 years as a trader because I wanted to believe trading was about being smart, and about being right more often than wrong. I thought if I could pick the right direction, I could win. Nope. Even with being right 6 or 7 times out of 10, I managed to lose.
Money management is important,
Risk management
Position sizing is important,
Get really familiar with mathematical concepts like exponential loss and gain. After a 1% loss you need a 1.01% gain to break even. After a 10% loss you need 11.11% to break even. After a 50% loss you need a 100% gain to break even, and after a 99% loss you need a 9900% gain to break even. Familiarity with this exponential curve will help you decide where on the curve you'd like to be to have the best chance at success over time. You'll need a strategy for entering trades and sizing your position that fits your loss per trade parameter.
Finally, you should be aware that most people who trade, even the ones that have a winning plan, have an extremely difficult time believing that their plan is telling them the best approach for trading. Most people have a plan and second guess it or ignore it.
As much time as you spend working on a system, money management, risk management, position sizing, and understanding mathematical concepts that are important to giving yourself the advantage, put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
That's pretty much what I wish someone had told me 6 years ago. Best of luck.
Read a lot of books like Alexandre Elder's "Trading for a Living."
Trading is a much bigger endeavor than I realized when I started. I failed for the first 5 years as a trader because I wanted to believe trading was about being smart, and about being right more often than wrong. I thought if I could pick the right direction, I could win. Nope. Even with being right 6 or 7 times out of 10, I managed to lose.
Money management is important,
Risk management
Position sizing is important,
Get really familiar with mathematical concepts like exponential loss and gain. After a 1% loss you need a 1.01% gain to break even. After a 10% loss you need 11.11% to break even. After a 50% loss you need a 100% gain to break even, and after a 99% loss you need a 9900% gain to break even. Familiarity with this exponential curve will help you decide where on the curve you'd like to be to have the best chance at success over time. You'll need a strategy for entering trades and sizing your position that fits your loss per trade parameter.
Finally, you should be aware that most people who trade, even the ones that have a winning plan, have an extremely difficult time believing that their plan is telling them the best approach for trading. Most people have a plan and second guess it or ignore it.
As much time as you spend working on a system, money management, risk management, position sizing, and understanding mathematical concepts that are important to giving yourself the advantage, put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
That's pretty much what I wish someone had told me 6 years ago. Best of luck.
This is a pretty damn good piece of advice. Live and die by this nugget and you increase your odds of making it exponentially!!!
Quote from J.Joseph:
put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
Quote from Swan Noir:
This is a pretty damn good piece of advice. Live and die by this nugget and you increase your odds of making it exponentially!!!
Quote from J.Joseph:
put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
this is probably the most important thing. I had 3 different set ups today that I saw out there waving their hands at me. I only took one, which I am still holding right now that is down 2 cents from where I entered, and it looks like I might escape for a profit (its up after hours). But the other 2 set up that I didnt take, are sitting there with 100% gains going into close.
So I found my set ups, and only took 1 out of 3...if I would have put 200 dollars in each trade...I could have closed out up $400 for the day, while I had a few cents loss on the bad one which would have come out to -35. so 600 + 400 -35 -comissions. That is something that new traders prabably struggle with is taking positions in all of the set ups they like.
as far as what should newbs trade? IMO its options. Open up a small cash account, with 1k, you can do 5 trades a day at $200 per position. You can trade out of the money, in the money, weeklie,monthly,2 months out options. Option funds settle the next day, so you can do day trades every day and not worry about tripping the PDT rule.
For a test of how good of a trader you are, start with 1k, attempt to turn it into 10k, then from 10k try to reach 25k. Because if you can get it right with options, trading shares with a 30k account and using 4 to 1 margin is much easier then options, and you can get close to the same amount of return. And I do not want to hear that it can't be done...it takes focus, patience and discipline. For example, out of the gate today, amzn 260 puts, .55 to 1.05. GLD weekly calls all strikes nearly doubled. thats just 2 picks, I scalped V calls on the dip for .15 profit. Bidu could have made a Mint buy the dip last week.
I have an account going right now, I started with 700, its now at 1250. my goal is to turn it into 10k by the end of the year, then the plan is to add 5k more as a "prize" to myself.
Quote from J.Joseph:
As much time as you spend working on a system, money management, risk management, position sizing, and understanding mathematical concepts that are important to giving yourself the advantage, put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
That's good advice but I don't think most people even get to the point of having a winning system.
I agree but that is part of what makes this advice so good. Before you get there hold on to your capital. You need to know you've got a positive expectation to take repetitive risk.
Quote from 1a2b3cppp:
That's good advice but I don't think most people even get to the point of having a winning system.
Quote from J.Joseph:
Finally, you should be aware that most people who trade, even the ones that have a winning plan, have an extremely difficult time believing that their plan is telling them the best approach for trading. Most people have a plan and second guess it or ignore it.
As much time as you spend working on a system, money management, risk management, position sizing, and understanding mathematical concepts that are important to giving yourself the advantage, put twice as much effort into finding a way to believe that your method knows better than you do. If your system has a statistical advantage, learn to relax and trust the law of averages to let it win in the long run regardless of the outcome of each trade. You're the only one who can get in the way of a winning system. Learn to trust it like a kid learns to trust that water will hold him up if he just presses into it and relaxes.
That's pretty much what I wish someone had told me 6 years ago. Best of luck.
This is why I automate my strategies. It takes out the human element which can destroy a profitable strategy. I also don't have to sit in front of a screen all day.