Learn how to follow the money by watching how the money moves between the Bonds market, the commodity market, the forex market and the Equity market.
What should newbies focus on?
- Thread starter trade5656
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Its as simple as cutting winners short and letting losers run. I know this is so basic you almost want to say its useless, but its absolutely true. If you consider that a trade is essentially 50/50, meaning it might win or lose, but you are always taking a tiny profit but holding through a bigger loss, you are guaranteed to lose money.
If you take even just a few dozen of these trades and analyze not just MFE and MAE, which only shows you what happened while in the trade, but analyze to see what the profit potential was and how wide of a stop had to be used, then you can find out an optimal risk and reward. For my own stats, I saw that using a 4 tick stop was way too short, it would hit quite regularly based on how I was entering, and this was before hitting a 4 tick profit. So now widen the stop to 8 ticks... what happens? Now widen the profit to 8 ticks as well, and what happens? It honestly doesn't take much data to see that there is actually an optimal setting for stop and target for this set of data.
Now does this mean that this optional stop and target will work for the next set or data? No way, but for a new trader, its going to be tons better than just getting out because you think it won't work. When I did my stats, you'd be amazed how many trades went down to -7 ticks, but never did hit -8 ticks, and then turned around and hit a profit that was bigger than the stop. As a trader without going over your stats, you might feel that you did good to cut the trade sooner, but all you really did was prevent a profit.
I realize some traders will develop a very good feel for the market and don't need even an 8 tick stop, but for most, this isn't going to be the case. So the line you quote simply means that if the trader enters the trade, if he uses anything other than a risk and reward that he sees is the best overall, then he may very well be messing with his edge, if he has one. At the very least, even some random entries will be lucky and hit profit.
Even if you think that you are the worst trader and that every trade losses, you'd be surprised how many can turn into winners if you just leave it alone. To be a trader that guesses the direction wrong every single time would be a skill that could be monopolized. The fact of the matter is in trading, even random entries will hit profit targets, but not if you as the trader doesn't hold on. Likewise, many trades will be losers, but if you as the trader don't take your stop, or your stop is so far away that the winners cannot make up for the losers, then it doesn't matter how good you are at picking trades because your profitability equation is messed up.
I advise not opening an account for 1-3 years, you know little and too easy to "try" something. Learning charting first, it is better to actually do it by hand, get open, high, low, close from sites even if showing you charts, there is something about hand to brain and learning this way. Learn trend lines, and like 15 different patterns, learn from Thomas Bulkowski on charting , he is like king of charting. http://thepatternsite.com/ Another is John Hills' books from late 1970s, and McGee and Edwards book from 1930s I believe on charting. When you have developed a strategy, paper trade $25k account and when you triple it three separate times, then you have a better shot of starting. Free software of Ninjatrader and free daily data from Zenfire for long term stocks, learn from using weekly charts as you like to be able to stay longer in stocks.
If you want to do day trading, going to take much longer as you will complete against the HFTs, and traders who run automation, and many gifted and worked long years to get good. Whereas stock trading much less fees. Also, learn about options on how to hedge and credit spreads. The amount of different ways to trade is endless.
Good luck to you.
You need to first get an understand of the different trading philosophies and find one that fits your personality. There are many ways to trade but most the ways to trade I completely ignore because I am not comfortable with them. They may be profitable but they don't fit into what I want to do.
Try out learning about three of the main analysis methods.
Fundamental analysis.
Technical analysis.
Quantitative analysis.
Learn what each encompasses, the pluses and minuses, the benefits of each.
Here is the best piece of advise that no one else will ever tell you. If your trades are keeping you up at night, then dump them, no trade is worth that kind of stress.
The market is a ball think like about the price moving - or was that be random and repeat? or was that that be the market or feel the market?, look at the bond and Forex and the MFE whatever that is and do what?, When 2 ticks or 4 or get out at 8 but take 4 to get 1 or was that 2 to get 4? - who the hell trades for ticks anyway? - no way could that LoJack Japanese trader be trading for a few stupid ticks - he must have thought big - become the ball and felt the price and all that to have made $34 million - going for a few silly ticks is Ramen profit. Now back to to the list ... don't trade at all for a few years until I already know how to trade by pretending first which is called paper trading - but before pretending first learn from a 1930 chart book how to pretend the right way and pretend my way into trading - o.k... right - 10-4 on that. Is this for kids or adults? Lets skip the pretending step. Back to the advice: when range expands look at the statistics & think like a ball or was that become the water flowing around the rock?, o,k, now look at the bond in relation to the Forex in relation to something - repeat every 2/4/8 ticks when the the water is moving or was that price - think like a ball, see the price/be the price/feel the market - look at the MFE - is that slang for mother f*ck? expanding over some statistics or analytical fundamentals but be a quant at the same time or was that also just pretend? maybe I will need that 1930 and 1970 chart book anyway ..wonder if the pages are yellowed? If I can just decode those yellowed charts - hope it has a decoder ring included. Maybe it is better to always pretend, I mean paper trade.
Dude - do yourself you a favor and get a beginners book on trading from Amazon with good reviews - maybe read the market Wizards and listen to 'Chat with traders'. I have been trading a long time and all this stuff makes me need a few drinks and pills to boot. Good luck to you.
Dude - do yourself you a favor and get a beginners book on trading from Amazon with good reviews - maybe read the market Wizards and listen to 'Chat with traders'. I have been trading a long time and all this stuff makes me need a few drinks and pills to boot. Good luck to you.
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Sim trading, back testing strategies etc
You should start where you feel you have most to gain, both in learning and doing, while doing your utmost to preserve your capital along the way. If you lose capital, the damage is not just monetary, but psychological as well. You don't need to lose badly in order to learn trading, but you need to learn to lose well. If you can allocate a little"play money" that you can absolutely spend 100%, this can be instructive together with backtesting / papertrading. Also, don't bet in sizes before your naturally and incrementally scale up to higher sizes due to consistent profitability. The best systems should fund themselves basically, but may then need to be modified in order to scale. Don't underestimate how much work may be required. Even if you somehow do OK, the system may have large opportunity costs and scaling-issues.
What should newbs focus on?
1) KEEP YOUR CAPITAL. Until you understand "One-third down is half-way back," do not trade.
2) THE MARKET IS REALITY. Look at the overlay your culture/sociological niche provides: is it as THIN as you can divine? The market cares not, what kind of car you drive, whether you hair is combed, whether you sit in a Herman Miller chair, whether you went to an Ivy school or to none at all. The market owes you NOTHING -- INCLUDING consistency. (Markets *appear* to our so-limited little human brains, to often be linear. They are absolutely NOT.) You'd best be prepared.
How to do that?
3) Prepare your exits WITH MORE CARE than your entries. "A good trader can often manage a profit from a poor trade. A bad trader can often manufacture a loss from a good trade."
Long story short?
4) Expectancy -- learn it; KNOW it; don't leave home without it.
Your mileage may vary. Past performance is not indicative of future behavior. Objects in mirror are closer than they appear. Do not take before operating heavy machinery. Please see your doctor if hemorroids, migraines, or hair loss persist. Beer is proof that God loves us, and wants us to be happy.
1) KEEP YOUR CAPITAL. Until you understand "One-third down is half-way back," do not trade.
2) THE MARKET IS REALITY. Look at the overlay your culture/sociological niche provides: is it as THIN as you can divine? The market cares not, what kind of car you drive, whether you hair is combed, whether you sit in a Herman Miller chair, whether you went to an Ivy school or to none at all. The market owes you NOTHING -- INCLUDING consistency. (Markets *appear* to our so-limited little human brains, to often be linear. They are absolutely NOT.) You'd best be prepared.
How to do that?
3) Prepare your exits WITH MORE CARE than your entries. "A good trader can often manage a profit from a poor trade. A bad trader can often manufacture a loss from a good trade."
Long story short?
4) Expectancy -- learn it; KNOW it; don't leave home without it.
Your mileage may vary. Past performance is not indicative of future behavior. Objects in mirror are closer than they appear. Do not take before operating heavy machinery. Please see your doctor if hemorroids, migraines, or hair loss persist. Beer is proof that God loves us, and wants us to be happy.
google Paul Rotter. Millions and millions trading ticks.
TRADE SMALL! WHEN YOU THINK YOU'VE FOUND THE HOLY GRAIL...KEEP TRADING SMALL THROUGH MANY MARKET CONDITIONS! ODDS ARE YOU DIDN'T HAVE WHAT YOU THOUGHT YOU HAD! KEEP REPEATING THIS UNTIL YOUR METHODOLOGY PROVES ITSELF THOROUGHLY THROUGH ALL KINDS OF CONDITIONS. BE PATIENT AND DISCIPLINED WITH THIS...IT WILL SAVE YOU A- LOT OF MONEY!!!! DON'T GIVE IN TO YOUR URGE TO MAKE THE BIG BUCKS "NOW"...TRADE SMALL-TRADE SMALL-TRADE SMALL!!! ODDS ARE YOU'LL HAVE TO GO THROUGH A LEARNING CURVE (MAYBE A LONG ONE) JUST LIKE EVERYONE ELSE!
Method itself: Learn price action of the markets through observation/back testing. Be ready to be creative and to think outside the box with any information that enters your BRAIN! Accept this concept right now: the market is gong to FUCK with you...trade like a machine...not a gambler!! If you don't have self control and trade with emotions...game over (until you change this)! Example: be STRICT with your placement of stops and profit targets by following them to the exact!!!!!
GOOD LUCK!!!!!!!!
Method itself: Learn price action of the markets through observation/back testing. Be ready to be creative and to think outside the box with any information that enters your BRAIN! Accept this concept right now: the market is gong to FUCK with you...trade like a machine...not a gambler!! If you don't have self control and trade with emotions...game over (until you change this)! Example: be STRICT with your placement of stops and profit targets by following them to the exact!!!!!
GOOD LUCK!!!!!!!!