If I had to give advice to a new trader, first, I would recommend trading either the ES or TF e-mini futures contract, but preferably the TF. It doesn't require a lot of initial capital and you don't have to lose 10's of thousands to figure out if you're good enough or not.
You've got to take baby steps so here's what you do:
You need to find (through research/real-time sim practice) a simple scalping system which can give you a payoff ratio (avg win / avg loss) close to 1.0 and a winning pct of around 55-60%. You want to avg around 1 tick better on your wins than your losses. Here, you have a slight edge, but not a great one. You are relying more on overall your winning pct. than your payoff ratio.
The important aspect of this is not to make discernible amounts of money at first, but to get you solid under the gun, taking lots of trades and sticking to your system. This kind of system is easier on the emotions because you don't win a lot and you don't lose a lot on each trade.
In a little system like this, make your goal like an average of 8 ticks ($80) per trade and 7 ticks ($70) per loss [note: trans fees canceled out with the 1 tick difference to cover overall entry/exit costs]. This is not to say that you won't get some 1.5 pt winners ($150) or some 1 pt losers ($100...I recommend this is a MAX acceptable loss level...you don't ever need more than a 1 pt loss on the TF to figure out if you're right or wrong on a scalp. And sure, if you're up 5 ticks but not at your target of 8 ticks yet, you're moving your stop up to a breakeven and might take 3 ticks profit instead of scratching the trade. There's all kinds of combinations like this which can go on trade after trade but the important thing is that it keeps you highly focused on the price action of the market you're watching.
All of this can be done with a decent real-time simulation environment like Interactive Brokers has just so long as you never count any trade in a sim environment where you got taken into the market by buying on the bid or selling on the ask. Only count trades which trade through your limit order by 1 tick. So start this way, build something which is repeatable over 100's of trades and then you're ready to try it out with real money.
I wish that I had done something like this when I started trading the futures. What happens in the process of trading in a more confined win/loss spectrum like this is the following:
1. You get used to taking profits and losses without thinking so much. This builds confidence over time.
2. You are subconsciously building up a feel for the market's price action. You're going to learn when some of those trades you entered are far better than your modest profit target. This is going to give you a lot of good ideas for expanding your trade setups as you grow out of the newbie stage.
It's not a bad thing to take 20 trades and find you're up only $100 to $200 for all of that effort. Because what you're also finding out is that you're not consistently losing because you are actually applying a consistent pattern of trading behavior to the randomness of the individual trade setups coming at you.
In my opinion, this is the easiest way to learn whether you have what it takes to trade without costing you so much of your hard-earned and hard-to-replace savings.
Next step? Do the same thing with 2 contracts, all-in / all-out. Now you've got more leverage and that will kick up your heart rate. Get used to this and try your best to perform at the same level as you did with 1 contract for the same amount of time.
I think that if you get past this step, you're going to make it and I certainly won't have to suggest to you what to do next...you'll already know.
Caveat:
This basic idea works in trends or sideways markets so you're never really on the sidelines for long. You can scalp either situation like this because your profit target is never too great (i.e. not more than 1.5 to 2 pts on your best scalps) to require a sideways market to turn into a trend before you reach that kind of target.
You've got to take baby steps so here's what you do:
You need to find (through research/real-time sim practice) a simple scalping system which can give you a payoff ratio (avg win / avg loss) close to 1.0 and a winning pct of around 55-60%. You want to avg around 1 tick better on your wins than your losses. Here, you have a slight edge, but not a great one. You are relying more on overall your winning pct. than your payoff ratio.
The important aspect of this is not to make discernible amounts of money at first, but to get you solid under the gun, taking lots of trades and sticking to your system. This kind of system is easier on the emotions because you don't win a lot and you don't lose a lot on each trade.
In a little system like this, make your goal like an average of 8 ticks ($80) per trade and 7 ticks ($70) per loss [note: trans fees canceled out with the 1 tick difference to cover overall entry/exit costs]. This is not to say that you won't get some 1.5 pt winners ($150) or some 1 pt losers ($100...I recommend this is a MAX acceptable loss level...you don't ever need more than a 1 pt loss on the TF to figure out if you're right or wrong on a scalp. And sure, if you're up 5 ticks but not at your target of 8 ticks yet, you're moving your stop up to a breakeven and might take 3 ticks profit instead of scratching the trade. There's all kinds of combinations like this which can go on trade after trade but the important thing is that it keeps you highly focused on the price action of the market you're watching.
All of this can be done with a decent real-time simulation environment like Interactive Brokers has just so long as you never count any trade in a sim environment where you got taken into the market by buying on the bid or selling on the ask. Only count trades which trade through your limit order by 1 tick. So start this way, build something which is repeatable over 100's of trades and then you're ready to try it out with real money.
I wish that I had done something like this when I started trading the futures. What happens in the process of trading in a more confined win/loss spectrum like this is the following:
1. You get used to taking profits and losses without thinking so much. This builds confidence over time.
2. You are subconsciously building up a feel for the market's price action. You're going to learn when some of those trades you entered are far better than your modest profit target. This is going to give you a lot of good ideas for expanding your trade setups as you grow out of the newbie stage.
It's not a bad thing to take 20 trades and find you're up only $100 to $200 for all of that effort. Because what you're also finding out is that you're not consistently losing because you are actually applying a consistent pattern of trading behavior to the randomness of the individual trade setups coming at you.
In my opinion, this is the easiest way to learn whether you have what it takes to trade without costing you so much of your hard-earned and hard-to-replace savings.
Next step? Do the same thing with 2 contracts, all-in / all-out. Now you've got more leverage and that will kick up your heart rate. Get used to this and try your best to perform at the same level as you did with 1 contract for the same amount of time.
I think that if you get past this step, you're going to make it and I certainly won't have to suggest to you what to do next...you'll already know.
Caveat:
This basic idea works in trends or sideways markets so you're never really on the sidelines for long. You can scalp either situation like this because your profit target is never too great (i.e. not more than 1.5 to 2 pts on your best scalps) to require a sideways market to turn into a trend before you reach that kind of target.
