I just found elitetrader and have looked through it the past few days. Really like it. I like silicon investor(post there as tradermike1999), but here the focus is really on trading and not trying to hype up stocks and personality conflicts. There are some real ego maniacs on there.
Enjoyed the thread someone started called "my story." Thought I'd throw my few cents in about this industry.
First. Trading is tough. Stastics show that 1/2 the people who try it lose money. 1/4 just match the market and only a tiny percentage make most of the profits. Most of the gains go to less than 5% of the traders.
The good news is that most people use flawed strategies or don't have any at all and that fact makes it easier to get into the "elite trader" category.
After ups and downs and blowouts I've managed to get into that category and have stayed in it the past few years - in fact the Nasdaq bear market collapse was my best time ever because I was net short and stocks drop faster than they go up. All rallies were times to pyramid shorts until this past April, but more on that later...
I first started to make money in the market when the Internut mania just started to heat up. Nasdaq stocks went up so fast that just about anyone could make money.
When I first got into trading I put all of my money in one stock. It then doubled and I thought I had found a new way to get rich. Over the next few weeks I tripled my money and then before I knew it I lost almost all of it.
You can tell what I did wrong. Not too complicated. Absolutely no risk management. Throw all of the money into one position. Don't use stops. If it goes up make a lot, but if it drops you lose your ass. And it was only inevitable that it wouldn't last. But the money I lost wasn't money that I depended on so I wasn't distraut. I remained confident that I would learn how to do better.
I spent the next 6 months obsessed with two ideas. Trying to find a strategy that would make me money and trying to break even!
I did what I guess a lot of people do. Get the idea that if I can find just the right strategy or guru than I can make money. Most gurus are frauds that don't even trade themselves and finding the right strategy is only 1/2 the equation.
I actually had the right strategy. I knew what to do to make money all along. Before I put my first trade in I read about 2 dozen books on investing and trading. The one that stood out the most though was Stan Weinstein's Secrets for Profiting in Bull and Bear Markets.
When I read it I felt that he was talking right to me about the market. And I just knew that if I applied his rules and tried his strategies I would make money.
He advocates using simple charts and technical analysis to buy stocks that are in strong sectors and are trending up. You sell for profits once the moving averages flatten out and the stocks break down or you sell for a loss if the stock drops through your initial stop. You hold for days, months, even years if you get a real long term winner.
But something happened. I took his basic concenpts and turned it into a short term daytrading method. I took the basic ideas of support and resistance and applied it to short term chart patterns. Buying technology momentum stocks when they broke out of short term resistance in the afternoon and selling them for a profit the next day. I also ignored the idea of using stops to cut losses.
What was going on here? I knew what I should do, but I did everything one shouldn't. Why did I want to try to make quick profits in momentum stocks(which were mostly garbage companies that would go up because they issued a hyped press release) instead of trading the type of stocks and strategy that Weinstein talked about which would provide higher risk to reward ratios and actually make more money in the long run?
One could say greed, but it is more complicated than that. I got the idea that I had to make money instantly. As fast as possible. I couldn't buy a stock and see if I'd have a profit a week later. I wanted to have the results in hours or at most a day. It didn't really matter if I made or lost money. I just wanted the action. This is the classic gambler's syndrome.
Unfortunately, most daytraders engage in this sort of self destructive behavior. Yes there are a small minority of successful daytraders, but you could say that daytrading - for most people - is a form of mental illness. It is a craving for control. Even if a daytrader loses money there is always the promise of the next trade. Even if they lose money on each trade the more trades they do the more in control they feel. But how many daytraders have stories that end in success and how many have stories that end with psychological suffering and financial distress?
And part of it is the siron song of money. People promise that you can easily make money daytrading and make it look like you can. Websites and daytrading gurus show you example after example of successful trades, but don't make any trades themselves. They're too busy collecting dues. But I'm digressing from my story.
I got to the point where I had to do something or else my account would go to zero. I stopped and thought things out. I incorporated a stop loss strategy and managed my risk by buying more positions and placing limits on how much money I could place in any single one. I also learned how to short stocks so that I could profit on down days - something that came in handy later.
I stuck to my short term 1-2 day horizon and thanks to my risk management made money. Made a lot of money. Over the course of two years I had over 10X what I started with.
But I looked back and saw that if I had held my positions in a longer time frame instead of taking quick profits I would have actually made more money. Looking back I see that I was still in a manic daytrading mode that demanded instant results. My next challenge was to learn to get away from that. I got to the point where I really had to anyway in order to continue to make large profits.
The secret no one tells you is that no one gets rich daytrading stocks. The problem is that you can only put so much money into short term positions. To do that you need to diversify in a large group of stocks and use a longer time frame. That is why people who are good daytraders - such as Jea Yu(I'm guessing he really trades, know him from his book) - tell you to keep 50k or 100k in your daytrading account and take any profits that take your account over those limits into your bank account as a paycheck. But then there is no useful way to use the extra profit/savings.
That's why hardly any of the real big players in the stock market are daytraders. George Soros, Warren Buffett, etc are not daytraders. Those that are big daytraders usually do it by playing something like the S&P futures or QQQ's - indexes - instead of single stocks.
Over time as I matured I did evolve to the point where instead of manic short term trading I was able to manage 10-30 positions at a time in a portfolio with a holding period from days to months to years. Days if its a dud and I get stopped out. The longer the better. What I do is go long in stocks that are in sectors which are outperforming the market and short sectors that are underperforming. That's how hedge funds operate. And not coincidently it is the hedge funds that are outperforming the market now and not the daytraders or the Janus funds.
My longs don't come from the popular stocks. Right now they are stuff like medical companies, railroads, parts stores, medical product companies. You could never get me to buy into a JNPR, JDSU bubble now....lol. That is where I short. But I'm out of shorts now. That time will come in the next few weeks.
The funny thing about this is - and maybe this is the real lesson - since I've gone from daytrading to holding for a longer time frame my profits have been larger and more consident. But not only that - I have a peace of mind. I have no worries about the positions in my portfolio. One single position means nothing. Its the workability of my strategy and commitment to cutting loses that make me money. Not individual stocks or what the market is doing. And as for the market is doing that doesn't matter because even my long positions tend to go up a little even when the market drops. When I daytraded I always felt that I was at the mercy of the Nasdaq. Watching the Nasdaq chart and always worrying. Now I don't worry about that and being like that makes it a lot easier to be more objective about things. And lets you devote your energy to more fun and useful things. It's nice when the market stops being something that your life centers around and becomes something that helps you live your life more fully.
This is the trading aspect of my business. And I consider it a business now instead of a roulette wheel. The other side is a newsletter I run and I don't want to talk about that here on this board. But I'll talk about my experiences in that industry and with journalists, and other websites and so called gurus in print and the net if interested. Maybe that is another topic.
Enjoyed the thread someone started called "my story." Thought I'd throw my few cents in about this industry.
First. Trading is tough. Stastics show that 1/2 the people who try it lose money. 1/4 just match the market and only a tiny percentage make most of the profits. Most of the gains go to less than 5% of the traders.
The good news is that most people use flawed strategies or don't have any at all and that fact makes it easier to get into the "elite trader" category.
After ups and downs and blowouts I've managed to get into that category and have stayed in it the past few years - in fact the Nasdaq bear market collapse was my best time ever because I was net short and stocks drop faster than they go up. All rallies were times to pyramid shorts until this past April, but more on that later...
I first started to make money in the market when the Internut mania just started to heat up. Nasdaq stocks went up so fast that just about anyone could make money.
When I first got into trading I put all of my money in one stock. It then doubled and I thought I had found a new way to get rich. Over the next few weeks I tripled my money and then before I knew it I lost almost all of it.
You can tell what I did wrong. Not too complicated. Absolutely no risk management. Throw all of the money into one position. Don't use stops. If it goes up make a lot, but if it drops you lose your ass. And it was only inevitable that it wouldn't last. But the money I lost wasn't money that I depended on so I wasn't distraut. I remained confident that I would learn how to do better.
I spent the next 6 months obsessed with two ideas. Trying to find a strategy that would make me money and trying to break even!
I did what I guess a lot of people do. Get the idea that if I can find just the right strategy or guru than I can make money. Most gurus are frauds that don't even trade themselves and finding the right strategy is only 1/2 the equation.
I actually had the right strategy. I knew what to do to make money all along. Before I put my first trade in I read about 2 dozen books on investing and trading. The one that stood out the most though was Stan Weinstein's Secrets for Profiting in Bull and Bear Markets.
When I read it I felt that he was talking right to me about the market. And I just knew that if I applied his rules and tried his strategies I would make money.
He advocates using simple charts and technical analysis to buy stocks that are in strong sectors and are trending up. You sell for profits once the moving averages flatten out and the stocks break down or you sell for a loss if the stock drops through your initial stop. You hold for days, months, even years if you get a real long term winner.
But something happened. I took his basic concenpts and turned it into a short term daytrading method. I took the basic ideas of support and resistance and applied it to short term chart patterns. Buying technology momentum stocks when they broke out of short term resistance in the afternoon and selling them for a profit the next day. I also ignored the idea of using stops to cut losses.
What was going on here? I knew what I should do, but I did everything one shouldn't. Why did I want to try to make quick profits in momentum stocks(which were mostly garbage companies that would go up because they issued a hyped press release) instead of trading the type of stocks and strategy that Weinstein talked about which would provide higher risk to reward ratios and actually make more money in the long run?
One could say greed, but it is more complicated than that. I got the idea that I had to make money instantly. As fast as possible. I couldn't buy a stock and see if I'd have a profit a week later. I wanted to have the results in hours or at most a day. It didn't really matter if I made or lost money. I just wanted the action. This is the classic gambler's syndrome.
Unfortunately, most daytraders engage in this sort of self destructive behavior. Yes there are a small minority of successful daytraders, but you could say that daytrading - for most people - is a form of mental illness. It is a craving for control. Even if a daytrader loses money there is always the promise of the next trade. Even if they lose money on each trade the more trades they do the more in control they feel. But how many daytraders have stories that end in success and how many have stories that end with psychological suffering and financial distress?
And part of it is the siron song of money. People promise that you can easily make money daytrading and make it look like you can. Websites and daytrading gurus show you example after example of successful trades, but don't make any trades themselves. They're too busy collecting dues. But I'm digressing from my story.
I got to the point where I had to do something or else my account would go to zero. I stopped and thought things out. I incorporated a stop loss strategy and managed my risk by buying more positions and placing limits on how much money I could place in any single one. I also learned how to short stocks so that I could profit on down days - something that came in handy later.
I stuck to my short term 1-2 day horizon and thanks to my risk management made money. Made a lot of money. Over the course of two years I had over 10X what I started with.
But I looked back and saw that if I had held my positions in a longer time frame instead of taking quick profits I would have actually made more money. Looking back I see that I was still in a manic daytrading mode that demanded instant results. My next challenge was to learn to get away from that. I got to the point where I really had to anyway in order to continue to make large profits.
The secret no one tells you is that no one gets rich daytrading stocks. The problem is that you can only put so much money into short term positions. To do that you need to diversify in a large group of stocks and use a longer time frame. That is why people who are good daytraders - such as Jea Yu(I'm guessing he really trades, know him from his book) - tell you to keep 50k or 100k in your daytrading account and take any profits that take your account over those limits into your bank account as a paycheck. But then there is no useful way to use the extra profit/savings.
That's why hardly any of the real big players in the stock market are daytraders. George Soros, Warren Buffett, etc are not daytraders. Those that are big daytraders usually do it by playing something like the S&P futures or QQQ's - indexes - instead of single stocks.
Over time as I matured I did evolve to the point where instead of manic short term trading I was able to manage 10-30 positions at a time in a portfolio with a holding period from days to months to years. Days if its a dud and I get stopped out. The longer the better. What I do is go long in stocks that are in sectors which are outperforming the market and short sectors that are underperforming. That's how hedge funds operate. And not coincidently it is the hedge funds that are outperforming the market now and not the daytraders or the Janus funds.
My longs don't come from the popular stocks. Right now they are stuff like medical companies, railroads, parts stores, medical product companies. You could never get me to buy into a JNPR, JDSU bubble now....lol. That is where I short. But I'm out of shorts now. That time will come in the next few weeks.
The funny thing about this is - and maybe this is the real lesson - since I've gone from daytrading to holding for a longer time frame my profits have been larger and more consident. But not only that - I have a peace of mind. I have no worries about the positions in my portfolio. One single position means nothing. Its the workability of my strategy and commitment to cutting loses that make me money. Not individual stocks or what the market is doing. And as for the market is doing that doesn't matter because even my long positions tend to go up a little even when the market drops. When I daytraded I always felt that I was at the mercy of the Nasdaq. Watching the Nasdaq chart and always worrying. Now I don't worry about that and being like that makes it a lot easier to be more objective about things. And lets you devote your energy to more fun and useful things. It's nice when the market stops being something that your life centers around and becomes something that helps you live your life more fully.
This is the trading aspect of my business. And I consider it a business now instead of a roulette wheel. The other side is a newsletter I run and I don't want to talk about that here on this board. But I'll talk about my experiences in that industry and with journalists, and other websites and so called gurus in print and the net if interested. Maybe that is another topic.
