Mindset

I can't say I know the answers but here's my story.. Was trading a signal and inadvertently hit the sell button instead of the buy.... double up to try and make it back to even, and again and again - losing 13,000 on my first week of trading for a living. Good career choice, huh? Didn't trade for a year after that trying to sort out a) a system I was comfortable with b) learning how to control risk c) learning to control / handle emotion Lessons for newbies 1. Trade a simulator EXACTLY how you would your own money - ie put in a spreadsheet all your trades and your daily profit and loss. Be absolutely honest with yourself. Until you make profits consistently do not trade with real money - some may never actually get there - this is not failure. 2. Preservation of capital is 100 x more important than profits - there is always another setup. 3. Have a plan - a complete plan of when to get in and how/why to get out - profits and LOSSES. This will take some time and is not as easy as it sounds. Understand that trading is extremely simple and extremely difficult all at the same time.

I merely postulate that markets are fractal in terms of volatility but it is not quite a square root relationship - close enough to be useful but not exact. There have been a no of studies from Hurst to Mandelbrot that have tried to encapsulate this mathematically. Edit - correction, OTHERS have used Hurst's work on the Nile flooding and translated his theories of persistence into markets.

There is a relationship between price and time. Volatility ie risk is generally a square root relationship. (volatility power of 0.5) For example, to obtain a 10-day volatility, multiply the one-day volatility by the square root of 10 . However this is not an exact rule - some studies have found the relationship to increase with time horizon BUT it always hovers around 0.4 - 0.6.

Become the 1 point king. Can you expand on the above please?

jonbig04 I think actually you are spot on - I spent 4 years coding up every indicator and strategy you could think of, "mastering" the techniques, etc. Now I spend all my time looking at how to discipline myself to trade a system I know has a very good edge. It is surprisingly difficult but at the same time most rewarding - the discipline that is - the strategy is about 4 lines of code ;-)

Don't be cheap and buy Camtasia and /or Snagit. Both are excellent. Be aware though that if you record live ticks and commentate you will need tons of ram and a big processor otherwise you get the speech lagging the screen. Oh and Be prepared to watch yourself make a complete ***!!** of yourself - my best one was where I found myself shouting at the replay " No buy don't sell".

DbPhoenix Do you think it's realistic for a beginning trader to find a trading method that is 60% + right? And Profitable? Maybe you have got to that great place with your experience but for a beginning trader I think that is unrealistic.

You'll have to explain that comment dbphoenix. I myself average 45% "right". You seem to be implying that your average is significantly higher? - if so I take my hat off to you.

"Fail to plan = plan to fail" Also how can you objectively measure how you are doing/ whether you are getting there if you don't know what you want to do ( "make money " is not an objective - 200% gain on capital is). From my minimal research I have found most traders hover around the 50-55% "right" mark. One or two very successful ones average about 40%. I am talking long term averages here.

I knew I shouldn't have done this. Let me give you a winning strategy then. This is on the mini Dow. Wait for 60 minutes from the day open. Buy the breakout, sell the breakdown from the opening range. Put your stop the other side of the range. Close at end of day. Now I am NOT saying that you will make money in 20 trades - but you certainly should not lose much. Most of the time you should make money (about 97% of the time). Trade it and develop it as you go along. One thing I do guarantee though - you will be a much better trader at the end of the 20 trades than you were at the beginning. "This is like saying to be a Formula 1 champion, you just need to be a good driver and that the car is irrelevant." There is a certain misunderstanding here - of course edge is important. You must have a positive expectancy. BUT in my opinion gaining the right mindset has very little to do with edge and is MUCH more important in the long run. To continue the analogy - this is a lifelong race, winners get to the end, 95% retire or crash- so does it matter if you drive a Mcclaren or a Ford?

Here is a simple test about the importance of edge vs mentality. Pick a strategy that you know makes money eg open range breakout. Write down entry , exit and stop parameters. Trade EXACTLY according to this plan. Repeat this exact trade 20 times. It will make you money ( not necessarily in the 20 trades ) BUT do you have the mindset to do it? 95% of people cannot do this - If you think you can try a demo account if you like. But assess at the end of 20 how you did - and don't lie to yourself. I have been trading full time for 6 years and never found anyone who can get to 20 without "interfering" with it! So the edge is there, but the mentality to follow the chosen plan may prevent someone from adopting the correct behaviour modifications to become a successful trader. What's important is NOT the edge - it's the ability to follow it. For the first 3 years of my trading I thought the edge was the thing and it really isn't. Doesn't stop me constantly striving to develop a better mousetrap however! Just to spur the conversation on however - to follow the plan you have to "own" the edge .... discuss.