New Trader here, Need some help

[awhoa99 10]

I have been day trading since the 2nd week in July. I have lost about 1300 dollars. Would that be considered a lot, a little, or just about right for the first two months when losing. I probably make about about 30 to 40 trades a day, making that about 5000-8000 shares daily. I was wondering if that is overtrading or just right? Any help would be great. I have felt that I have kept my losses pretty tight especially since ive started in the dreadful summer.

[Soultrader 12]

Hi awhoa99,

 

Couple of things I would like to point out. $1300 is not alot of money to be losing as a beginner trader. But just because you are losing less than the average new trader does not mean you are trading better.

 

I assume commision is taking a big chunk out of you since you make 30-40 trades a day. This is approximately 15-20 roundtrips? Or are you making 30-40 roundtrips? Regardless I think you are overtrading as a new trader.

 

If you are scalping than 30-40 roundtrips is understandable but I do not recommend any new trader to begin scalping. Couple of things you need to keep in mind. How you been demo/paper trading? Do you have a trading strategy that fits youre style? Do you have a methodology that works?

 

Trading because the stochastics pointed up or the RSI is up is a sure way to lose. You need to find a strategy that you feel comfortable with and that represents you. For example, my core methodology is based on market profile and pivot points. If you are unsure what your trading method is, you probably do not have one yet. It is crucial to study and find one first. Other examples could be: fib trader, Gann trader, etc... But make sure you become an expert in one method.

 

Linda Raschke said it best. "You can make a living trading just one setup." There is no need to trade as much as you do. Trading should be boring and not exciting. Most of the time should be spent waiting for the right opportunity. I make anywhere from 1-5 roundtrips a day. But I trade in a sniper mode waiting for high probability opportunities. Remember, trading is a game of probabilities.

 

Also, what stocks do you trade? What is your average size positon? Do you use stops? I would like to know a little more about how you control risk. You mentioned you keep your losses pretty tight but maybe that is causing a lot of losses by being stopped out?

 

Regards,

 

Soultrader

[carter 10]

30-40 trades a day as a new trader shows that you do not have a strategy. It looks to me that you are buying or selling just because it feels right.

 

My advice is to drop whatever you are doing right now and just observe. How many different stocks do you trade? Do you know the stocks personality? The market makers behind it? etc... Would you buy a car without test driving it first? This is the same as trading.

 

If you don't mind I would like to hear more about your strategies that you are using. How are you basing your buy and sell decisions?

[awhoa99 10]

I pay by share, as I am trading firm capital until I am able to make some profits. As far as entry goes, I have charts pulled up. I look at 5 minute charts to see if the stock is going in a certain direction, using MA and MACD to see of any convergence. Then, if there is convergence, I switch to a 1 minute chart using MA and MACD and then I look at the level II and the tape to pick a good entry point. I trade off earnings, when there are earnings, as well as certain commodity stocks, such as gold, steel, oil, coal, oil rigs; NYSE only. I usually do 100 to 200 share lots, depending on how it looks. I feel as though sometimes I am chasing profits, which could be from my use of the MACD and stochastics. Once in a trade, I set a stop of about 10-15 cents, as if this usually gets hit, the stock doesnt retreat back. Please give any suggestions. I read articles all the time, and it is hard to decipher which articles are good and which are not, as they usually conflict with one another, such as the use of such indicators as the MACD. Today, I traded and lost 200 within the first 40 minutes which is very uncharacteristic of me. I was rather upset, and I got stopped out as if any new trader loses 200 in a day, they are stopped for the rest of the day. After this day, i wrote down a few rules to live by, which I hope help. I need to tighten up my trading and begin to have a better way of judging entry points. Please give me lots of suggestions. I have read the other posts numerous times, every bit helps.

 

Thanks

[chaostrader 11]

You say you trade the firms money.. are you a prop trader? Do you work for an investment firm?

 

You seem to have full discretionary control of your trading capital.

[Soultrader 12]

awhoa99,

 

You probably are getting into the stock at a later point than most professionals. You wrote that you may be chasing profits which you probably are. And this is due to the fact that you trade using lagging indicators. I am sure you read alot of articles convincing you to trade with indicators on multiple time frames. But this is a strategy that all new traders use. Professionals rely on price action only. Indicators only exist to indicate or confirm price action.

 

Do not base your trading decision on indicators. Instead use it as a tool of confirmation. Learn to read price action. Then until you get used to it you can rely on indicators to confirm your decision. The MACD is not a great tool to use when you are trying to trade on a 1,5 minute chart. In my opinion it is way too slow.

 

You are still very new to trading. Know beforehand that trading can take a lifetime to master and at least 1-3 years to trade profitably. Your first year should be for you to craft and perfect your skill. I am not saying you need to lose this year.... but you need to spend time developing your trading style.

 

So far, it seems like you have only one trading method based on the moving average and MACD. I suggest you unlearn and learn. Hope this helps.

[awhoa99 10]

So what type of strategy do you suggest as I start out. Should I just be looking at the level II screens and price movements. Please help me out and give me some direction as to what I should be looking for and how I can choose a winner from a loser.

 

I am considered a prop trader. I have full control of what I do with my capital, and I have a trainer that helps me day to day.

[Soultrader 12]

How is your current trainer helping you out? Does he stand by you when you trade? Is he teaching you any trading techniques?

 

My advice for you is to not get absorbed too much with Level 2. Once you are certain of your entry point, you can narrow it down to Level 2. Other than that, it should be your last resort.

 

What you need to do is study different methodologies and strategies and find something that fits your personality. Are you familiar with pivots, fibs, market profile, market internals, etc..? Try to expand your mind to the different techniques available to trade the markets. Pick one and work on it. Forget indicators. They are useless.

 

My methodology is based on pure price action using market profile and pivots. I use market internals as well to gauge market strength or weakness. This method may fit you or may not. This is up to you to decide.

 

I know of traders who trade price action based on moving average clusters and fibonacci clusters. Traders have their own preference of style but all successful traders have found a style that they feel comfortable with. They have picked one style, worked on it, and have become experts at it. Tape reading is an excellent skill to have but unless you are a pure scalper you need to learn other methods. Combine tape reading with different strategies and you will have an tremendous edge over other traders.

 

Do you know what kind of trader you are? Are you aware of your style of trading?

[awhoa99 10]

Thanks for all the help.

 

As far as pivots go and fib numbers. I am somewhat familiar with fib numbers, but as far as pivots go, are there any posts on them that go in depth bout them. Are you able to plot them on a chart using software or are they done by hand. I am a little confused by them. Sorry if this question sounds dumb but I am still new and learning

[Soultrader 12]

Here is a quick link to pivot point formulas:

 

http://www.traderslaboratory.com/forums/derivatives/35-pivot-point-formulas.html?highlight=pivot+points

 

If you want more info, I write about pivot points 80% of the time in my articles or setups. Use the search box in the left hand navigation and input "pivot points." You should get a list of threads or videos on pivots.

 

As far as I know you can purchase commercial pivot point indicators. Most trading platforms should also come with it. But since I use my own custom pivots, I plot everything manually everyday.

 

Here is an article I wrote about my methodology using pivots:

 

http://www.traderslaboratory.com/forums/trading-articles/351-advanced-pivot-point-trading.html

 

This is no exact science but I am able to use it successfully because I understand market internals and market concept. You need to understand the bigger picture before you can narrow it down to your entry points.

 

PS: Its always good to ask questions, so feel free to keep asking

[awhoa99 10]

thank you so much, im gonna look into this more this week and ill let you know how it goes. And you just put in the numbers for intraday?? Like I use the high, low, and the close from the previous day in order to create the points for todays use?? is that right?

 

and from there, what type of chart should i be using? 5 minutes? still a little confused?

[Soultrader 12]

The pivot points can used for intraday, weekly, and even monthly charts. Simply take the high, low, and close and use the formula to get daily pivots.

 

It does not matter what time frame charts you use. I usually plot all the daily, weekly, and monthly pivots on my 233 TICK chart. One quick note though.... the basic concept and formulas of pivot points are just starters. In order to use them successfully there are many other information that you need to understand.

 

For example, in my article of "Advanced Pivot Point Trading" I mention how I use clusters. I also adjust pivots manually after plotting them. I will go over the charts and figure out the significant pivots from the less significant ones. I also use market understanding and market internals with pivots. This gives me an edge instead of just using pivots which alot of people follow.

 

Also, I trade index futures. Different markets require different strategies so you will need to study the methodology to see if its works or not. Remeber, I do not trade a mechanical system. All trades are done discretionary so you need to have a "feel" of the market language.

[awhoa99 10]

I notice that in a lot of your posts about pivots, that you use it using certain market indexes. Can you use pivots with particular stocks. What stock react best with these types of pivots. I would guess high volume ones that move a lot??

 

Also, I do not want to sound like a cynic, but it seems that a lot of traders are tied down and in love with their ideas, which makes it hard to decipher what information is pertinent. I can find tons of traders who love MACD and stochastics and trade simply off that, and then I can find a ton of traders who say that is garbage and that pivots and bollinger bands are the way to go. It seems that they say to take emotion out of trading, but when it comes to the type of trading one does, they in fact use their emotion and become in love with their ideas.

[Soultrader 12]

I notice that in a lot of your posts about pivots, that you use it using certain market indexes. Can you use pivots with particular stocks. What stock react best with these types of pivots. I would guess high volume ones that move a lot??

 

Also, I do not want to sound like a cynic, but it seems that a lot of traders are tied down and in love with their ideas, which makes it hard to decipher what information is pertinent. I can find tons of traders who love MACD and stochastics and trade simply off that, and then I can find a ton of traders who say that is garbage and that pivots and bollinger bands are the way to go. It seems that they say to take emotion out of trading, but when it comes to the type of trading one does, they in fact use their emotion and become in love with their ideas.

 

I don't think traders are in love with their ideas. This would make them feel like a genious... and in trading the moment you think you know everything is the moment you have become a fool.

 

Good traders all have a distinct style of trading that they have come up with over their trading career. They have worked hard to develop this style and have tested their methodology and trading setups. Thus, their unique trading style gives them an edge over others. Trading style is like a fingerprint. No two are alike. Good traders have adjusted their styles to fit their personality.

 

The most important is that you find your style as well and become an expert in it. Too many traders search for the Holy Grail jumping from one methodolog to another without mastering one method. Study from the good traders and take what fits you. Then adjust it accordingly, implement new ideas..... and that becomes your style.

 

Also, price based traders like myself are not fond of technical indicators. Like the name states, they are indicators. My style of trading is discretionary but with a systematic approach.

 

Pivots work well in any market. You just have to test it out, take some data, and see if its suitable. Don't rely on them blindly though. Learning market language and internals is important to your trading strategies.

[carter 10]

awhoa99,

 

Just because a trader sticks to one methodology does not mean he is trading emotionally. Trading emotionally means not having a strategy or method and relying on feeling. Do not mistake this for intuition. New traders trade emotionally without a plan. If a trader trades strictly of off pivots, this is a plan. Having setups will help eliminate emotionaly trading as long as you follow your rules. You may been confusing the term "emotional trading".

 

Do you have setups that you follow religiously? Do you have rules that determine your entry and exits?

[awhoa99 10]

Another quick question regarding pivots, when the price does eventually cross the support or resistance line, how do you know when to enter the position, readin the tape?? Also, what type of stop loss should one use? is this done once again by simply reading the tape. Also, are these day trades usually, meaning holding for a longer portion of the day, or can this be used to scalp??

[Soultrader 12]

I trade intraday only and I scale out of all my trades. The next line of pivot is a common exit target for many pivot point traders.

 

The way I time my entries is based on tape reading and market internals. If price reaches a support pivot, but the market internals are pointing down I will not buy at this pivot. There is a good chance the markets will break this pivot and go lower. In this case I will short the retracement back to the pivot.

 

I do not use pivot points blindly. If a support pivot is right above the previous days low, there is a chance the markets will break the pivot and test the previous days low. Its important to know where all the key levels are to use pivot points successfully.

 

By market internals, I look at the TICK, TRIN, TIKI, Prem, and PC ratio. This gives me the feel of the markets. You dont want to be shorting at every pivot level in a strong market environment.