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RobinHood

The Simple Epiphanies I've Had This Year

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I've been trading for 3.something years now. I've had nights where I've lost a few thousand (more than I make in 6 months from my day job). I've had months where I've lost more money then I make from my day job in a year. I've given up on holidays, trips and adventures so I could keep trading. It was all worth it.

 

I have not made it yet (I made more than I lost, but not what I would label professional consistency).

I'm about to begin scalping (I was a position trader) so I could lose a whole lot more soon but there is no doubt in my mind that I will eventually 'make it'. Its only a matter of time.

 

I'd like to share with the readers of this forum some of the concepts that have only really clicked for me in the last year of my trading journey, fresh from my trading journal. They are really simple and obvious and yet they have eluded me for so long.

 

 

Screen time

Reading about patterns and looking at static charts is one thing, but actually watching the market movements live is another. You pickup things you could not possibly pickup from a static piece of paper, the finer and more important skills required for profitability. 'Experience' is probably a better word for this. This is why you can have someone who has a read a chart pattern book and is able to see patterns on static charts, but is unable to compete with someone who is intimately familiar with a market through screen-time (and has not read any books) - he knows the tricks and the way things move, the shakeouts and fakeouts - he sees them before they happen. This is also why if you read a book on kick-boxing you still cannot possibly compete with a pro-kickboxer - you need to internalize patterns and automate reactions to them with your subconscious / 'feelings'.

 

Leverage

This one really depends on who you are as a person. When I started trading I was attracted to the really volatile speculative issues but they simply weren't for me. They may move quickly, but if you like trending less volatile stocks you can still make as much money by using leverage - since the risk of a 50% gap-down is just not the same. This is why you can make as much money trading futures moving .5%-1% a day as a stock moving 8% and in my opinion you can make even more as usually the solid movers allow you to move larger sizes without moving the actual market against you.

 

Starting capital

$1k isn't enough, neither is $20k (for most - exception here is those actively investing - e.g. CANSLIMers who only require IBD newspaper who today can get pretty cheap discount brokerage). It is possible to make it but really the odds are against you big-time when you have to buy data and charting packages and in many cases you are blocked of from trading many contracts because they are simply too big for you. I think here your learning curve will be really slow as you have to build up enough capital to the point where you can afford betters things - conducting your own serious research on historical data and getting access to better rates on brokerage and other data (market newsletters, metric software like TraderDNA etc). I've spent weeks organizing all my trades so I can go over them - something which would take TraderDNA a few seconds and probably with much more accurate and detailed metrics/stats.

 

 

Adaptation

This really relates to screen-time, it could possibly be the same thing but I think its important to give it a mention. IMO the real "secret" to all of this trading is quickly adapting to conditions and finding a style that suits your context. Adapting to conditions is skill you can only pickup from screen-time.

 

It can be pretty easy to make money when conditions are conducive to your strategy (e.g. buying breakouts in a strong bull market) but the real challenge to consistent profitability is how quickly you are able to tell the environment has changed?

Will you blowup (because you didn't learn proper risk management) or will you suffer 20%,30%,50%,70% draw-down (death by paper-cuts as I've heard before) before realizing something is different (which is what happened to me)?

 

The pro will quickly be able to tell that conditions have changed through his screen-time /experience and then either go to cash or change his strategy in response.

 

The only real lesson to take from this is implement proper money management principles so when you do get to this point your drawdown will not be so bad and you'll survive to trade another day and work on improving.

 

 

-----------------------------------

BTW, these days, I would also say shorter-term trading is a much better place for the trading newbie to start. You see in one week what would take you a few months to see and learn swing trading on a longer term time frame, things like the above concepts. The only downside is the overhead.

Edited by RobinHood

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If I put this in a bad location, apologies.

 

Don't mind if it is moved to another thread/location.

 

It is not in a bad location at all, no apologies needed, it is a great post, what I meant was you could include your comments also and add some more, in the other thread where there is a debate going on edge v/s mentality, sure to generate more interest.:)

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