How Do You Start Trading?

[klainey 10]

hi,

 

I am looking at all the platform traders on the Internet and to say I am:confused:is an understatement. I think the more I look the more confuses I get. A lot say you need experience like TradeStation, that asks if you have had at least 2 years trade experience. I have been using a demo account by Mirus Futures / Ninja Trader.

 

Could someone please tell me if they know of a user friendly platform to become a member. I feel I am slamming my head:crap: and pulling out my hair.

 

Thanks Kerry

[zdo 20]

One alternative is Ninja trial, free Gain data feed and a very small, real FX account* - which you trade and manage and protect as if it had 3 or 4 more zeroes on it.

Become so proficient at losing and sizing your losses that a loss at any scale just doesn't matter anymore - ie apply discipline here.

Optimize to the smallest time frames possible so that you're screen time is busy, productive and you get high a quality and quanitity of effective practice.

If you don't have an edge be like a kid in a toy store for a while - try everything... you'll later be naturally guided back to the ways, methods, techniques that are true to your nature - ie don't apply discipline here for now. Instead apply reckless curiosity.

 

Keep in mind that others may tell you to do the exact opposite of all these recommendations above. The industry and most of the players won't tell you that small real trumps big sim in the long run, etc. Ultimately only you can really discover what is true for you.

 

* Oanda is as good as any for this

[thalestrader 14]

Hi there,

 

I think Zdo's suggestions are very good - a small fx account, and Ninjatrader with the free Gain data feed. I am hesitant to agree to the smallest time frame suggestion, but then again, viewing price through any discreet unit other than itself, e.g. time, volume, tick, etc. is arbitrary.

 

I would suggest that if you are truly new to trading, if you really are starting out from scratch, then do yourself a favor, (it will cut years off of your learning curve), and focus on learning to trade around support and resistance. Resist the urge and desire to find a magic bullet or Holy Grail in somme system, indicator, trading course, siftware, etc.

 

The Holy Grail is to be found by trading price action itself coupled with sound risk management.

 

If you already have caught indicatoritis (the chronic need for something external to yourself and price action on which to base decisions due to an extreme disbelief that everything you need to know to decide how to trade is already on the price chart) then for goodness sake do not spend a dime on any system! There are folks out there who have provided "systems" that will work so long as you use sound risk management, and they have done so for free. If you want some suggestions, reply to me here in this thread and I will respond with a few suggestions here in this thread.

Good Luck to you!

 

Best Wishes,

 

Thales

Edited June 23, 2009 by thalestrader

[Dinerotrader 10]

Thalestrader

I am always ready to here suggestions from you on systems you feel are workable. I am currently trying to decide what system to start using in simulated trading. A couple strategies on my list would be:

Candlesticks with S/R lines

Bounces off the 20EMA

 

It seems that the most respected people on this forum do not use indicators much but struggle more with fine tuning exit strategy and money management. All suggestions you can provide would be appreciated by many of us novices. Thanks.

[thalestrader 14]

Thalestrader

I am always ready to hear suggestions from you on systems you feel are workable. I am currently trying to decide what system to start using in simulated trading. A couple strategies on my list would be:

Candlesticks with S/R lines

Bounces off the 20EMA

 

It seems that the most respected people on this forum do not use indicators much but struggle more with fine tuning exit strategy and money management. All suggestions you can provide would be appreciated by many of us novices. Thanks.

 

 

Hi imorgan,

 

I reiterate that, in my opinion, you will serve yourself best by not looking for a system, but rather to learn simply to use observable s/r and learn to trade off s/r.

 

I think that adding candlesticks to s/r is an obvious close second choice. I believe that that is the approach used by Brownie, and he has posted some impressive results.

 

As you know, I use the 20 ema on a 5 minute chart for day trading stocks only - I do not use it anywhere else; and even there, it figures in fewer than 10% of my trade decisions.

 

When I offered to share some suggestions with the OP, I had in mind suggesting an indicator approach that works well with forex. At forex factory dot com, I would suggest Sonic's thread as a good read.

 

Also at FF, and mentioned elsewhere here at TL, are two excellent threads - James16 at FF and Trader Dante's thread at t2w. I posted the link to Trader Dante's thread in the pin barthread here this morning. You can google James16 and Sonic and find them easily enough.

 

This weekend I became aquainted for the first time with The Rumpled One. I think he has something worthwhile there, though I have a very preliminary and incomplete understanding of his approach.

 

But, in the end, I do not believe that one can beat simple S/R. I've been working with my daughter, who wants to learn to trade as a summer project. I have her trading a small microlot account at FXCM. All she knows is what I have shown her - trendlnes, support, resistance, highs, lows, prior highs, prior lows, and just a small bit of fibonacci (extensions not retracements).

 

She wouldn't know a stochastic if it jumped out of her closet or a MACD if it crawled out from under her bed. It has been very much like Rousseau's Emile. She is removed from the influence of all the Grail seekers (among whom I used to count myself) and the sellers of pseudo-grail systems (to whom I have generously contributed thousands of dollars over the years). She knows of no other way to make trade decisions other than what I have shown her - all of which may be found here at TL in my posts. I have nothing to hide and nothing to sell.

 

So, how is she doing? Well, she started trading live on Friday with $25 in the account. As of this moment, she has a balance of $42.70 - a feat she accomplished by trading 1 microlot/trade, which is worth 10 pennies/tick (thats $0.10/pip for you forex "purists"). She buys breakouts above resistance and shorts breakouts below support. She trails her stops according to the natural stops the market provides. She has an average profit of 59 ticks/trade.

 

Oh, and did I mention that she is nine years old and just finished the third grade?

 

Best Wishes,

 

Thales

[Dinerotrader 10]

Thalestrader-

I appreciate the information. The path to getting better at using S/R seems very unclear. At first glance, drawing S/R lines is pretty easy. Getting to the point where you have high confidence levels in those S/R lines probably just comes with lots of screen time in drawing them and determining if you were correct.

 

Is there any book or concept that took your S/R line identification to the next level besides just practising the simple S/R 101 principles?

 

If your daughter wants to switch places with me for a week so I can learn from you and she can watch over my wife and 4 sons (all under the age of 5) I would be okay with that.

 

All the best.

[ant 10]

I thought I'd provide my perspective on trading as well...

 

I used to use support/resistance areas and then monitored price behavior around those areas. Although it intuitively makes sense, I had a tough time trading using this simplistic trading approach. These S/R levels held just enough to keep me thinking that this is a good way to trade profitably over the long term. I've found that when these S/R levels do hold, I would be late to the party if I wait for confirmation once price trades in that area. With the good trades, price is rejected from those areas fairly quickly. When they don't hold, the market gives traders enough time to enter. I think that's because it's normal to see a minor reaction (a pause) around those areas most of the time. My view is that the best trades only give traders a small window of time to enter (opportunity does not last long) and the trade feels uncomfortable at first. If a trade feels comfortable, it most likely isn't a good trade. Another key issue I had with this approach is that most traders see the same S/R levels and use the same technical analysis tools to monitor price, i.e. most traders conduct their business in the same areas at the same time. I didn't feel this gave me an edge over anyone else.

 

Now, I still identify key reference areas in my trading. However, I now try to understand what the market is doing. Which timeframe is dominating the market? Is it a long liquidation break or a short covering rally? Is it a real breakout? What's going through the heads of my competitors? If the longer timeframe is dominating the market, basic technical analysis and short-term S/R levels do not often hold. The longer timeframes do not care about these levels and the longer timeframes trump the shorter timeframes. Same thing with liquidation breaks and short-covering rallies. When the market needs to balance its inventory, S/R levels usually get mowed over during a vicious short-covering rally or liquidation break. Learning to "read the market" is hard work and takes a lot of time, and the learning never ends. However, I believe that having the ability to interpret the market and understand what your competitors are doing/feeling (e.g., feeling the anxiety of shorts or longs before they throw in the towel and cover), provides an informational edge that few traders have. Unlike many rigorous trading systems, this type of edge never goes away since the trader is capable of adapting to the changing markets.

 

I use Market Profile to help me understand market context. Market Profile is only 25% of my trading, another 25% is probably understanding market logic (not based on Market Profile), and 50% is the mental aspect of trading (psychology). I manage risk by identifying good trade location and monitoring for trade continuation using the Market Profile. I constantly strive to think in terms of probabilities and continue to adjust my risk as the odds change. My goal is to always exit a winning or losing trade on my own and not have my protective stop take me out. Obviously, I'm not always successful, but that's my goal. As everyone knows, trading is not easy. I also believe that the markets are complex and require a lot of knowledge and experience to trade consistently profitably, which I work on every day. For me, the journey to become an expert trader is extremely enjoyable. Without a passion for trading, I can't imagine why anyone would choose to trade for a living.

 

Antonio

[thalestrader 14]

The path to getting better at using S/R seems very unclear. At first glance, drawing S/R lines is pretty easy. Getting to the point where you have high confidence levels in those S/R lines probably just comes with lots of screen time in drawing them and determining if you were correct.

 

The path seems unclear because the path itself is so easy and simple that our minds reject what we see, and instead we throw obstacles to our vision between us and our objective.

 

I have posted many charts of my recent trades here at TL, many of which were posted in real time, prior to a trade being triggered. Look at those charts! A simple line draw across a recent high or low. So simple, even a child can do it! A buy stop or sell stop placed a tick or two or a penny or two beyond that line and I'm in. A stop loss goes a tick or penny beyond the most recent natural stopping point against the position.

 

You speak of getting to the point where you have high confidence in those levels. But the levels simply are! Support and resistance points are facts to be observed. It is yourself in which you desire confidence.

 

You must listen to yourself (γνῶθι σ'αυτόν- Know thyself): You conjecture that such confidence comes from much practice drawing trendlines and determining if you were right.

 

But how will you judge whether you were correct or not?

 

The implication is that upon having drawn a trendline or otherwise having identified a support or resistance level, you would then paper trade around that information. If that trade would have been profitable, you would then conclude that you drew that line correctly. Conversely, if that trade would have lost, you would conclude that you did not draw that trendline properly. You would learn nothing of value from such an excercise. After all, trading based upon support and resistance is not a holy grail that will assure only profitable trades.

 

Is there any book or concept that took your S/R line identification to the next level besides just practising the simple S/R 101 principles?

 

For the speculator, there are, in my opinion, only two must read books:

 

Reminiscences of a Stock Operator by LeFevre and How I made 2,000,000 in the Stock Market by Nicolas Darvas.

 

After those, I would suggest How Charts Can Help You in he Stock Market by William Jiler and Technical Analysis of Stock Trends by Edwards and Magee (try to find a used copy of the 4th edition or earlier as later editions were published after the deaths of both Edwards and Magee, and subsequent editors have damaged the book's original integrity and usefulness).

 

I am also a big fan of IBD and William O'Neil: I highly recommend his most recent edition of How to Make Money in Stocks. He has annotated charts of the 100 most profitable stocks of the last 100+ years. These patterns occur not only on weekly and daily charts, but all time frames.

 

 

If your daughter wants to switch places with me for a week so I can learn from you and she can watch over my wife and 4 sons (all under the age of 5) I would be okay with that.

 

You do not need me. I have nothing to teach. I have no secrets to tell. Everything anyone needs to know to trade as I do may be gleened from reading my posts here at TL and studying the charts I have posted.

 

It is up to you to decide whether or not you will commit to trading according to what the market is telling you through pure price action alone. My way is not the only way to achieve consistent profitability through speculation, but I am convinced it is the simplest and easiest; and because it is simple and easy, it is also the most difficult for folks to accept.

 

I'll leave you with two charts - the EURUSD and the 6E. I just took these screen shots as I fam finishing typing this. A buy stop would go just above the blue line, and the stop loss goes just below the red dotted line. Will it trigger? I do not know. If it does trigger, will it be profitable? I do not know. But that is how I would trade the 6E if I were trading it right now (which I am not). That is how my daughter would be trading ithe EURUSD if she were trading right now (and she is not).

 

The point is this: Win or lose, if it triggers, it is an excellent trade. An excellent trade, win or lose.

 

Best Wishes,

 

Thales

Edited June 25, 2009 by thalestrader
spelling

[DbPhoenix 42]

I thought I'd provide my perspective on trading as well...

 

 

If you're still around, klainey, I hope you study this post carefully and translate it into a series of specific actions.

 

It's not about platforms or systems or books or courses or seminars or CDs or DVDs or workshops or even being mentored, unless it's exactly the right person, which will be unlikely. It's about understanding how markets work, particularly auction markets. Why price moves at all, much less in a way from which you might profit. What traders are doing to move price, and how aggressively -- or not -- they're doing it. And where they're doing it. Which brings us to support and resistance.

 

Most traders wouldn't know support and resistance if they fell over it and broke both their legs. They don't understand what it is, so they find it in peculiar places that too often lead them either to the conclusion that their method of finding support and resistance works, even though it's entirely irrelevant to actual support and resistance, or to the conclusion that support and resistance "doesn't work" and is a lot of hooey.

 

The unfortunate fact is that most beginners have no idea what they're looking at. Many of them never will, either because they're not intelligent enough, or they don't work hard enough, or, oddly, they don't care. They don't much care, for example, why price is reversing. They only want an indicator or pattern that will tell them that price is reversing. They may even have marginal success in finding one that will work. For a while. In a marginal way. But not in a way that they have complete confidence in. Not in a way that will enable them to make a living trading.

 

So if you're in it for consistent profits, much less to earn a living, forego the short cuts. Learn what it's all about. Take your time. Study the charts. Watch price. Don't do anything about it or even wonder what you would do about it if you were to do anything about it. Just watch it. Study it. Learn to understand it. Eventually you'll learn how to play it for profit.

[thalestrader 14]

I'll leave you with two charts - the EURUSD and the 6E. I just took these screen shots as I am finishing typing this. A buy stop would go just above the blue line, and the stop loss goes just below the red dotted line. Will it trigger? I do not know. If it does trigger, will it be profitable? I do not know. But that is how I would trade the 6E if I were trading it right now (which I am not). That is how my daughter would be trading ithe EURUSD if she were trading right now (and she is not).

 

The point is this: Win or lose, if it triggers, it is an excellent trade. An excellent trade, win or lose.

 

Best Wishes,

 

Thales

 

Following up on the potential EURUSD trade posted last night, using the natural stopping points the market gave us, the final result would have been a marginally profitable trade for approximately 10 +/- ticks (in at 1.3955 and out at 1.3965). Not a wildly profitable trade, by any means, but a surprising number of such trades will result in the 50-100 tick profit.

 

I have included a screen shot of the GBPUSD which shows what I mean: A sell stop would have gotten a trader short at 1.6366, and using a natural stop method, the trade would currently be +120 ticks open trade equity, with a stop loss that would capture approximately +90 ticks.

 

These opportunities occur far more often than most realize.

 

And each can be identified in real time, before hand, with entry orders entered well in advance of the trade, and all without the use of volume, better volume, fractals, fibs, Ganns, squares, magic, market profile, worrying about your "competitors" and what "they" are doing, and with no understanding of what "fundamentals" are behind the move, not knowing whether price is moving on rising volume or falling volume, no need for "permission" from "indicators" (one of the silliest things traders say is that they "had permission from my stochastics" to take a trade, or "I would have taken that trade but my MACD didn't give me permission" - You should trade to be free, not to be enslaved to a mathematical equation). You do not need to use phrases like market structure or market flow, and I admit I have no idea and nor do I care to know what folks mean when they speak of "market context." You do not need to buy CD's or DVD's or subscribe to a chat room or trading room or a mentor or load your bookshelves with high priced priced text books.

 

 

Identify the immediate trend of the market, and trade accordingly.

 

Do that and win or lose, if it triggers, it is an excellent trade. An excellent trade, win or lose.

 

Best Wishes,

 

Thales

Edited June 25, 2009 by thalestrader

[BlowFish 10]

I've been working with my daughter, who wants to learn to trade as a summer project.

 

Wish I had had you as a parent Wish I could interest my son to the level that he would want to follow through.

[BlowFish 10]

OP if you are still round you should really read and digest the two nominated posts. If you can get to the point where you might actually believe them you will be on your way.

[Dinerotrader 10]

Thanks everyone for all the useful posting. It is threads like this that make TL so valuable for the beginning traders who are looking to get started in the right direction. I read postings from this forum for about 6 hours a day right now (day-job is slow) because I consistently find pockets of great information that help me to build a wide base of wisdom from those that have been on this path for a while. Thanks and keep up the great posts.

All the best.

[thalestrader 14]

One way to start trading is to identify a potential opportunity and trade it.

 

This mess from the EURJPY sure looks to me as though it should resolve to the downside. However, looking at current price action, it is a long trade opportunity that looks most likely.

 

I took two shots - one with a wider stop and one with a relatively close stop. I'm not real comfortable with that close stop - as I said, PA on this pair has been a mess today.

 

At any rate, I'd have a buy stop at 134.29 (I see that I have typed 134.35 as the buy stop on the chart - that is incorrect. I'd correct it now but I have to run. Sorry about that error).

 

Best Wishes,

 

Thales

[Dinerotrader 10]

How much weight do you give to chart patterns in your analysis? I noted on this chart what looks like a pretty good set up to go short on but I don't have a good feel for chart patterns yet.

 

[thalestrader 14]

How much weight do you give to chart patterns in your analysis? I noted on this chart what looks like a pretty good set up to go short

 

I agree. In my post above, I said the following:

 

This mess from the EURJPY sure looks to me as though it should resolve to the downside.

 

I've attached a 15 minute chart, where I note the same formation you outlined. I would right now be long from 133.29, and it now looks as though that stop loss at 133.11 would be the right place to exit the position if price does retrace that far.

 

As to chart patterns, I use particular chart patterns support trading decisions once the pattern completes.

 

As in this case, however, I would not allow a developing but incomplete pattern to prevent me from taking a trade opposite that which the chart pattern suggests.

 

I would still be comfortable staying long here with a stop at 133.11, even though I'd be 15 ticks in the red at the moment. Actual HH's and HL's have to trump the mere potential for LH's and LL's.

 

Best Wishes,

 

Thales

[Dinerotrader 10]

Thanks for your perspective. I see chart patterns mentioned around the forum but I don't read my posts where people are using them in their trading strategy. They are probably more rare than is preferred for a day trader style but maybe I am wrong.

[ant 10]

I look for chart patterns but I don't trade them in a vacuum. I like one of the examples that Thales posted in this thread where there was a gap down open and the gap wasn't filled so he traded S/R levels in the direction of the gap. IMO, that's an example of the way to trade. I think understanding market context is essential for successful trading as I've mentioned in my prior post. The patterns I look for in weekly, daily and 30 min bar charts are mostly double tops/bottoms, trading ranges, and trends. I look at weekly and daily bar charts prior to the open for perspective and to identify the market condition in various timeframes. Intraday, I look for patterns in the Market Profile graphic which is what I actually trade off of. It seems that over time my mind has been conditioned to seeing the markets in terms of trading ranges and trends so that I can adjust my trading accordingly. All other patterns are secondary and not as important to me. I do try to stay aware of other patterns and technical analysis indicators, such as trendlines and S/R levels followed by most traders, to help me determine if shorter term traders are dominating the market, which would usually indicate a low confidence market. Identifying low confidence markets allows me to lower my expectations for a trade versus letting the profits run on a high confidence trending day, for example. Pattern recognition and understanding market context are areas where human beings excel over computers. These are areas that can provide a real edge for the trader in the marketplace. Those two concepts dominate my trading. Any trading system that can be automated I avoid like the plague because I know that I can't compete with others with deeper pockets in this arena. Frankly, that trading style just doesn't suit me anyway even as a software developer.

[klainey 10]

Hi,

yes I am very new to this. I will have to read these messages again. Not to mention google the net to get my head around some of the terminology used. Any of your suggestions would be appreciated. But please think of me as your 9 year old daughter most of this is way over my head. I am going to check out your other messages. Thanks again. Kerry

[DbPhoenix 42]

Hi,

yes I am very new to this. I will have to read these messages again. Not to mention google the net to get my head around some of the terminology used. Any of your suggestions would be appreciated. But please think of me as your 9 year old daughter most of this is way over my head. I am going to check out your other messages. Thanks again. Kerry

 

Terminology can be a challenge, particularly if those who are discussing something are using the same words to describe different things. Perhaps the following will help get you started:

 

The Nature of Support and Resistance

 

Support & Resistance and Trading Trend

 

The Basic Law of Supply and Demand

 

Auction Markets

 

As a start.....

 

Put simply, support is the price at which those who have enough money to make a difference are willing to show their support by retarding, halting, and reversing the decline by buying. Resistance is the price at which those who have enough money to make a difference attempt to retard, halt, and reverse a rise by selling. Whether one calls this money professional or big or smart or institutional or crooked or manipulative or (fill in the blank) is irrelevant. If repeated attempts to sell below this support level are met by buying which is sufficient to turn price back, these little reversals will eventually form a line, or zone. Ditto with resistance.

 

A swing high or low represents a point at which traders are no longer able to find trades. Whether that point represents important support or resistance will be seen the next time traders push price in that direction. But everyone knows this point, even if they aren't following a chart. It exists independently of the trader and his lines and charts and indicators and displays. It is the point beyond which price could not go. Hence its importance, both to those who want to see price move higher and those who don't.

 

The first two posts to this thread address these matters, as do others here and there. However, finding S&R in real charts in real time takes more than just a couple of posts. But one must understand the nature of support -- and resistance -- itself before he begins to look for it. Otherwise, he will find what he thinks are S&R in some very peculiar places.

 

Before coming to any conclusions about what “works” or “doesn’t work”, and thus does or does not provide an edge, one ought to keep in mind that a given event -- such as price seemingly finding support or resistance at a trendline (or moving average, candlestick, Pivot Point, Fib level or whatever) -- may be only incidental to what is truly providing that support or resistance.

 

A fundamental misunderstanding of how "indicators" are calculated and what they're supposed to do can lead to all sorts of off-task behavior. We think we see the indicators indicating something, or not, and believe we have made an important discovery. We then devote our efforts to improving the hit rate and the probability of whatever it is we think the indicator is indicating when our efforts ought to be focused on determining whether or not the indicator is actually indicating what we think it's indicating. In most if not all cases, it isn't.

 

Consider the virgin being tossed into the volcano: sometimes it results in a great crop, sometimes it doesn't. Maybe tossing her in earlier or later will change the probability of a healthy crop. Maybe two virgins are better than one. Maybe six. Maybe tall virgins are more effective than short ones. And surely age is important. But does the robustness of the crop really have anything to do with tossing the virgin into the volcano in the first place?

 

The money under the pillow is not evidence of the existence of the tooth fairy, and spring will arrive regardless of whether the virgin is tossed into the volcano or not.

[Kiwi 16]

There are some excellent posts in this thread and I'm not really going to add much to it.

 

I liked a statement made by edabreau in another thread "That is probably one of the most crucial events of all. When I finally knew that I was not trading the price action, but trading my trade setups and rules."

 

I find that this is an important point. If you think you are trading "price action" or "indicator action" or whatever you are much more inclined to beat yourself up as the market moves in its merry way and you are not profiting because you are not "in." When you truly believe that you trade your tested setups and rules then, like when you truly believe that you can't tell whether this trade will win or lose, your trading will become much easier.

Edited June 29, 2009 by Soultrader
link redirection