Hidden or Special Risk when Starting Out Daytrading?

[TroyMaster 10]

Hey guys,

 

this is another question I need to figure out when I jump in the cold water of the stoxmarket.

 

Obv. the biggest risk when starting out is to loose all your money - which almost all people do if I should believe the few scientific researches around daytraders.

 

But are there other maybe hidden risk or special risks Im not even able to think about because I dont have the horizon yet?

 

E.g I can Imagine that its not only hard to loose all money but that you might not recover from it psychological and gonna suffer the rest of your life.

 

Or you might not be able to go back having a "normal" job again.

 

Basicly I do know its a huge risk for me like it is for everyone to go into daytrading. I can win - but I will never be sure. Im just trying to figure out what is the worst case. How much can I loose? How high is the risk to give it a shot?

 

Thanks

Troy

[SIUYA 11]

you are young go for it. You can always get a job again, and you will recover from it.

Its not as stressful as divorce or moving house and plenty of people do that time and time again.

(if you were older +40 with a family etc; maybe the advice would be different)

[Tradewinds 12]

If you learn something valuable, you will have that for the rest of your life. Most people who succeed, keep on going after a couple of failures. Here is something else to think about; if you take no risk, and just live an average or below average life, then, to some degree you have already lost. For people who find success and money easily, it may mean nothing to them. So even though they have success and/or money, it may be a meaningless life.

Any psychological factors that a person deals with are probably related to issues other than success or failure in trading. Sure, success or failure in trading could make your emotional/psychological state worse or better, but it's probably not the real cause of a person's issues.

Personally, I have tried making things work, at a time in my life when I wasn't in a state that allowed me to have success. But, you can't wait for the perfect situation either. There needs to be some kind of balance.

Don't be insane. :doh: In other words, if something doesn't work, do not keep doing it over and over again. If you take some losses, take some time to figure out what went wrong.

The cash balance in your practice account should be steadily going up in value before you go live.

Try to write down trading rules, and a trading plan. You will probably abandoned your rules and scrap them, but keep writing them down. It's a process. You must go through the process.

[cpo188 10]

Hai Troymaster,

the best part of trading is day trade, you can control your risk and reward. The most important thing is your self discipline.When you 3 losses take a break and have holidays and think back.

[suckassjuice 10]

Well, there definitely is a worse case scenario if you're really interested in hearing about it. It involves only learning how to trade one side of the market (i.e. long) and adding to losing positions such that you get overly leveraged. Then the market moves violently against you and you lose MORE than your initial stake. That's a pretty grim scenario, but it's not quite worse case. After getting pummeled like you have never been pummeled before, you realize your personality can't cope with such a dramatic loss. The only way out is determined to be a bullet through your brain. Still not quite worse case. You happen to also be a bad shot and you fail to kill yourself. Instead, you survive as a quadrapelegic. FYI, this isn't fiction. Glad you asked.

[Rande Howell 10]

TroyMaster

Don't feel like the lone ranger in this. I just got back from the Dallas Traders Expo where a large number of traders came up to me and said something like this, "I got sold blue sky by groups telling me how easy it would be to make money trading. I had no idea what I was getting into. And I was unprepared for trading psychologically." A number of trader education groups also talked to me about their frustration with having traders in their internet classrooms following them as they trade -- and the traders doing the exact opposite of what the teaching trader is teaching them, all out of fear.

 

If you are going to trade you better learn a dependable methodology. And you better be prepared to retool your psychology so you don't waste a perfectly good methodology. What ever psychological demons you have been avoiding before trading, you will no longer have to worry about avoiding them -- because they will be stalking you. Most traders take 4 -10 years to "get" this. The markets will let you take whatever time you want to learn this. Get your head on straight for trading. It is a very different state of mind, most likely, than the one you brought into trading.

 

Rande Howell

[Tams 20]

TroyMaster

Don't feel like the lone ranger in this. I just got back from the Dallas Traders Expo where a large number of traders came up to me and said something like this, "I got sold blue sky by groups telling me how easy it would be to make money trading. I had no idea what I was getting into. And I was unprepared for trading psychologically." A number of trader education groups also talked to me about their frustration with having traders in their internet classrooms following them as they trade -- and the traders doing the exact opposite of what the teaching trader is teaching them, all out of fear.

 

If you are going to trade you better learn a dependable methodology. And you better be prepared to retool your psychology so you don't waste a perfectly good methodology. What ever psychological demons you have been avoiding before trading, you will no longer have to worry about avoiding them -- because they will be stalking you. Most traders take 4 -10 years to "get" this. The markets will let you take whatever time you want to learn this. Get your head on straight for trading. It is a very different state of mind, most likely, than the one you brought into trading.

 

Rande Howell

 

retool your psychology

 

that sums it up everything you need to do before you start learning to trade

yup, that's it...

for those people who were brought up to be an upright citizen,

pay your taxes on time,

give to the charities,

join the boy scout,

redemption through hard work,

sing in the choir,

karma,

respect your elders,

give your life to serve the country,

marry before sex.

you need to retool your psychology.

[Tams 20]

... deleted ...

 

 

(sorry I talked too much)

[maxr 10]

Speaking as one who is going through the process, all these guys are right, and here is my personal suitability questionnaire - answer each question 'on balance'...

 

1) Can you be comfortable with your decisions being wrong much of the time, and not knowing why many of the others turned out right? If YES, read on...

 

2) Are you attached to money? Do you sort of feel it as a presence in your bank account, does $X represent a new car, or a boat, or a house to you, would you feel bad all day if you dropped $100 in the street and it blew away? If NO, read on...

 

3) If you lost your trading pot, how much difference would it make to you physically and psychologically? If the answer's 'not much at all', read on...

 

4) Are you considering trading partly as a way to increase your self esteem in the community and among your peers? Well, nobody else understands what we do, so If NO, read on...

 

5) Do you enjoy a gamble - does it get your heart beating and your adrenaline going? If your are a gambler, trading will take your money faster than a casino. If NO, read on...

 

6) Are you looking to trade yourself out of financial difficulties? If YES, the pressure will kill your trading. If NO, read on...

 

7) Do you respect the opinions of economic and financial commentators in newspapers and periodicals, and would you consider them to be able to provide a worthwhile guide to investment and/or speculation? If NO, read on...

 

8) Do you consider that one can predict the future with a reasonable degree of certainty? If NO, carry on...

 

9) Are you happy to work entirely on your own? If YES, carry on...

 

10) Can you take decisions quickly? If YES, read on...

 

11) Can you accept 100% responsibility for the outcome of your efforts, without making any excuses or explanation whatever for failures other than 'I was wrong', and be content with that? If YES, carry on...

 

12) Can you follow a plan precisely if required, or do you always change it as you go? If you can follow one, carry on...

 

13) Are you happy to take what you can from events totally beyond your control? If YES, carry on...

 

14) Do you really know and understand yourself to a reasonable extent - your character, strengths, and failings? If YES...

 

CONGRATULATIONS! - if you got this far, you have some of the attributes required to start to learn about trading.

 

This is a bit tongue and cheek, but you get the idea. However, financial trading as an individual appears to require an unusual mindset, which is not what it may appear before you get involved - I reckon it may be nearer that of a Zen monk than 'Wall St'.

 

Like you say TroyMaster, you'll never know unless you try - and you WILL learn a huge amount about yourself if you do - I have already, and I'm still a student. Oh, and by the way, if you look to trade FX, be aware that is probably the most shark infested territory in trading. There are good FX trading methods and coaches and good FX brokers out there - unfortunately it's easier to find the other ones. Believe nothing anyone tells you unless you've seen them do it live - teaching a trading method is absolutely no guarantee that it works, even for the teacher :-)

 

Max

[steve46 12]

Hello, I do this for living...have done it for years. I work in futures now (S&P) but I did work in the Euro and Bond markets

 

May be a good idea to understand that its a big world, a competitive world, and your competition are some of the smartest most motivated people in the world.....all because there is a lot of money at stake..and so

 

If you last long enough you may discover that there are many levels of participation....you can participate as an investor (long time horizon) as a swing trader (variable time horizon) and as a short term day trader. Most newbies are drawn to the fantasy of the "daytrader"...You get up, you trade the market and make money (of course you do) and then you go do something else with your new found freedoms (time and money, right)...

 

I hope it works that way for you, but I would suggest you prepare for an "alternate reality"...and that one involves long hours learning your profession, endless searches for "an edge", and then endless research to maintain that edge (and thats just the start). Once you have a theoretical edge that you believe is viable, generally speaking you get to have the experience of find out that your system doesn't work as you thought it would...You find that out by losing money....more than ever planned to lose, and that causes you to stop and re-evaluate your ideas....

 

Its a turning point in most newbies experience, because from here you have two possible destinations....one is that you buckle down and find the tools necesary to win at this game...and in the process you discover it is nothing like what you expected...or the other destination involves either blowing out your account, or bleeding it dry slowly because you can't find a solution to the big problems.

 

I certainly wish you the best...and I guess I would suggest you take it slow, and preserve capital as long as possible. I think your best investment is in your education, but then most people don't take enough time to do that....Oh well.

 

Good Luck

Steve

[MadMarketScientist 11]

Hi,

 

No I don't think there is any hidden-risk. Like anything there is success and failure, and day-trading is one where you have *almost* complete control of your destiny. I think its more important that you are giving it a shot rather than sitting and watching everyone else trying.

 

Go ahead and try, yes you might lose money so make sure you don't put all your eggs into one basket. Trade a practice account first to get the technical skills ironed out. Then trade small amounts of real money to get the mental skills ironed out. But give it a shot. If you lose your money and fail - take a break and get back on the horse. Everyone fails. But how many get back up and try again?

 

Good luck!

MMS

[Keroro 10]

I think , Ignorance Is Risk ^_^

[Pony 10]

"Trade a practice account first to get the technical skills ironed out. "

 

What's a good website or software for practicing stocks?

[Tradewinds 12]

"Trade a practice account first to get the technical skills ironed out. "

 

What's a good website or software for practicing stocks?

 

NinjaTrader can be downloaded for free, and you can replay historical data for practicing. Or you could fund an account, and use SIM. If you use a trial version of a trading platform that usually only lasts a month.

 

I don't know if there are other free options.

[maxr 10]

There are lots of free Forex simulator platforms available with live datafeeds - FXPro is one of the better ones as it doesn't currently appear expire after say 90 days. I don't know what trading a live account with them is like, but when the time comes, there's lots of info on the forums.

 

If you do go down the Forex route, be aware that unless you are going to trade a 'true ECN' account (you'll know because they'll tell you, and they'll charge commission rather than just widening the spread), it is possible for brokers to manipulate your orders (using a program designed to do that). This operates on the best known retail trading platform, which is MetaTrader4, and for all we know, some other brokers can manipulate their orders placed through their custom trading platforms. Not all brokers do this, but it appears some do (there are huge threads on at least one FX trading forum on this). I guess you could call that a hidden danger.

 

Also, many trading educators don't teach you about the importance of money management, and being aware of how the Bid-Ask spread (Investopedia that if you're not sure) affects the actual order levels you place as opposed to what you see on the screen. There's quite a lot of free info about this available on the FX Smart Tolls site (they're Forex specialists, but this info is universal) Forex Smart Tools . I'm not connected with them in any way other than I use their software.

 

Max

[Pony 10]

I think I found one. Nobletrading.com