Observations of a Noobie Trader for Other Noobie Traders

[Dcash 10]

this site is great and I have/am learned/learning a lot and have progressed to sym trading a paper account. I'm not the expert here and this post is IMO so take it with a grain of salt.

 

1. there are a lot of differing openions here with a lot of strong emotions about who is right and who is wrong. one of my aha moments was when I realized that a lot of this is like the 3 blind men describing an elephant they all have valid discriptions of the part that they are describing but are not describing the same part so they all disagree.

 

2. my progress has been directly linked to time spent learning how to best use the indicator/methology that is in front of me and not looking for new indicators/methods.

 

3. pratice pratice pratice even when I know what im going to do (or more importantly not do) I do it wrong in the heat of the trade.

 

4. trades are all over the place so do not try to force a trade it either fits the trading plan to a high degree or pass on it (still working hard on this)

 

5. write the trading plan down and reread it often, I'm supprised how often I get off track and my trading plans gets mentaly modified durring trading, in the end the plan needs to be revised if and only if the changes have been tested and the results are +.

 

6. it is about making money not being right so if the trade I just made is not working out the way I planed it and the results are going aginst me, get out and look for a new trade do not hope it will get better. I only need to get a few right to make a lot of money unless I hang onto bad trades hoping they will get better untill they create a hole that I later have to climb out of to have a + day/week/month.

 

7. how I deal with a loss is going to be a big bridge for me to cross (sym trading currently).

 

8. it is very important to pick a type of trading that fits with my personality (this was a supprise to me)

 

just random thoughts that some may find helpful or not.

[TheDude 10]

youre on the right track!

 

as for pt 7, you will get losses. if they are that much of a burden, then you either have ego issues (we all do i guess), or your losses are too big for your account size? no one likes a loss of course. they should be considered a business expense. do your research and understand what sort of string of losses youre likely to incur over a series of x trades. if you get more than this amount, something could be wrong so stop until you find and fix whats wrong (probably some area of execution/selection)

 

as you get experience, you will learn what a loser looks like after a fill and get out quickly (you can always get back in) rather than sitting round like a lame-o waiting for the stop to be hit.

 

good luck!

[TraderWill 11]

Great post, you're off to a good start in your trading. I'd also add that when you start trading with real money you want to limit the risk you take on each trade. Know what your maximum loss will be, where you put your initial loss. And make sure that you're not risking more than 1% to 2% of your account on any individual trade. That way even if you get 5 or 10 losing trades in a row your account will survive. And although it sounds like a lot, if you have a system that wins 2/3 of the time then statistically you should expect a 10 trade losing streak once or twice a year. Keeping your risk small will allow you to recover from these drawdowns.

Good luck.

[TheNegotiator 13]

Dcash,

 

One thing I have noticed in my time trading is how many people really do understand trading and how to make money. I mean they really do understand. The difference is whether they can bring everything together and have the discipline and commitment to make it work. This is where people trip up. So whatever you do, don't kid yourself into thinking you are a good trader because you understand a good amount of things about the business(or not - always a learning experience for me). This is an easy mistake to make. The other point I'd like to comment on is about being in it to make money. Wrong. You are in it to trade well. Money is a great reward for being an excellent trader. How many top sports pros are there who are purely in it to make money? Maybe a few. But the top top pros want to be the best to be the best. Money flows to them naturally as they begin to achieve this.

 

TheNegotiator.

[Dcash 10]

Dcash,

 

One thing I have noticed in my time trading is how many people really do understand trading and how to make money. I mean they really do understand. The difference is whether they can bring everything together and have the discipline and commitment to make it work. This is where people trip up. So whatever you do, don't kid yourself into thinking you are a good trader because you understand a good amount of things about the business(or not - always a learning experience for me). This is an easy mistake to make. The other point I'd like to comment on is about being in it to make money. Wrong. You are in it to trade well. Money is a great reward for being an excellent trader. How many top sports pros are there who are purely in it to make money? Maybe a few. But the top top pros want to be the best to be the best. Money flows to them naturally as they begin to achieve this.

 

TheNegotiator.

 

first off thanks for taking the time to read my thread, you (and the others) point out some things that are on my radar already except for the part about not being in it to make money I do not know that I agree with that (not that you need me to agree with you or that I'm disagreeing with the point so much), my search is to develop a second income to build into a primary income (already a well paid profesional engineer), I'm not striving to develope something else to take over my life, I enjoy and want to be good at trading, I will put in the work to become good at it, but I do not intend to go thru for a second time in my life having a career be the purpose of my life. so I guess my mission statment would be "trade to live not live to trade", I guess that where my view point differs is that I do not derive my self worth in being a "Better Trader" than someone else (this comes hard for me) and I'm trying to keep it from being an ego thing.

 

Am I off base with that?

[TraderWill 11]

I think we do trade to make money, but TheNegotiator makes an excellent point about the right mental attitude going into any individual trade. Assuming that you have a system that's been back tested and yields positive results over a longer timeframe, then you should approach each trade with a neutral expectation as to whether it will be a winning trade or a losing trade. You will have winners and losers in any system. But your focus has to be on excecuting your trade according to your trade plan, which is based on your back test results. Know where the entry should be, where the target and stop will go, and trade accordingly. Don't deviate or improvise.

Good luck.

[TheNegotiator 13]

TraderWill reminded me of another thing that you hear from traders who do well generally. The outcome of any individual trade should never matter that much. That's why people liken successful trading to successful poker playing. Play enough hands in the right way and you will overall come out on top. Undoubtedly you will lose some hands and get some hard to take 'bad beats', but overall you should do well. Same with trading.

[MC101 10]

After reading these posts, I too would agree with the Negotiator as this is my fundamental practice as well. We are not in the market to just make a bundle of money even though that is the most simplest of answers and most obvious. The real question you want to ask yourself is this.. Is it the money you are seeking or is it what that money can buy you in terms of creating memories and purchasing material objects and having the money to buy what your heart desires? Or ..you may have other motives.. like 'keeping up with the Jones' or 'bragging rights/showing off'. You have to really dig deep and find out why you want the kind of money you are seeking in trading the markets. What are your true motives and intentions. Once you discover this, the clouds will part and the fog will be lifted. You have to be totally honest with yourself on this one. In the end, money is just a tool. Use it to improve the quality of your life and invest it wisely and enjoy it !

[djohnsonhot 10]

The negotiator is right: one trade is never that important. It, that terrible trade for example, is very important if that particular trade is one of many that one analyzes and finds, after the analysis, that it was the "same mistake all over again." GUILTY!

 

There was a time that I could NOT seem to get it in my head that taking long break-out trades at key resistance levels would never work. Those types of trades tend to be shook out by strong longs that have not scaled out or gotten out completely. Those long commericals will grab all of your stops and keep on trading higher until THEY decide to go short.

 

The point is that I was entering long and getting taken out on 4-point stops. OUCH. Over and over again. Same thing for shorts.

 

So, I would get terribly angry with myself for taking those trades when I could not see a trend if it slapped me in the face with the back of its hand.

 

I have finally learned. I keep track of the 3 to 5 day ranges, determine key price levels (daily closes, two-day mid-lines, key support and resistance levels around those, the open price - - all which are pre-drawn before the open at NY time)....I trade those areas with RESPECT. Sing it.

 

Therefore, as an example, if we have a run-up that I missed, and that gobbles up a good part of the daily range, I begin to look for signs of weakening price action: doji's, minor pull-backs with minor new highs, all signs that the move may be over. Then I look for ONE MORE Stab higher. This sometimes causes me to miss the short or roll-over points. OH WELL, too bad, I did not short at the top..but, wait!

 

NO MARKET ACTION MOVES IN ONE DIRECTION without some pullbacks..not normally anyway...and if I see a stacking 15 minute or 30 minute candle form (or a GAP lower or higher after the prev candle close), and not much of a pullback or none at all, and I respect the range (in other words, in a 12 point range, we have only covered 25% of that possible range despite a contraction or expansion), then I will take the trade finally. I will suffer 3.75 point pullbacks but NO MORE THAN THAT.

 

Anyway, the point is that I am trying my best to elevate my patience levels and live with no-trade days. Still a work in progress so I am working options trades these days. If I take any long, I look for dips and buy....shorts have been limited lately. Trade with the trend, look for strong support levels, and the go long until this thing finally begins a 30 to 50 point pullback (ES).

 

Dave

[TheNegotiator 13]

Too right Dave. It's better to have rules that sometimes keep you out of winners than no rules at all. Remember, and I know this seems really obvious, missing a winner is not the same as taking a losing trade. There are plenty of opportunities for you if you are diligent and trade to your plan. Trigger happy traders or 'itchy' trigger finger traders usually have to get burned before they realise their error. Some never learn. But hey, if you disagree then let me know!

 

TheNegotiator.

[MadMarketScientist 11]

Great thread. Lots of insight for not even 'new' traders.

 

I just got done reading an email from a new trader who talked about what made the difference for him. His top breakthrough was putting in the work. And not shaking himself out from some initial trouble. Since he "believed" in the system, felt it was proven and others had success he did not get discouraged when in the first two weeks his equity curve went down. Rather than b'ching and moaning about it and saying the strategy/system stinks he realized that he was in learning mode and not doing everything right.

 

And, he did this all in SIM mode. Not putting real money on the line pushed him through. After about two weeks his equity curve then went sideways for a couple of weeks. Again, many would quit right? After all that's no way to get rich quick a flat equity curve but it's clearly huge progress to go from losing to flatlining.

 

You know what happened next? Him putting in the time and not quitting and then the equity curve literally exploded to the upside.

 

I guarantee 90% would have quit in phase 1 or 2 of this. Few can make it through.

 

But now he's got a strategy he's mastered and a skill for a lifetime and in the single percent I'm sure of those that get there.

 

Sure, you have to have a system/strategy that "should" work - not going to help if it has no chance but if you do -- you've got to put in the work and stop thinking the results should be perfect in the beginning.

 

 

MMS

[Dcash 10]

After reading these posts, I too would agree with the Negotiator as this is my fundamental practice as well. We are not in the market to just make a bundle of money even though that is the most simplest of answers and most obvious. The real question you want to ask yourself is this.. Is it the money you are seeking or is it what that money can buy you in terms of creating memories and purchasing material objects and having the money to buy what your heart desires? Or ..you may have other motives.. like 'keeping up with the Jones' or 'bragging rights/showing off'. You have to really dig deep and find out why you want the kind of money you are seeking in trading the markets. What are your true motives and intentions. Once you discover this, the clouds will part and the fog will be lifted. You have to be totally honest with yourself on this one. In the end, money is just a tool. Use it to improve the quality of your life and invest it wisely and enjoy it !

 

 

to be honest some of the bad things creap into my mind like keeping up with the jones/bragging rights etc but I keep working on that part. My defined goal is to become self suficent trading part time with the objective of meeting my financial needs with trading and then move away from current occupation to provide stable secure life that does not keep me away from family. this is a long term goal (10 years) although I would not object to getting there sooner.

 

anyway thanks for the input

[Dcash 10]

Too right Dave. It's better to have rules that sometimes keep you out of winners than no rules at all. Remember, and I know this seems really obvious, missing a winner is not the same as taking a losing trade. There are plenty of opportunities for you if you are diligent and trade to your plan. Trigger happy traders or 'itchy' trigger finger traders usually have to get burned before they realise their error. Some never learn. But hey, if you disagree then let me know!

 

TheNegotiator.

 

I have been learning this part

[TheNegotiator 13]

Dcash,

 

Is there anything in particular that you believe helps you to stay out of non-setup trades and stick to your rules?

 

Cheers,

[Dcash 10]

Dcash,

 

Is there anything in particular that you believe helps you to stay out of non-setup trades and stick to your rules?

 

Cheers,

 

yes negative feed back of doing it intentionaly and observing the results (in sym only) kind of like learning that this does not work and this is the results. I just put my trading plan in frount of me and not trade it, and observe the results and after many losing days I develope an adversion to taking any trade that is not part of my plan (unless I get lucky or unlucky depending on how you define it and the off plan trade makes money but this is not offten). for me I have to make it clear in my mind that this is not part of my plan and trade it with the proper trade in mind. I will work on taking trades early before the setup is complete or late or some other variation that is tempting for me to take.

 

this not advice from me but just my method of conditioning myself to trade properly and may be very messed up.

[TheNegotiator 13]

It doesn't sound messed up at all. In fact, it sounds to me at least, very sensible. Creating aversion to bad habits, instincts or desires surely has to benefit you in the long run. But are there any negatives to this approach? Does it also create a dependence on the plan? Does it just create the desire to always take the setup? It really depends on what sort of trader you are. System or discretionary. It sounds to me like it's a good thing although if you can force yourself to take the trades that specifically don't meet your criteria to create the aversion, I suppose the question to ask would be why can't you also force yourself to adhere to your plan anyway? Just a thought...

[Dcash 10]

It doesn't sound messed up at all. In fact, it sounds to me at least, very sensible. Creating aversion to bad habits, instincts or desires surely has to benefit you in the long run. But are there any negatives to this approach? Does it also create a dependence on the plan? Does it just create the desire to always take the setup? It really depends on what sort of trader you are. System or discretionary. It sounds to me like it's a good thing although if you can force yourself to take the trades that specifically don't meet your criteria to create the aversion, I suppose the question to ask would be why can't you also force yourself to adhere to your plan anyway? Just a thought...

 

definatly working on being a system trader, and I do work on forcing myself to adhear to the plan also but isn't that Backtesting? and I was responding to your post of "Is there anything in particular that you believe helps you to stay out of non-setup trades and stick to your rules?" and the previous post refering to itchie fingers or specificaly not trading when there is no clear setup or before the setup fully completes. for me these are 2 diffrent cases. so to roll these 2 togeather my method is to trade the plan (backtesting) and trade the plan wrong on purpose (anti-backtesting?). for me one of the largest problems is to "sit on my hands" and not take trades untill they are there.

 

in the end sym trading and backtesting are the path but by specificaly concentration on problem areas I feel that I get better results.

 

my untimate goal is to devolope a trading tool to get into the trade with me there to manage the trade once in it (in my 10 year goal)

 

once again I'm not offering any advice just sounding out what I'm going thru.

Edited February 21, 2011 by Dcash

[jeremymullins79 10]

3. pratice pratice pratice even when I know what im going to do (or more importantly not do) I do it wrong in the heat of the trade.

 

Practice makes it perfect. Well not quite perfect but close to it. I as well think practice is extremely important as long as you learn something from it and it doesn't come as an automatic response.

[MightyMouse 12]

Dcash,

 

In trading money is the only thing.

 

Money is the way you keep score in trading.

 

It is true that a lot of people get more out of trading than just money, which is probably a justification of not making money in the same way that blackjack players "enjoy" playing blackjack while the casino picks their pocket.

 

As a trader you have to learn how to take money from other traders before they take it from you. You are trading with other traders and collectively we all want you to leave your money behind when you exit a trade.

 

 

MM

[Ingot54 13]

The other point I'd like to comment on is about being in it to make money.

 

Wrong. You are in it to trade well.

 

Money is a great reward for being an excellent trader. How many top sports pros are there who are purely in it to make money? Maybe a few. But the top top pros want to be the best to be the best. Money flows to them naturally as they begin to achieve this.

 

TheNegotiator.

 

Fully agree - get the method right and the money takes care of itself.

 

Getting the method right initiates the learning curve ... and that is why you can not put a wise trading head on newbie shoulders.

 

Had I understood this principle - and it IS a principle - as I came into the trading world, my learning might have received a magnificent boost.

 

I didn't know that I didn't know the skills to work at.

[TheNegotiator 13]

MM, I see trading as a game. A game that is serious and a game you want to be good at if you want to play. Treating it as an exercise in making money CAN open up a whole new set of problems for many people. That is why I have always said trade to trade well and the money should follow. (imo).

[MightyMouse 12]

MM, I see trading as a game. A game that is serious and a game you want to be good at if you want to play. Treating it as an exercise in making money CAN open up a whole new set of problems for many people. That is why I have always said trade to trade well and the money should follow. (imo).

 

Sure, it can be looked at as a game. The only way one can win the game is if in the end, he or she makes makes more than is lost. The tactics and strategies that are used, are used to make money or lose as little as possible.

 

There are lots of other games that can be played that do not involve money if someone doesn't want to open up that can of worms. However, in this game, as soon as you put yourself at risk, money is involved. At least one person who is opposite you at a point in time is trying to take money from the market. If there were a way to make you lose so that they can win, they would do it and not care how well you are following your plan, rules, or set up. They simply want your money.

 

I personally think that one should really understand the money part. All the traders you trade against want your money. When you enter, you want their money. If you are winning and you don't want the money that you are winning, then its not very likely that you will be able to hold onto your gains. If you lose and don't care if you continue losing, then you will continue losing. Money.

 

If trading ability matters, then the guy who wants the money the most, will win. It will not matter how good your set up was or plan, etc. He may sell right into support that is supposed to hold simply because he saw that traders were there who would give up their positions quickly at a loss if he pressed hard enough or better yet, they may get stubborn and add. His trade could have been a horrible trade, but it made money this time. In essence, he took advantage of your money management.

 

If you go home at the end of the month and your wife asks you how well you did, and you tell her that you didn't make money but you followed your plan to the tee. I am sure she will agree that playing the game well is important. No doubt she will set in motion her own game.

 

MM

[TheNegotiator 13]

Good points MM. Nevertheless I stand by what I say. In my experience, the best traders talk in ticks. They tot up their earning each day/week/month etc., but their goal is to trade well. Also they talk in market ticks not in terms of size specific ticks. So if they took a 10 tick winner on a 1 lot or 100 lot, they would say they made 10 ticks. Understanding money is important of course, but imo that needs to be at the back of your mind when trading.

 

Think about the wife asking how you did again. Maybe if you did well you might say to her "yeah honey, I made a gazillion dollars this month". If you lost money but traded well and minimised the losses, do you say "I lost a gazillion dollars honey, sorry" or "I traded really well but the market has been tough"?

[Ingot54 13]

At least one person who is opposite you at a point in time is trying to take money from the market. If there were a way to make you lose so that they can win, they would do it and not care how well you are following your plan, rules, or set up. They simply want your money.

 

I personally think that one should really understand the money part. All the traders you trade against want your money. When you enter, you want their money. If you are winning and you don't want the money that you are winning, then its not very likely that you will be able to hold onto your gains. If you lose and don't care if you continue losing, then you will continue losing. Money.

 

If trading ability matters, then the guy who wants the money the most, will win. It will not matter how good your set up was or plan, etc. He may sell right into support that is supposed to hold simply because he saw that traders were there who would give up their positions quickly at a loss if he pressed hard enough or better yet, they may get stubborn and add. His trade could have been a horrible trade, but it made money this time. In essence, he took advantage of your money management.

 

I think you are making two erroneous assumptions MM:

 

1) That the trader opposite has deeper pockets than you, and can run a position to bluff you out of yours.

 

2) That "the guy who wants the money the most will win."

 

You are assuming (point 1) that my plan is easily defeated by someone who doesn't care about my plan. The point of my plan is that is has a positive expectation, and it does NOT always win. At SOME point the opposite number WILL get my money - but not ALWAYS. Don't assume that some hungry peasant is going to beat a good strategy EVERY time - they simply don't, and they won't. There would be no market if all the hungry-Jacks simply won every trade - they don't.

 

If there is such a player with deep enough pockets to run a position, then a trader who is trading "well" will protect a position by closing it at their predetermined stops, and reenter when the trigger signal is given. That is what I would call 'trading well' - and I can not see how that could be construed as "not wanting the money more than the opposite number"

 

The opposite number will only get your money if you fail to trade your plan - ie if you failed to stop when your rules say "3 ticks and get out". It then doesn't matter if he runs the trade 30 ticks - if you are not in the trade at that time, because of your skillful trading, he can be as hungry as billy-o and it won't allow him to touch one cent of your money.

 

My brain tells me that a trader who has a WINNING strategy will overcome a trader who just wants your money, regardless of how 'hungry' (read: greedy) he is.

He might win the a battle or two, but he can NOT win the war.

 

Strategy will overcome brute force.

 

I expect you will hold your line on this ... but so will I.

 

What is the point of developing a winning strategy, if all you need is the Bank of England behind you, and greed?

[TheNegotiator 13]

Lol. I think we could definitely say there is at least one organisation in the world economy who seem to have this strategy! But we won't get into that here.