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MPBigley

Newbie Questions.....

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I recently came upon this website and forum and have found it to be a great learning tool and resource. A couple of questions for any of you seasoned traders when you have some free time. I've been a short term and long term investor for some time (about seven or eight years now) and have always wanted to dabble or day trade. I've read quite a few books in the last three years on the subject. I tend to be a good short term and long term investor, but I fully understand this is a totally different animal. I'm willing to pay some 'tuition' in learning the trade and perhaps find a way to make a living doing something I've always enjoyed. In the next year I will have an equity account that approaches around 100K to begin to trade. I have accounts at AMTD and also Scottrade. Fine for what I do, but in looking into day trading I realize I'll need a much stronger platform. Best choices available? In the next year I am going to 'paper' trade. I've followed about 50 equity symbols for the last few years some liquid enough to daytrade and some not. I'm comfortable trading stocks. Is it more important to trade stocks you follow closely and know or seek out momemtum each hour, day, week, month? Of the fifty I mentioned above, I probably know twenty like the back of my hand, trading patterns, the business, the expectations, the growth patterns, and business cycles. I would be comfortable enough trading them, and have been, just not on a day to day basis. Is 100k account enough to survive, paying some learning tuition and perhaps turn a decent years profit? I'm not going to quit my 'day' job until I can prove to myself I can stand on my own two feet. Thanks for responses, and thanks for the resource of information here.

 

MPBigley

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Hi MrBigley,

 

Welcome to Traders Laboratory and welcome to the world of micro trading :)

 

Adjusting your trading from a longer term timeframe to a intraday timeframe can be quite a challenge. My personal opinion on new day traders is to learn the game by observing and practicing at first. Specialize in a certain market. If you plan on day trading stocks, specialize in a few stocks. This way you can learn its personality and the big players behind it. You will be competing against the best.

 

You will also need to learn a whole new set of tools that can help you in your day trading. Im a futures trader.. but I can give you an example of the tools I use: TICK, TRIN, Pc Ratio, Premium are all examples of market internals.

 

Regarding your account size, I dont recommend dumping all your risk capital into your first day trading account. Its going to take some time to learn this game and the worst thing you want to do is to lose all your capital once you learn it. Trade small at first. Dont focus on the money but craft your trading skill. Develop strategies that you can use and find a intraday trading style you feel comfortable with. Know thyself and your trading style. This is so important in finding trading success.

 

Hope this gives you an idea and feel free to ask us any questions. Plenty of great traders here that are willing to help.

 

Soultrader

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I recently came upon this website and forum and have found it to be a great learning tool and resource. A couple of questions for any of you seasoned traders when you have some free time. I've been a short term and long term investor for some time (about seven or eight years now) and have always wanted to dabble or day trade. I've read quite a few books in the last three years on the subject. I tend to be a good short term and long term investor, but I fully understand this is a totally different animal. I'm willing to pay some 'tuition' in learning the trade and perhaps find a way to make a living doing something I've always enjoyed. In the next year I will have an equity account that approaches around 100K to begin to trade. I have accounts at AMTD and also Scottrade. Fine for what I do, but in looking into day trading I realize I'll need a much stronger platform. Best choices available? In the next year I am going to 'paper' trade. I've followed about 50 equity symbols for the last few years some liquid enough to daytrade and some not. I'm comfortable trading stocks. Is it more important to trade stocks you follow closely and know or seek out momemtu.m each hour, day, week, month? Of the fifty I mentioned above, I probably know twenty like the back of my hand, trading patterns, the business, the expectations, the growth patterns, and business cycles. I would be comfortable enough trading them, and have been, just not on a day to day basis. Is 100k account enough to survive, paying some learning tuition and perhaps turn a decent years profit? I'm not going to quit my 'day' job until I can prove to myself I can stand on my own two feet. Thanks for responses, and thanks for the resource of information here.

 

MPBigley

 

Well first off welcome to the forums MPBigley!

 

I don't know if I'm seasoned quite yet, perhaps still marinating :p . I can throw out a few answers none the less.

 

As far as your broker is concerned you might want to look into direct access brokers for intraday trading, those such as Interactive Brokers, Tradestation, Thinkorswim, MBTrading etc.

 

As far as it being more important to know the companies you trade, thats ehh..up to debate really. Some folks don't mind the alerts and the scanning etc. some loathe it (like me, although I only day trade index futures). The other things mentioned don't really apply to intra day trading imo, thats more of a swing approach. Day trading is more about psychology and hardcore technical analysis.

 

100k is more than enough, really. If I were you I might even take 65k and put it in a money market account and start with 35k (you'll need at least 25k to meet pattern day trader status)

 

Most of all, be patient with yourself, day trading is hard. Focus on execution of your trades, your money management, and your mind first. Profits come from those things. Stick around here and you'll find more than enough people to help you with those aspects.

 

Have you looked into e mini day trading at all? They do offer advantages over stocks.

 

Hope that helps a bit, if you have anymore questions feel free to keep askin'!

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MrPaul, you mentioned e-mini futures. Would you mind elaborating on this comment?

Have you looked into e mini day trading at all? They do offer advantages over stocks.

I am interested ever since you talked about e-mini's in another thread. I think it would be good for me, MPBigley and other new traders to understand the differences; the pros and cons. Thanks...

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MrPaul, you mentioned e-mini futures. Would you mind elaborating on this comment?

 

I am interested ever since you talked about e-mini's in another thread. I think it would be good for me, MPBigley and other new traders to understand the differences; the pros and cons. Thanks...

 

Sure I would be glad to help,

 

Here is a short presentation on e-mini trading from the Chicago Mercantile Exchange and another website with other video links:

 

Trading E-mini Stock Index Futures

 

http://www.teachmefutures.com/archive.asp

 

If you have anymore questions after that ask away!

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Thank you for all of your responses, they were all helpful, and appreciated. I will look into the e mini futures also, to be honest, I never contemplated doing anything other than equities, although as an investor from time to time used put options for insurance and also some income selling calls on underlying equities I held. I will look into futures also, thanks for the tip.

 

A couple of other questions that I have been wondering about also when you have some time. Does anyone know a good resource that can show me how to set up my trading as a business? Since I will not be 'quitting my day job' and probably actively trading also, how will I be treated by the IRS, since I will be deriving income from my primary job and also deriving and income (or loss) trading actively? Any suggestions, thoughts? Thanks for the help.

 

MPBigley

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In order to get the trader status with the IRS, your income from trading has to be superior to your day job. It also requires you prove that you've traded a minimum number or trades plus a minimum number of hours each day. If you do get this status, tax benefits are very attractive than if you don't have the status. With futures, you don't have to list your buy and sell record each and every one like you do with stocks.

 

Check this site: Traders Accounting

 

Very informative newsletter. Good luck!

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Some time ago I posted some questions regarding trading equities for a living. I believed at that time that I could daytrade equities. While papertrading a system I developed (simple, like me, lol) I ran across a couple of things that intruiged me, and began to build a simple trading system based on the idea. Granted I have only paper traded it for a few months, but I wanted to post some of the criteria to get all of your helpful input. Please feel free to shoot holes, offer advice, negative or positive as you wish. I'm looking for constructive or destructive, lol, criticism.

 

Sorry, I must preface this, I can't get away from the equities thing, lol, and I know most of you all are futures traders, but, principles usually apply across the board. I manage some family members accounts, and was using some ETF's, specifically the Proshares indice ETF's long and short to hedge some portfolios back during the 'correction' in early March. I noted how these ETF's correlated to the indices and began to follow them daily. Specifically, Proshares has some X2 (long & short) ETF's that track the major indices. I began playing with the idea of attempting to build a simple trading system to profit daily from utilizing these vehicles to daytrade or scalp or swing trade. I also wanted to keep it simple, and trade one market, learn it, understand it, live it, and attempt to profit from it. What I did was use the QID(NASDAQ 100 SHORT ETF X2) and the QLD (NASDAQ 100 LONG ETF X2) and used two specific technical indicators (RSI & STOCHASTIC) on a 1 minute intraday chart. The ETF's trade completely opposite of each other, hence, when an extreme buy indicator is generated, on one ETF, the inverse ETF is generating an extreme sell indicator. Proshares has ETF's that track (X2) all of the indices long and short, and although I haven't researched it to the extent I did the QID/QLD relationship, I'm sure it can be applied across the board, although liquidity might be an issue on the other ETF's. Generally speaking, it usually generates a total of between 3 and 5 buy signals per trading day, and over 70% of the time it is a valid profitable signal. I initially worried about liquidity, but after following the daily volume and tape for some time, I belileve that is not an issue. I am also using stops (mental, though, not order wise). I stated I had about 100K in capital, but, have found using a small portion of that capital, I have been able to paper trade successfully for some time. I realize that, that literally means nothing, but, am wondering how long I should continue to paper trade this thing before attempting to get my feet wet ( or chopped off, lol). Am I onto something that I can make profitable here? Can anyone fire me some questions about problems that I am not foreseeing? Anyway, I began to research this more in detail after reading all of the wonderful information contained within this website from all of you. Some common themes I garnered were, keep it simple, do only one thing, understand it, live it, preserve capital, and constantly keep attempting to learn. I welcome any and all of your input, as you have generated a lot of ideas from just reading your posts. Thank you for your time, and I apologize for the length of this.

 

MPBigley

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In addition to paper trading, put down some rules and trading plan with details. Because once you're on the battlefield, that's your bulletproof vest and helmet. Why? Paper trading is nothing like real trading, bullets are real and they kill so these rules will keep you focused and put emotions and stress aside. Remember, day trading is no walk in the park, everything happens fast and you'll be tempted to participate and before you know, you're committing mistakes already (i.e. overtrading, a very common trap, long, then short, then long, then short, etc. vicious cycle). Get John Carter's book "Mastering the Trade", there's a sample trading plan at the end of the book that's very helpful. It should give you an idea how to go about getting started and modify to your own preference. Long-term investment may or may not use trading plans, but day trading, it's your life vest to survival. The biggest obstacle to success is not knowledge or skills, but psychology. Good luck.

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MP - good question on how long to papertrade. It's a personal decision, but I have found that when trading on a sim, it's too easy to get lax. I would suggest trading live as soon as you are comfortable but start with a very small trade amount. Since trading the ETF's, you can literally trade one share. I realize that commission on one share is probably not effective, but that's not the point. The point is to get some REAL money on the table, REAL money at risk and see how YOU react in those scenarios. It becomes personal when your hard earned money is at risk. You need to prove to yourself that: 1) you can do this live with real money and 2) your system makes money.

 

Good luck!

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For me, paper trading is really to develop a performance results and evaluating them more than a simulation. In trading, this word "simulation" is an oxymoron since it doesn't really simulate the real trading due to factors not existent during demo trading. Real trading is the only way to go I agree.

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I appreciate the comments and I should tell you that I have a trading plan and have designed the rules for the system. The first month was spent tweaking and adjusting every time it blew up. Basically, the last three months I have spent 'paper trading or sim trading' through my broker real time using the appropriate dollar amount I would be trading with live. I have focused on preserving capital, limiting losses, and following the system rules. I laughed when I read both of your posts regarding advice, because, at first I did everything you guys described. Over traded, breaking the rules in order to just participate, lol. Once I found I had worked out the technical bugs, and trusted that the probability for a profitible trade existed when buy signals were generated, the results improved significantly. It does take an extreme amount of discipline to keep your hands off until the market conditions generate a probable buy signal. It appears the only way to truly know if I have the ability, discipline, and mentality to do this is to do it. I'll 'paper trade' until the end of June, then start live in July. I will pick up that book you mentioned, it sounds like an informative read. Any information to help is appreciated. I appreciate the time you took to answer and look forward to hearing more also. Thanks, I really appreciate this forum, as it is the best resource I have found on the web related to day to day trading.

 

MPBigley

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Let us know how it goes. Sometimes we were all in the same boat but different times and seems a waste of time not to tell someone about the experience. But then again, anyone can describe and persuade you until he's blue in the face until you realize you've just got on that boat too. Sweat, blood and tears (experience) are more valuable than gold in trading. I think you might be well on your way now that that part is over.... maybe (it'll creep back from time to time).

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Will do torero, thanks for the posts. Capital is transferred today, we'll give it a Monday, July 2 start. I'll post a monthly update at the end of July. Best wishes to all of you.

 

MPBigley

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Hi! Since I'm a noooB I can ask silly questions!!??? Like...

I need to educate myself,

should I become a student ($$$) of Jesse Webb or Larry Levin etc..?

or should I read/watch everything on TL instead?

I want to learn Option Trading but of course, I am faced with information overload.

Where do I begin? My day job is hard work so every minute & penny count.

Thanks

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There is plenty of free information on the web first without having to pay for it.

Unless someone can completely summarize this information in a manner that perfectly suits your own abilities/ideas, then I would not suggest paying anyone first up.

Unfortunately this can be a long winding road and while we all like to short track things often thats not possible.

In my mind the best way is learn it yourself, or join a small group (and help each other through shortcuts, or learn in your own time) (For my definition - a mentor does not charge you money)

 

I would also add....something that many dont do is actually study trading. Just reading is not studying..... take notes and formulate thoughts of why and how, dont just regurgitate others.

Understand in your own mind these things....then on the day the penny drops, everything will be much clearer, much quicker.

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