Advice for Beginners....don't Try to Make Money.

[TheNegotiator 13]

:haha: I hear you say. But really. I think that this is perhaps the single biggest factor in the high failure rate of new traders. Perhaps it would be better put that you should not expect to make money.

 

Let me put it in a different way. A beginner will come into trading and have had very little experience of anything similar. The market will however look familiar somehow and tease them into thinking small successes are down to skill. After all, humans like certainty and are quite happy to congratulate themselves when they think they are good at something.

 

Would you expect to pick up a guitar and then a month or two later be playing at a rock concert? Would you expect to pick up a paintbrush and shortly after have an exhibition on display at the Louvre? Probably not. The difference is though that poor trading costs you your money. Coming into trading, you will be pitted against seasoned professionals, massive hedge funds, banks and computer systems to name but a few.

 

Losses early on affect more than just your bank balance. They affect your emotions and your ability to learn and develop confidence in your understanding of markets and methods you use to trade. If you don't understand how to 'take a loss' this can be catastrophic.

 

Do yourself a favour, when you start trading, trade to trade well, not to make money!

[Tradewinds 12]

I have a suggestion. When someone first registers at Traders Laboratory, automatically send them some tips, or links for beginners. They may not be a beginner, but it won't hurt.

[Tradewinds 12]

Would you expect to pick up a guitar and then a month or two later be playing at a rock concert? Would you expect to pick up a paintbrush and shortly after have an exhibition on display at the Louvre? Probably not.

 

Those are good analogies. The underlying comparisons have to do with:

 

• Level of proficiency
  
• Time spent practicing
  
• Time spent studying
  
• Professionalism
  
• Performing to a degree of excellence
  

 

If you are a "C" grade student of trading, I doubt you will make money. To make money trading, you need to get an "A" for a grade on the test. A 75 score out of a possible 100 won't get you anywhere. If you are not on the "honor role", you won't make any money. In school, you can take a few notes, rely on short term memory, and hope the True/False answers come out in your favor, and get a passing grade. In trading it's a different story. You not only need an "A" on the test, you need to be able to apply it to the real world of trading.

[phantom 16]

Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start. Just remember to look for trades that have a decent probability for a high reward to risk ratio (such as 5 or 6 side-by-side bars on a 120 minute chart in just about anything breaking out into a steady move on a 15 minute chart: trade any 15 minute bar that shows price rejection, such as a rattail candlestick; risk half the rattail range and lock in profits as the move breaks from your entry zone...)

How dare you advise people to settle for mediocrity when one needs to build successes in this business to stand a modicum of a chance at success???

 

Luv,

Phantom

[Coicah 10]

Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start.

I once read that if you trade to trade well, money naturally follows. I think this is good advice because it takes the trader's focus away from the money aspects and more towards trading itself. This fact alone typically means better control of emotions for the trader.

 

It's especially good advice for new traders because it can help dampen those "get rich quick" urges.

[Stanton 10]

Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start. Just remember to look for trades that have a decent probability for a high reward to risk ratio (such as 5 or 6 side-by-side bars on a 120 minute chart in just about anything breaking out into a steady move on a 15 minute chart: trade any 15 minute bar that shows price rejection, such as a rattail candlestick; risk half the rattail range and lock in profits as the move breaks from your entry zone...)

How dare you advise people to settle for mediocrity when one needs to build successes in this business to stand a modicum of a chance at success???

 

Luv,

Phantom

 

I think you missed the point. In your example you cited a few examples of a particular high probability setup. But how would a beginner know and identify that- even after reading your advice?

 

What the originator of the thread is suggesting is that emotional capital is as important as financial capital. If one has "beginners' luck" he really does not know why he made money. When that beginner starts to lose he does not know either, but ends up being in a situation where he becomes afraid to trade, and even with increased skill cheats himself because of the fear.

 

What I think the originator is suggesting is that the beginner build a set of skills, a system and practice before putting much capital at risk. You wouldn't see a baseball player (even a Little Leaguer) go to bat in a real game without batting practice would you? Well... There are no Minor Leagues of trading.

[TheNegotiator 13]

How dare me? Well you definitely missed the point I'm afraid. As Stanton said, how does a beginner know what a high probability setup is? Otherwise why is there such a high failure rate and so many blown up accounts? Everyone who tries to trade should be a millionaire right? Maybe even a billionaire. J/k. But the likelihood is they will think they know how to trade. Trading is a highly competitive game and it's unlikely that you'll make money as a beginner by being more skillful and faster than seasoned pros. You probably were just lucky. But you won't know it. Losing the money by trading in a way you think is correct, will piss you off. You'll probably start pushing harder to make it back. Maybe start averaging in on losing trades. Before you know it you'll have an empty account and a damaged ego.

[phantom 16]

I missed no point. I understand all of the ins and outs of the beginner's plight. But its been my personal experience after working one on one with many individuals over the years that the number one reason people wash out in this business is a lack of patience waiting for high probability breakouts to occur. Trade selection and risk management are the ONLY two factors a trader has control over.

 

I see beginners time and time again try to chase a moving market and take unnecessary losses because they get trapped in the volatility.

 

I realize that newbies don't know enough to know why they are correct or incorrect in their trading but there are myriad books available on trade setups, And way back when, I was able to make ten thousand dollars on a single trade I got from the Street Smarts book just by cookbooking it when I had no idea how to trade correctly.

 

My point is this: this business is about positive expectancy and execution. If you bypass the "action junkie" mentality and use a modicum of emotional control while waiting for good setups like the one I gave you above, you stand a much greater chance of not only surviving the game, but actually making money while gaining the experience necessary to trade well week in and week out.

[Tradewinds 12]

Trade selection and risk management are the ONLY two factors a trader has control over.

 

Good point. I could see how people who try to "make things happen", and willfully try to make things go their way, could have a lot of trouble trading.

[BlowFish 10]

The trouble is people don't work purposefully towards their goals. They do not consider the process. The way you tell whether a setup is a 'high probability' setup is you test it backwards and then forwards. The process allows you to build confidence in the outcome. A principle reason people experience emotional difficulties is they have not adequately done this. Trading is similar to most endeavours in many ways (more so than it's different).

 

There are lot's of 'truisms' (though how true they are is debatable, many are just BS rhetoric) 'don't fight the trend', 'look after the losses and the wins will take care of themselves" etc. (I always liked Ken Wolfs, Jimmy Youngs are good too) The thing is these 'sound bites' are of actually pretty much zero practical use to beginners. Of course posts like this you can bash out in two minutes.

 

DBPhoenix talked about the process in numerous posts on the forum here (Whyckoff section mainly) there is a hint in his blog here The Trading Journal - Traders Laboratory Forums You have to go back in time a fair bit but there are some great threads here that give good actionable advice to fledgling traders. Looking forward to seeing if phantoms develops into such a resource.

 

My tip for the day..."don't eat yellow snow"

Edited May 16, 2011 by BlowFish
typos <sigh>

[SIUYA 11]

 

My tip for the day..."don't eat yellow snow"

 

that one is applicable to all beginers

[Mysticforex 13]

:haha:

 

 

Do yourself a favour, when you start trading, trade to trade well, not to make money!

 

 

Agree 100% ! First learn the Craft, the money will follow.

[phantom 16]

Jesse Livermore once said "It's easier to make a million dollars when you know how to trade than it is to make a hundred dollars when you don't."

 

So here's my question:

 

How do ya know you're "trading well" if you're not making any money?

 

Just curious...

 

 

Luv,

Phantom

[Tams 20]

:haha: I hear you say. But really. I think that this is perhaps the single biggest factor in the high failure rate of new traders. Perhaps it would be better put that you should not expect to make money.

 

I think another mistake is...

 

beginners try to be a trader.

 

 

no, no, no.... don't try to be a trader.

 

I am not a trader.

 

I do not trade in the traditional sense... buy spice from india and ship it to egypt, trade it for camels and ship them to china, trade the camels for tea cups and ship them to france... and so on.

 

I am not a trader.

 

I am a parasite.

 

I benefit at the expense of the others.

 

Unlike a predator, I am small. Nobody can see me, or care about my existence.

 

Unlike a predator, I do not control my prey, I tag along for the ride.

 

I am a parasite. I suck blood.

[Tradewinds 12]

I am not a trader.

 

I do not trade in the traditional sense... buy spice from india and ship it to egypt, trade it for camels and ship them to china, trade the camels for tea cups and ship them to france... and so on.

 

I am not a trader.

 

I am a parasite.

 

I benefit at the expense of the others.

 

Unlike a predator, I am small. Nobody can see me, or care about my existence.

 

Unlike a predator, I do not control my prey, I tag along for the ride.

 

I am a parasite. I suck blood.

 

You're funny. A parasite with humor. :rofl:

[Tradewinds 12]

How do ya know you're "trading well" if you're not making any money?

 

Just curious...

 

 

Luv,

Phantom

 

Good point! :rofl: I guess if someone was following their strategy with absolute perfect discipline, and was loosing money, they could say they were trading well, but their strategy is garbage.

[fxallday 10]

Forex is too complicated! Autotrading is more easy but even for this forex knowledge is needed. I use Zulutrade for receiving entry signals and seems to be the easiest thing BUT...

if I had set wrong settings for my signal providers or did not know anything from risk management?

My equity would be only 1$.

Always remember to review your trades to realize what went wrong and avoid it in the future.

[bwebber 10]

Traders lose because they are willing to trade systems based on blind faith instead of rigorously testing the system. In particular, the system must be tested on a large data set it has never seen before during it's development. If it passes that test the system should be tested live on simulator. If it still looks good it should be traded with real money with very small positions. If it still looks good it should be traded live with positions sized to the traders comfort level anticipating drawdown levels approached in the testing phase.

[Maisey 10]

Of course we are all in the game to make money. However, I think too many new traders place too many trades. Patience is something that must be learned. Follow the trend - don't fight it- or you will always lose. I have waited months to get in on a great stock on a dip, and have always made money in doing so. Read as much as possible and follow your gut. And when I followed the advice of friends, relatives and brokers, I've had to wait a very long time to cash in on any profits. It's your hard earned money...so gain all the knowledge you can before investing.

[gavind 11]

If you're a beginner, one good advice that I have learn over the years is to only invest on something that you can afford to lose.

[shuvo7748 10]

If you're a beginner, one good advice that I have learn over the years is to only invest on something that you can afford to lose.

 

Yes, i also think so. we should invest on something that we can afford to lose. Here no guaranty...

[prax 10]

Yes, i also think so. we should invest on something that we can afford to lose. Here no guaranty...

how bout invest with learning, it;s highly guaranteed of earning. there's no such affraid to lose while we stay focus on learning process.

[shuvo7748 10]

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[gavind 11]

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I hope that one will be as true as advertised.

[ankita 10]

Learn basics trading on demo and then jump it to live.