A Few Basic Questions to Start on the Good Foot

[wanr 10]

Hi guys,

 

I am new to trading and after studying the basics of technical analysis, I would like to backtest a few strategies to start with.

 

I have 5 questions that most of you have probably heard thousands of times but a few tips would be very helpul and would save me a lot of time !

 

 

I installed Ninja Trader and took a connection to Kinetick to download intrady historical data.

 

1. Do you guys think it is a good tool to start?

 

 

Since I have a friend trading commodity futures, I decided to start with these instruments.

 

I was thinking of one Instrument per category to see the differences and I am considering Sugar 11, Crude Oil, SP 500, Gold and a Currency to be determined because USD or EUR may be too much likely to be influenced by Fundamentals if not manipulated (and will they still exist in 3 months?).

 

2. What do you guys think? Is it a good way to compare different instruments or do you think I should concentrate on 1 category? Are Futures a good start for trading?

 

 

I also try to see the brokerage fees and Exchange fees to integrate them to the simulations but I am confused: should I add brokerage fees to Exchange fees. I think the ICE charges commissions for each trade that are not small, and my future broker will do as well.

 

3. Am I correct? I could not find these fees on the net. Can you guys tell me the commissions range for futures? Where can I get all the figures?

 

 

I started to look at the Sugar 11 for a few weeks and was confused when confronted now to the contract rollover.

 

4. How should I consider the contracts roll-over for back-testing over a long period of time? What historical data should I consider ? From which Volume do you consider that the historical data are good enough to work with? Are Swing traders just closing their positions on the July contract now and follow the same strategies on the October contract as if nothing happened or do they consider some corrections from the spread or something like that?

 

 

Don't worry, I will not quit my job to trade unless a miracle happens and I manage to make some good money out of it. I have understood that there is more change that I lose money than make money at first but I am willing to take the challenge.

 

5. What is the minimal amount of money I should put on my trading account (and be ready to consider lost) to have a chance to learn and make a few mistake? What capital I should consider if I manage to do well after some time and would like to make a leaving out of it?

 

 

I know it is quite a lot with these 5 questions hiding in fact themselves other questions but every comments will be welcome !

 

Thanks,

Wanr

[SIUYA 11]

Hi guys,

 

I am new to trading and after studying the basics of technical analysis, I would like to backtest a few strategies to start with.

 

I have 5 questions that most of you have probably heard thousands of times but a few tips would be very helpul and would save me a lot of time !

 

 

I installed Ninja Trader and took a connection to Kinetick to download intrady historical data.

 

1. Do you guys think it is a good tool to start?

 

 

Since I have a friend trading commodity futures, I decided to start with these instruments.

 

I was thinking of one Instrument per category to see the differences and I am considering Sugar 11, Crude Oil, SP 500, Gold and a Currency to be determined because USD or EUR may be too much likely to be influenced by Fundamentals if not manipulated (and will they still exist in 3 months?).

 

2. What do you guys think? Is it a good way to compare different instruments or do you think I should concentrate on 1 category? Are Futures a good start for trading?

 

 

I also try to see the brokerage fees and Exchange fees to integrate them to the simulations but I am confused: should I add brokerage fees to Exchange fees. I think the ICE charges commissions for each trade that are not small, and my future broker will do as well.

 

3. Am I correct? I could not find these fees on the net. Can you guys tell me the commissions range for futures? Where can I get all the figures?

 

 

I started to look at the Sugar 11 for a few weeks and was confused when confronted now to the contract rollover.

 

4. How should I consider the contracts roll-over for back-testing over a long period of time? What historical data should I consider ? From which Volume do you consider that the historical data are good enough to work with? Are Swing traders just closing their positions on the July contract now and follow the same strategies on the October contract as if nothing happened or do they consider some corrections from the spread or something like that?

 

 

Don't worry, I will not quit my job to trade unless a miracle happens and I manage to make some good money out of it. I have understood that there is more change that I lose money than make money at first but I am willing to take the challenge.

 

5. What is the minimal amount of money I should put on my trading account (and be ready to consider lost) to have a chance to learn and make a few mistake? What capital I should consider if I manage to do well after some time and would like to make a leaving out of it?

 

 

I know it is quite a lot with these 5 questions hiding in fact themselves other questions but every comments will be welcome !

 

Thanks,

Wanr

 

1....yes Ninja is a good start tool. There are also many others that you will find and each has their advantages and disadvantages depending on what suits you. Only your own homework and trials will work that out

 

2....i think looking at a few instruments at the start will help keep an open mind that instruments do trade slightly differently, but that generally all markets are the same and so your system/market theories should have have robust and generally universal success, even though they might suit certain markets. Its a trade off in terms of one instrument and knowing it really well and many that give you a broad diverse portfolio.....again only you will work out what suits you. Give the futures ago as given you are from a mathematical back ground you are more likely to go down the systemised route, however dont discount anything...there are many ways to skin a cat and those that push only their way is the right way are usually best left alone.

 

3....fees....when testing get as close to reality as possible....if your broker gives you one all in price then use that, otherwise it should be easy to split things up....allow for slippage as well. Plus every broker is different in terms of fees.....again avoid any broker who has hidden fees or does not reveal everything

 

4....massive, massive can of worms here......google such things as back adjusted futures contracts, back testing future rolls, building continuous futures contracts etc.....there are threads here dealing with this and on the net.....there are no universally accepted methods for when to roll, why, how and how to adjust, however there are general guidelines that once understood allow you to tailor your own data.....this will take up most of your time because testing with crap data will give crap results. Then there is the on going collection of data, another can of worms.

 

5....again a very debatable subject. Start with SIM until you do your testing, understand how the platforms work, how your tests work and how the market works....after that you might have a better idea of how much money you need....you might be disappointed to find out its often way more than you think or are told by others.

 

welcome to the start of exhilarating frustration and highs and lows.

[wanr 10]

Hi SIUYA,

 

Thanks for taking some time answering my questions. It sounds like there is no big mistakes in my first assumptions, so well understood, I will do my homework :missy:

 

I will start contacting a few brokers to have a better understanding of the fees involved.

 

I just saw a live trading session on the net with FX micro-contracts where the guy was trading within a P&L range of only 5-10 USD per position. I will therefore investigate those micro-contracts in order to get familiar with live trading earlier than I initially planned while limiting the risks involved.

 

I am considering doing 1-2 months of paper trading and then go live on a micro-contract with maximum 1 trade per day (systemic approach) with tight Stoploss to minimize the risks but confront myself to the reality of this game: get familiar with losses, avoid mistakes in making orders, experience the relationship with a broker and be sure that my simulations are based on real data (slippage, commissions, etc...)

 

I will probably start with a very conservative approach and then relax some paranoid rules step by step.

 

These micro-contracts might also be good way to try algorithmic trading and not being scared that your computer will mess with your account like your wife would do if you give her your credit card...

[Tams 20]

...

 

I am considering doing 1-2 months of paper trading and then go live .....

 

try to budget for 1-2 years.......

[wanr 10]

My first plan was to stick to paper trading for 6 months and then assess my results to see if I would continue more training or go live.

 

But with these micro contracts, I am thinking of shortening that period. With all the mind games that apparently occur when going live, I think it may be a loss of time to polish my trades on paper for years and mess everything when going live due to the emotional charge.

 

I may be wrong but I would see trading 1 trade per day on these micro contracts with a tight Stop loss more like sparring rather than getting into the ring.

[SIUYA 11]

there is also a lot of debate about SIM trading and its benefits and detrimental effect it can have on traders mindsets.....which you clearly are aware of...

as a suggestion....dont think in terms of one trade per day.....think in terms of trading only when the trade idea you are using shows itself....it might be three times in a day - the first attempt might fail, but the other two work.....or it might not occur at all in which case you dont want to fall into the trap of looking for your one trade for the day...when there is nothing there to do.

There is nothing wrong with sparing as it beats getting into the ring and getting floored in the first round.

you have a job, you have patience and time on your side.....they are advantages, dont get sucked into the get rich quick crap if you dont have to.

If your personality suits that style of trading, then you will get rich quickly a few years after you might have....no big loss, but if it does not then you may find you are out of the game before you have a chance

[eqsys 10]

Ninja is an excellent product. I use TradeStation to backtest, automate strategies.

 

I started decades ago trading futures - but, I would recommend stocks. Start small. With futures you can lose a lot of money fast. With stocks, you can start with a very small position and work up from there.

 

With futures I would recommend 5-10x the exchange required margin to trade 1 contract. If you use actual margin you will be wiped out very quickly.

 

Simulated trading is NOT real trading, because it's not real money - not YOUR money, and so you don't make stupid emotional mistakes when the market moves against you.

 

Still, I would rather SIM trade first if I had to start all over. That way you'll find out if you really have a system that works before you put real money on the line.

 

Remember, everything changes when you start losing actual money. Trading is NOT easy. Best of luck.

[Pony 10]

If you're wanting to day trade for a living. Securities and Exchange Commission (SEC) says that if you want to make more than 4 round trips trades in any five business days, you have to have at least $25,000, if you're wanting to trade stocks. That being said, the appropriate equipment/software/learning curve. I would start with nothing less than $30,000. It also seems unanimously decided that stocks are much less profitable, and taxed at a higher rate, but they're easier to trade.

 

If 4 round trips are enough for you consider this. If you have a winning system, let's say you win 50% of the time and loose 50% of the time. Say on your wins you try to make 1.5 percent and your stop losses are put at 1 percent. You should average .5 percent return per trade. So for every one thousand dollars you have, you're going to make five, minus commissions of $20 dollars per round trip. Start with plenty of capital! (those numbers are just simple numbers to give you an idea, even the best systems will lose sometimes)

Edited June 24, 2011 by Pony

[reset.no.regret 10]

I am considering doing 1-2 months of paper trading and then go live on a micro-contract with maximum 1 trade per day (systemic approach) with tight Stoploss to minimize the risks but confront myself to the reality of this game: get familiar with losses, avoid mistakes in making orders, experience the relationship with a broker and be sure that my simulations are based on real data (slippage, commissions, etc...)

Instead of setting a time line for paper trading, you might be better to set a result; such as paper trade until you are seeing a profit before using real money. If your paper trading is not successfull there is no reason to think real money will be.

[zapisy 10]

In my opinion, SIM trading is good just for finding the way we want to trade (the system).

It is also good to learn the greed, since sometimes it is very easy to bet double on the trade trading fake money. If you learn to avoid it on SIM, then you'r 1+.

 

But sim account should not be used too long, since it does not include the real risk and the greediness. It is better to start trading micro lots, because you will make and lose real money but it does not cost that much.

[wanr 10]

Hi everybody,

 

I was away for a few days without my password to access the forum.

 

Thanks for all who replied to my thread despite the lame title (I realized just after posting that it was probably one of the worst possible title to try to draw some interest!).

 

I started paper trading for a few weeks with a lot of losses as you can imagine...

 

I also started a few simulation and was surprised to see that even some simple Moving Average reversal strategies could be "theoretically" profitable for a lot of instruments with a nice regularly raising equity curve although generating quite big drawdowns. With good parameters for the slow and fast moving averages for day trading, I had often and for different instruments about 40% winning trades around 1 hour in the market. But the winning trades were generating just a little more profit than the loss generated by the losing ones, so such a strategy would be able to produce very bad days that my small portfolio could not allow.

 

I think I will buy a new computer running all day dedicated to testing strategies (computations can be very time consuming).

 

In the meantime, I will continue evening paper trading (i work during the day) until I can be consistently profitable if ever...

 

I also got intereted in the QQQ which people told me is easier to trade with a nice volume and could be a good instrument to start.

 

While continuing my studies and readings about trading, I got more and more interested.

Such complexity and simplicity at the same time is a real beauty.

 

Learning how to trade seems to develop a lot of interesting qualities: patience, stability of emotions, accepting risks, accepting lossese, accepting to be wrong and being able to change your mind quickly to reassess the possible trend of the market, confronting theories to reality with a quick and direct feedback, the ability to summarize the complexity and changes of the market evolution in a simple system, determination, riguor, discipline. And of course a closer insight to economical/financials news.

 

I am getting convinced that the mindset that one has to develop to become a profitable trader can be very usefull in a lot of other areas in life.

 

Do you guys noticed a change in your personnal life or personnality after successfully learning how to trade?

[Tradewinds 12]

I started paper trading for a few weeks with a lot of losses as you can imagine...

 

If your trade does not immediately start making money on the first price move in the direction of the order, then I would exit at a loss. If you want to take on more draw down as your trading gets better or more sophisticated, then you need a really good reason, or it's just gambling.

 

I also started a few simulation and was surprised to see that even some simple Moving Average reversal strategies could be "theoretically" profitable for a lot of instruments with a nice regularly raising equity curve although generating quite big drawdowns.

 

I would stay away from a strategy that makes good money, but takes big drawdowns. Those big drawdowns are going to turn into a big loss sooner or later. One huge loss can really cut into your profits, or wipe them out. A strategy that looks great from the stats, but takes big drawdowns, could be biased to the major trend in the time period that is was tested in. Major trends could last for years.

 

With good parameters for the slow and fast moving averages for day trading, I had often and for different instruments about 40% winning trades around 1 hour in the market.

 

I would want a strategy that had at least 70% winning trades, and hopefully higher. Real trading will cut that rate down.

 

Do you guys noticed a change in your personnal life or personnality after successfully learning how to trade?

 

If you are involved in trading, successful or not, for an extended period of time, I think it will change you as a person. Whether you are successful or not, you may become more hardened to the harsh reality of trading and life. I'm not saying a person will become hardened from trading, but I'm guessing the odds are high. There is a good side to trading, in the sense that you can learn and grow as a person, but there is a definite downside that I think is difficult to avoid.

 

I think it would be kind of like being a butcher. You might make good money being a butcher, but you need become accustomed to and desensitized to killing and blood. That may sound a little harsh, but I'm just trying to make a point. All I'm saying is, that trading has the potential to have a harsh downside to your personal life and how it affects you. I'm not trying to say that trading has some exclusive bad side to it. I'm sure there are plenty of other life experiences that can affect a person as well.

 

Apart from other traders, you may not find many people who have any interest or understanding for what you are trying to accomplish in trading.

[avir4tg 10]

Hello wanr. I know my reply will not directly answer your question. I just want to throw out that you should also invest time in the psychology side of trading. I hope others on this thread will agree with me that the majority of mistakes you will encounter will be "between your ears." I've observed many new traders constantly switch their trading system because they blame their losing performance on bad technical indicators. Most of the time it's "The archer, not the arrows."

 

When you are starting out is the best time to build a good foundation for the mental side of trading. At a minimum I'd like to suggest you journal your behavior while trading. If you really want some good feedback assign and track your outcomes to money. For example when you break an entry rule which results in a losing trade - how much did it cost you?

 

Just my 2c. I wish you the best of luck!