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Tradewinds

What a New Trader Needs to Know About Trading

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My opinions about what a new trader needs to know about trading ...

 

- The first thing you need to know, is that your failure is at least 90% guaranteed. The investment industry in general, probably doesn't want you to know that.

 

- You could take a lifetime reading stuff about trading. There is a lot of trading related material "out there". But there isn't enough time for anyone to go through it all. Try to get a good basic overall knowledge before you get deep into a particular market or trading strategy.

 

- RISK: We don't like fear. But the only way the market can reward people is by taking risk. No risk, no reward. If you try to eliminate risk from your trading, you will not make any money. You must take risk to make money.

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- LIQUIDITY: Traders add liquidity to the market. If Traders did not bring any value to the market, then the people who own the exchanges would not be able to pay you anything. The long term investor enters and exits infrequently. But no one would invest in the market if they couldn't exit. I would never buy an investment that I couldn't get rid of. That's where the traders come in. The trader is willing to take the short term risk. The trader is willing to take that short term risk because there is a reward. The more traders there are in the market, the more opportunity there is for things to get bought and sold. No traders, no liquidity. If there is no liquidity, then no one will enter the market, and the market would just stagnate.

The market needs people willing to take the risk. The market won't reward you for taking no risk.

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ENTRY: You can buy when the price is going up, but then if the price goes down, then you entered at the worst possible place. You bought high.

When price decides to move, if moves VERY quickly from price level to price level. You don't have time to react when those really fast price moves happen, you must be prepared for them ahead of time. The reason the market surges very fast and hard when it decides to move to another level, is to make it difficult for you. If it was easy, then everyone would do it, and it would be easy money.

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TREND LINES: The emphasis of trends lines is on "smoothing" the price action, and eliminating "noise". But the market is not smooth, its volatile. Don't fight it, take advantage of it. You can't fit a volatile market to a trend line, it just doesn't work. If the market is trending, then you don't need a trend line to show you that, it's obvious.

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SPECULATION: You will often see the price drop on GOOD news. I didn't understand that for a long time. The market is about speculation. Investors are speculating ahead of time what the future will bring. That is what investing is. No risk, no reward. So investors and traders buy ahead of the news speculating on what the news will be. Then when the news comes out they sell, even if the news is good. So you have all these people selling to take profit, and the price goes down on good news.

On the surface, it doesn't make any sense, but in terms of speculation and short term profit taking, it makes perfect sense.

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Must be willing to take risk.

No risk, no reward.

Market is an auction.

Speculation drives price as much as news, and profit taking.

Price moves very fast from price level to price level.

Enter long when price is going down, sell when price is going up.

Look for confirmation that your entry is good right after you enter it.

If no good confirmation that it's a good entry, exit and look for another opportunity.

Be patient, even predatory, looking for your best attack.

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  Tradewinds said:
My opinions about what a new trader needs to know about trading ...

 

- The first thing you need to know, is that your failure is at least 90% guaranteed. The investment industry in general, probably doesn't want you to know that.

 

- You could take a lifetime reading stuff about trading. There is a lot of trading related material "out there". But there isn't enough time for anyone to go through it all. Try to get a good basic overall knowledge before you get deep into a particular market or trading strategy.

 

- RISK: We don't like fear. But the only way the market can reward people is by taking risk. No risk, no reward. If you try to eliminate risk from your trading, you will not make any money. You must take risk to make money.

 

what are you offering?

 

much better if you would just spell it out clearly on the outset?

 

you do not chat like a trader. you sound more like a merchandizer of some product.

 

like to know what you are attempting to sell....?

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  nakachalet said:
what are you offering?

 

much better if you would just spell it out clearly on the outset?

 

you do not chat like a trader. you sound more like a merchandizer of some product.

 

like to know what you are attempting to sell....?

 

I'll sell anything anyone is willing to buy if I can make a profit. Actually, I won't sell anything that has more value to me if I just keep it to myself. And I don't want to sell anything that does not have value to the buyer. I'm not a real trader. I'm just a wannabe trader. I'm really a nobody trying to be somebody. I'm a pathetic joke of a person trying to boost my ego here by making posts to Trader's Laboratory.

 

Oh, this is the perfect opportunity to point out that my Trader IQ recently went over 90%. Now I have a new goal. I'd really like to have a perfect Trader IQ.

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  nakachalet said:
what are you offering?

 

much better if you would just spell it out clearly on the outset?

 

you do not chat like a trader. you sound more like a merchandizer of some product.

 

like to know what you are attempting to sell....?

 

 

I don´t understand why most people are skeptical prejudiced. This isn´t an attribute of successful people / trader. If someone attempts to sell something that isn´t valuable for a person, than nobody squeeze him to buy it.

 

BTW, I don,t think that Tradewinds is trying to sell something rather he is trying to give honest advice what really matters in trading. And as far as I read his comments they are all absolute correct and believe me, I had learned it the hard way.

 

Tradewinds, keep up the good work

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  nakachalet said:
what are you offering?

much better if you would just spell it out clearly on the outset?

you do not chat like a trader. you sound more like a merchandizer of some product.

like to know what you are attempting to sell....?

 

haha - hang out around the forums longer and you'll see Tradewinds is not trying to sell anything!

 

MMS

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  Abde said:
I don´t understand why most people are skeptical prejudiced. This isn´t an attribute of successful people / trader. If someone attempts to sell something that isn´t valuable for a person, than nobody squeeze him to buy it.

 

BTW, I don,t think that Tradewinds is trying to sell something rather he is trying to give honest advice what really matters in trading. And as far as I read his comments they are all absolute correct and believe me, I had learned it the hard way.

 

Tradewinds, keep up the good work

 

Wow! Thanks. I use the forum mostly to learn new perspectives, and a diversion from staring at charts and writing code. My bad side is that I like biting sarcasm. :rofl: Yes, I have a dark side behind the blinding pure light.

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Tradewinds

 

Respectfully I disagree...

 

There are many things a trader should know if they are going to work in this profession (I am not talking about hobbyists or other amateurs)

 

I would like to post the following attachement so you can see the broad strokes...we can talk about what it means to the retail trader if you wish or you can ignore it, or ask to remove it if you feel it is not suitable...My purpose is to educate and to do that, at some point you have to outline what that means....

 

 

Example Syllabus

General information for the student considering trading as a profession

 

Reviewing available literature, we see that the majority of retail traders lose money participating in the markets, and the shorter the time frame of the transaction, the more likely it is that a retail participant will be on the losing end.

 

Looking below the surface, we see the obvious. The majority of retail participants are unqualified to work in the industry, possessing neither applicable education nor experience to call on when making decisions related to financial markets. Based on experience it seems that most retail traders do not possess a strategy with a mathematical advantage, nor do they have a specific risk management protocol in place and just as importantly, they generally do not keep accurate records nor do they review or evaluate past trades with any regularity. As a result, if the strategy they have chosen does not work, they are usually unable to recognize it in time to avoid significant financial loss or “ruin”.

 

What is less obvious, is the requirement for psychological “fitness” in order to survive in what many would characterize as the most lucrative and competitive profession in the world. Based on our recent research of the subject we have learned that the trader’s sense of “self esteem” and personal expectation for success are critical elements. Within the room, we will model adult self-esteem so that clients can see for themselves the effect of positive expectation on their results.

 

While the evaluation of a person’s psychological “fitness” is best left to professionals, the impact of unresolved psychological issues can be seen all around us. The old saying is “Insanity is doing the same thing you’ve always done, but expecting different results”. How often do we see struggling traders in this very position, frustrated, losing money, uncertain about how to proceed, repeating the same mistakes over and over again, hoping for a more favorable outcome?

 

Education

 

We intend to provide 15 modules of education for the market participant as follows;

 

1. Basic Specifications for the S&P, Bond and Currency Markets

2. Risk Management

3. The Significance of Lifestyle and Psychological Issues

4. Basic Evaluation of Strategies

5. Reading the “Time & Sales Strip”

6. Interpretation of Price Action

7. Understanding and Using Wholesale & Retail Value (Market Profile)

8. Incorporating “Time-Based Pivots” into a systematic approach

9. Interpreting Volume and Market Breadth

10. Understanding the NYSE TICK

11. Understanding the Interdependence of World Markets

12. Trading the Globex Market

13. The Importance of Record Keeping

14. Developing a business plan

15. Evaluation and Analysis of Outcomes (Adapting to Changing Markets)

 

Group Environment (“GoToMeeting”)

 

Opening one hour prior to the open of the US market, we will review and analyze market conditions. We will provide our opinion as to the open and general direction of the market and publish our “action plan” (worksheet) for the day. Initially we intend to cover the S&P Futures market only. Depending on the client’s abilities and interests we will offer commentary and analysis for the US Treasury Bond, as well as exchange traded currencies including the Yen, Euro, Pound and Franc.

 

Nightly Review of Markets

 

A review of Asian and European markets will be provided each evening at a time to be decided.

Edited by MadMarketScientist
attachment removed

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Hello Tradewinds,

 

Thank you for your post. I see that you too state that the chances of success are less than 10%. Would you possibly be able to support this statement with some seminal works of statistical analyses that substantiate this common claim within the industry?

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TIME IT WILL TAKE TO BECOME PROFITABLE:

 

I don't have statistics to prove this, but from what I've read and experienced, it can take quite a while to become consistently profitable. I'm sure there are people who were fortunate, and developed good techniques and got good information early on, but they are probably in the minority.

 

I have heard stories of traders having mixed success, succeeding, then loosing everything, blowing out multiple accounts, taking years to become successful. There is a common view held by many that it takes 10,000 hours to become very proficient at anything, . . . . not just trading. And I have read quite a few comments warning against naive traders thinking that they are going to be the exception, and become a great trader in just a few months.

 

So, be aware, that many traders fail, and of those who do become successful, it took some of them years to become consistently profitable. Not only that, but there are traders who met up with a major change in the industry and could not adapt. So there is also the possibility that you could become stagnant as a trader.

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  blindfingers said:
Hello Tradewinds,

 

Thank you for your post. I see that you too state that the chances of success are less than 10%. Would you possibly be able to support this statement with some seminal works of statistical analyses that substantiate this common claim within the industry?

 

I did some searching and found this:

 

Google Books - the Futures Game Page 310

 

travismorien.com

 

There is the:

 

  • Hieronymous' Study
  • Houthakker Study
  • Rockwell Study
  • The Johnson Report on Day Traders
  • Gilbert and Brunetti Study
  • Odean's study of stock traders
  • Dalbar, Inc Study of Mutual Fund Investors

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A great book I just read is "Trend Trading" by Daryl Guppy.

 

I've been mostly working on my discipline in my trades. There are so many great online resources that I have been trying out as well. I have found everestforex's trading strategies really great.

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If you are just starting out on your forex journey add these to your bag of essentials: Read "The Complete Turtle Trader" by Michael Covel. Learn some forex trading strategies in a place like Everestforex. (You can even receive a $100 free bonus to trade if you pass their simulator). For the forex basics, check out ForexTrendFollowing. Hope you find it helpful. Happy trading!

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