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Just Starting?


It's advisable when first starting to trade to take every trade which seems appropriate, thereby giving you the right over time to discern a favorable trade over one that isn't. Since the consensus is to trade a sim account as if it were real, the mistaken tendency and detriment to your account is to right away risk buying power in favor of what's hoped to be big moves, more points and hence more money. Unless you've been coached by someone reputable, the odds are against you that you wont blow through an account, and possibly more than one account, in this way before forcing yourself to find and hold to emphatically and with rigid discipline a money management strategy fitting to your temperment and financial means or giving up trading altogether.

Here's some insight: pit traders seldom are in trades for more than two points depending on the liquidity in the instrument. In order to get two points out of a trade you'll pretty much have to be able to anticipate, excecute, wait patiently and exit a trade flawlessly. Intraday for two or two hundred otherwise, that doesn't happen overnight.

It's been my observation people wait far longer than they have to to go live. The longer they wait for the holy grail of indicators to be bestowed upon them, the more frequent is the lack of confidence in there being the be-all, catch-all indicator. And there isn't one. Psychologically, as a result, self-sabotaging habits are formed. Most give up and move onto other less risky modes of wealth-building; and of those, too few ever make it to gambler's anonymous.

I'm serious, if you're trading because you're compelled to instead of professionally and for a living, step back, look at it, and deal with it promptly; and never allow yourself to lose sight of the crutch. If you are unable to do this, heed this advice: don't even think about becoming a trader. You wont make it, and those around you who care for you don't deserve the pain and undue hardships. Cut and dry.

Here's a trading platform money management strategy I use for scalps:

I use ninja trader, but most platforms offer a variation on this theme so if you'ld like, adapt:

I want two points on any given scalp. I'll risk one point to get two points. Realistically though if price moves more than two ticks against you after placing a trade, it's possible you've misapprehended the trade as being in your favor and/or got a horrible fill. In which case try to break even or give back as less ticks as possible. Don't give back more than two ticks. I repeat: Risk four for room for price to breathe, choke a move against you. If price doesn't quickly move back to break even or a tick below and is at two, take it on the chin and exit immediately while loss is still managable. You don't want to chase a losing trade to get filled. Trust me doing so on the trade you wanted two points from will cost you, if you're lucky, two points.

I like stop-limit bracket orders. I never use market - the slippage no matter how great the technology is still exists. While from time to time you may get slippage from brackets, it occasionally moves in your favor, which in the long run balances out. It never will with a market order, believe that. By and large limit orders are great for entries but aren't reliable for exits. A manually managed stop-limit bracket moved to market price I don't care if there are only two traders trading in the entire World that exit is immediate and statistically in your favor per slippage.

To manage an entry initially I'll click on a hard stop at four ticks below entry in the middle column to engage moving it to near to break even as I can but hovering over two ticks. Once the trade goes in my favor four ticks I have my hard stop programmed to rise to break even. At five ticks, it locks in a point, raising another four ticks. Most times, I'll get stopped out at a point if the move isn't a strong one. But it's profit. At seven ticks, I lock in a point and a half.

It looks like this: the bare bracket stop-limit is set for four ticks stop-loss and eight ticks profit target -- then I have a stepped stop strategy saved within the bare bracket strategy: four ticks break even, one tick trailing stop loss initiated every other tick at five ticks' profit target advance. lol Trust me, you wont find a better one. It will lock in a point and a point and a half, two of the most likely end-points enroute in the attempt for two points. You could have the trailing stop initiated at every third tick but a stall at six or seven ticks, and you have to walk away with four. It's not the best feeling. Too, because the trailing is tight, you wont incur as much slippage.

At three contracts, a point is one hundred and fifty dollars; at six contracts, three hundred. It's not Buffet's capital gains, but it's a living, and one better than most in a Country where the Middle Class is near non-existent are accustomed to. Occasionally you'll get your six ticks and two points, but it should be viewed as icing on the cake, and not bread on the table.

Anyway, using that strategy, or one very close to it, in sim for a few weeks, you can trade live as soon as you have the money without going broke 1) and 2) you'll even add equity in your account. And isn't that the name of the game.