trading advice
i also came across this of late but dont know who to attribute it to:
My best advice:
1. Do not trade all day. Trade the first 90 minutes or so. Many of the best opportunities happen in the morning while price discovery is taking place. If you must trade to the close, come back for the last hour! I personally find that after making a number of good trades in the early part of the am, if I continue to trade its often a case of getting stuck in the chop and giving back the easy money made earlier. Its just not worth it.
2. Limit the number of trades you do. Teresa Lo limits herself to 3 and rarely breaks that rule. She has a ton of discipline. I wish I had inherited her discipline much earlier in my trading career. That one step improved my trading tremendously. If you know you only have three stabs and then you are out, you aren't going to waste them. Trust me on this.
3. Know what you are trading. No one, in real time, can be master of all setups and trading styles. Until you can be consistently profitable day trading, I would pick one or two setups and only trade them. You may go all day without having a single setup appear (unlikely) but if thats the case, don't do it. Even now I have only two primary setups - test
4. Get your mind around why overtrading is happening. If you can quash that "problem" (I believe it to be, been there done that) you will probably succeed in enforcing the discipline required.
Position and swing trading is much easier, in stocks, IMO. You have time to contemplate your moves and are not under the real time gun. You might even question why you want to day trade. Some people I think switch to day trading just to get an adrenaline kick, when in fact they might be far more successful as position traders.
There is something very appealing about getting all that time back. Using only end of day data, orders transmitted at the open, you then get the day to yourself to do something else.
I switched to day trading futures some time ago and do not day trade stocks at all, much to my (stock) brokers disappointment I am sure. I have never looked back - futures allowed me to focus on improving my trading, not trying to find 'the' best stock(s) to trade on a given day.
Just some musings. Oh, a final comment. I believe a person makes it as a trader when the act of trading becomes boring. I tell ya, sitting all day waiting for a setup to happen along is boring!
:) mw
My best advice:
1. Do not trade all day. Trade the first 90 minutes or so. Many of the best opportunities happen in the morning while price discovery is taking place. If you must trade to the close, come back for the last hour! I personally find that after making a number of good trades in the early part of the am, if I continue to trade its often a case of getting stuck in the chop and giving back the easy money made earlier. Its just not worth it.
2. Limit the number of trades you do. Teresa Lo limits herself to 3 and rarely breaks that rule. She has a ton of discipline. I wish I had inherited her discipline much earlier in my trading career. That one step improved my trading tremendously. If you know you only have three stabs and then you are out, you aren't going to waste them. Trust me on this.
3. Know what you are trading. No one, in real time, can be master of all setups and trading styles. Until you can be consistently profitable day trading, I would pick one or two setups and only trade them. You may go all day without having a single setup appear (unlikely) but if thats the case, don't do it. Even now I have only two primary setups - test
4. Get your mind around why overtrading is happening. If you can quash that "problem" (I believe it to be, been there done that) you will probably succeed in enforcing the discipline required.
Position and swing trading is much easier, in stocks, IMO. You have time to contemplate your moves and are not under the real time gun. You might even question why you want to day trade. Some people I think switch to day trading just to get an adrenaline kick, when in fact they might be far more successful as position traders.
There is something very appealing about getting all that time back. Using only end of day data, orders transmitted at the open, you then get the day to yourself to do something else.
I switched to day trading futures some time ago and do not day trade stocks at all, much to my (stock) brokers disappointment I am sure. I have never looked back - futures allowed me to focus on improving my trading, not trying to find 'the' best stock(s) to trade on a given day.
Just some musings. Oh, a final comment. I believe a person makes it as a trader when the act of trading becomes boring. I tell ya, sitting all day waiting for a setup to happen along is boring!
:) mw
I am brand-new (this is my very first post), but I will try my hardest not to ask really basic questions. Here goes:
Q: I'm JUST starting out in day trading and I appreciate what you have said mainly because I am not greedy. I consider myself to be an extremely diciplined individual looking for a way to consistently make a pre-tax profit of $200/day (4 points) on S&P e-mini futures. What would you tell, say, a family member who was just starting out in day trading and they were DETERMINED to make it their sole 'job'?
(be brutally honest. thats the only way I'll survive in this shark tank.)
Q:I know what I don't know. I know I want to watch markets in real time and paper trade while I learn. I've heard TradeStation w/ maybe, NinjaTrader is a way to go. What would you suggest?
Q:I'm not even certain what price action is, but where might I go to learn a lot about it?
Q: Where do I go for learning setups?
Lastly,
Q: If I wanted to trade in the first 90 minutes and get out, can I make a living IF I BECOME PROFICIENT?
Thank you very much, in advance.
DBT
Q: I'm JUST starting out in day trading and I appreciate what you have said mainly because I am not greedy. I consider myself to be an extremely diciplined individual looking for a way to consistently make a pre-tax profit of $200/day (4 points) on S&P e-mini futures. What would you tell, say, a family member who was just starting out in day trading and they were DETERMINED to make it their sole 'job'?
(be brutally honest. thats the only way I'll survive in this shark tank.)
Q:I know what I don't know. I know I want to watch markets in real time and paper trade while I learn. I've heard TradeStation w/ maybe, NinjaTrader is a way to go. What would you suggest?
Q:I'm not even certain what price action is, but where might I go to learn a lot about it?
Q: Where do I go for learning setups?
Lastly,
Q: If I wanted to trade in the first 90 minutes and get out, can I make a living IF I BECOME PROFICIENT?
Thank you very much, in advance.
DBT
quote:Don't expect to be successful overnight. Look at all your other successes in life and see how long it took to build up to them. If you became good/great at a type of sport, or hobby, discipline, or profession then recall how long that took you. How many years and how much effort did you put in? Don't expect day trading to be any easier or quicker to achieve the same level of expertise.
Originally posted by deepbluetrader
Q: I'm JUST starting out in day trading and I appreciate what you have said mainly because I am not greedy. I consider myself to be an extremely diciplined individual looking for a way to consistently make a pre-tax profit of $200/day (4 points) on S&P e-mini futures. What would you tell, say, a family member who was just starting out in day trading and they were DETERMINED to make it their sole 'job'?
(be brutally honest. thats the only way I'll survive in this shark tank.)
quote:Try a few combinations. I think that Ninja is great and use it myself - I'm a big fan. Between TradeStation and eSignal I chose eSignal but try them both and see which you like. There are also others.
Q:I know what I don't know. I know I want to watch markets in real time and paper trade while I learn. I've heard TradeStation w/ maybe, NinjaTrader is a way to go. What would you suggest?
quote:Price action, to my knowledge means looking at the current price changes without indicators. Where can you learn more? Don't know, but be careful about paying for this information. Lots of sharks out there...
Q:I'm not even certain what price action is, but where might I go to learn a lot about it?
quote:I would recommend Market Profile
Q: Where do I go for learning setups?
quote:I would guess yes but don't know anybody who does this.
Q: If I wanted to trade in the first 90 minutes and get out, can I make a living IF I BECOME PROFICIENT?
I've been away for a while but I wanted to thank you for replying to my "simple" questions. While you have taken the time to answer my questions, I feel like the babe in the wood. I have my Technical Analysis for Financial Markets by Murphy, but now what? Can you recommend a platform to bang around in while I'm studying? (I've read TradeStation is good). And after I choose one, do I open an account and just start clicking around? If so, no problem, but is this the best use of a beginner's time? I know the only person who will teach me anything in this shark tank is myself, so with that said, can you point this 'dinghy' in a direction so I can know at least north, south east or west?
Thanks a million, in advance.
DBT
Thanks a million, in advance.
DBT
DBT: What you lack today is experience, time with the market. The trick is to find a way to gain experience without giving the market all of your money in the education process.
Here are a few suggestions:
Education:
Send the Murphy book back, TA will most likely get in your way, it's a distraction.
Learn to read a price chart (price, time and volume).
Learn about market structure.
Learn to read the emotion in the market.
Learn about Risk:Reward, understand the math (probabilities) behind profitable trading, keep your losses small compared to your expected reward
Practice:
Pick one chart setup (price & volume or structure based pattern)
Practice trades based on this setup (paper trading)
Move to a trading simulator, practice order entry and position management.
Always use a stop loss.
Live Trading:
Start small, 1 contract.
Move to 2 contracts only when your profitable for at least one month using your one chart setup.
Honor your stops.
The market will teach you what you need to know, if you are willing to set your opinions (ego) aside and listen and learn. Profitable trading is all about discipline.
Here are a few suggestions:
Education:
Send the Murphy book back, TA will most likely get in your way, it's a distraction.
Learn to read a price chart (price, time and volume).
Learn about market structure.
Learn to read the emotion in the market.
Learn about Risk:Reward, understand the math (probabilities) behind profitable trading, keep your losses small compared to your expected reward
Practice:
Pick one chart setup (price & volume or structure based pattern)
Practice trades based on this setup (paper trading)
Move to a trading simulator, practice order entry and position management.
Always use a stop loss.
Live Trading:
Start small, 1 contract.
Move to 2 contracts only when your profitable for at least one month using your one chart setup.
Honor your stops.
The market will teach you what you need to know, if you are willing to set your opinions (ego) aside and listen and learn. Profitable trading is all about discipline.
I agree with everything that pt_emini has said.
I would add that you should also understand (and experiment/test) how different money management strategies will yield vastly different results on the same trade setups. For example, giving yourself a 12 tick stop instead of an 8 tick stop could change a losing strategy to a winning one and vice versa.
Charting platforms are difficult to recommend. I use eSignal and think that it's the least of all the evils. eSignal is one of the pricier ones but comes with a certain amount of convenience. TradeStation is more economical especial if you use them as a broker and you are trading live money. If you're still paper trading then I'm not sure if they are more economical. Can you program or write simple scripts? Then that might influence your choice of charting platform as you will be able to modify indicators that you can use. eSignal uses a super-set of JavaScript while TradeStation uses a proprietary language called EasyLanguage.
You might also want to look at Ninja Trader. They are a trading platform but have recently added charts to the mix and use the built in .NET language of C# which is very convenient, powerful and fast. If you just use their simulation software then I think that you might be able to get their trading and charting for free while you're paper trading. Let us know how you go on that one if you try them out.
I would add that you should also understand (and experiment/test) how different money management strategies will yield vastly different results on the same trade setups. For example, giving yourself a 12 tick stop instead of an 8 tick stop could change a losing strategy to a winning one and vice versa.
Charting platforms are difficult to recommend. I use eSignal and think that it's the least of all the evils. eSignal is one of the pricier ones but comes with a certain amount of convenience. TradeStation is more economical especial if you use them as a broker and you are trading live money. If you're still paper trading then I'm not sure if they are more economical. Can you program or write simple scripts? Then that might influence your choice of charting platform as you will be able to modify indicators that you can use. eSignal uses a super-set of JavaScript while TradeStation uses a proprietary language called EasyLanguage.
You might also want to look at Ninja Trader. They are a trading platform but have recently added charts to the mix and use the built in .NET language of C# which is very convenient, powerful and fast. If you just use their simulation software then I think that you might be able to get their trading and charting for free while you're paper trading. Let us know how you go on that one if you try them out.
Read ONE and only ONE book. <a href="http://www.amazon.com/gp/product/0471059706/sr=8-5/qid=1140725915/ref=sr_1_5/103-4513128-6436642?%5Fencoding=UTF8">Reminiscences of a stock operator - Jesse Livermore</a> <br>
If you really have to read another book then re-read this one. Once you have re-read it then do it again and again and again.
If you really have to read another book then re-read this one. Once you have re-read it then do it again and again and again.
I agree with Ally on book choice. Reminiscences of a Stock Operator is number one on my Top Ten Trading Books to read.
quote:
Originally posted by novastar
2. Limit the number of trades you do. Teresa Lo limits herself to 3 and rarely breaks that rule. She has a ton of discipline. I wish I had inherited her discipline much earlier in my trading career. That one step improved my trading tremendously. If you know you only have three stabs and then you are out, you aren't going to waste them. Trust me on this.
This is not so easy as it seems. What if you made 2 trades and you have a decent pattern? Do you take that third trade? If you do, you can't trade anymore, whatever the outcome of the trade (win/loss).
After your third trade the market gives you the best pattern possible, you are going to make $$$. Do you go into this trade? No, because you have allready traded 3 times.
I tend to take all the trades that are winners according to my trading plan/setup.
I try to limit the time I trade instead of the trades I make. You can only focus for a limited amount of time.
Let's take an analogy back to our grass roots. Say that you are a fisherman and that's how you feed your family. You don't have refrigeration so everyday you need to go out and fish otherwise your family will starve. Your family needs 3 fish per day to survive.
So the time it takes you to catch those 3 fish is irrelevant. You stay out there fishing until you have 3 fish and as soon as you have 3 you take them home because you can't eat or store more than 3. If you catch them all in the first 10 minutes then you go home early. Some days you'll stay there all day and not catch anything.
You have no idea what the markets are going to throw at you today. If you get your 3 trades early on then you've burnt the emotional energy required for 3 trades. Remember that while you sit there and watch your trade you are burning mental and emotional energy while you manage it and try and work it to the maximum profit or minimum loss - even if you have a rigid plan it is impossible not to burn this mental energy. So, why subject yourself to more trades per day than you can handle. In Teresa Lo's case that is 3. In your case that might be 1 or 2, perhaps 5 or 6, only you know the answer to that. At least, only you can work out the answer to that.
To come back to your point. Limiting yourself by amount of time you trade is not, IMHO, effective. This is so because you are burning different amounts of energy depending on if you are in a trade or not. You may also be wearing yourself out if the market is moving about a lot and producing (or almost producing) signals. If the market is flat then you might not be expending any energy...
So the time it takes you to catch those 3 fish is irrelevant. You stay out there fishing until you have 3 fish and as soon as you have 3 you take them home because you can't eat or store more than 3. If you catch them all in the first 10 minutes then you go home early. Some days you'll stay there all day and not catch anything.
You have no idea what the markets are going to throw at you today. If you get your 3 trades early on then you've burnt the emotional energy required for 3 trades. Remember that while you sit there and watch your trade you are burning mental and emotional energy while you manage it and try and work it to the maximum profit or minimum loss - even if you have a rigid plan it is impossible not to burn this mental energy. So, why subject yourself to more trades per day than you can handle. In Teresa Lo's case that is 3. In your case that might be 1 or 2, perhaps 5 or 6, only you know the answer to that. At least, only you can work out the answer to that.
To come back to your point. Limiting yourself by amount of time you trade is not, IMHO, effective. This is so because you are burning different amounts of energy depending on if you are in a trade or not. You may also be wearing yourself out if the market is moving about a lot and producing (or almost producing) signals. If the market is flat then you might not be expending any energy...
My only advice is 2 things. Money management and get a mentor.
Read and learn and apply Money management as much as you can, this will help you stay in the game while finding your style, method, markets, etc.
The 2nd requires luck and persistance, and may not be necessary if you eventually find success consistently without blowing out. But you're a slow retarded learner trader like me, getting a mentor turned my trading around. Reading books is a great way to learn about trading but problem with books is it's a way street, when you need help in details answered, when, where, why and how to apply this method day after day of market action. Learning this plus the confidence to stick with it is difficult. Just getting someone to walk you through to what the market is doing is invaluable, plus giving you many intangibles you'll never get from anywhere else. It's like having 5-10 yrs of experience on your back.
Just a simple advice from a 2-bit trader.
Read and learn and apply Money management as much as you can, this will help you stay in the game while finding your style, method, markets, etc.
The 2nd requires luck and persistance, and may not be necessary if you eventually find success consistently without blowing out. But you're a slow retarded learner trader like me, getting a mentor turned my trading around. Reading books is a great way to learn about trading but problem with books is it's a way street, when you need help in details answered, when, where, why and how to apply this method day after day of market action. Learning this plus the confidence to stick with it is difficult. Just getting someone to walk you through to what the market is doing is invaluable, plus giving you many intangibles you'll never get from anywhere else. It's like having 5-10 yrs of experience on your back.
Just a simple advice from a 2-bit trader.
I used to trade all day. Then I realized that I get lazy and give money back in the afternoon. How do FOREX traders day and night? Maybe I'm just getting old.
"At all levels of play the secret of success lies not so much in playing well as in not playing badly."
"At all levels of play the secret of success lies not so much in playing well as in not playing badly."
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