sminicooper
Experienced member
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Hi, I've jotted down my immediate thoughts to your comments largely based on my early experiences and I hope they may be of use. Other people may offer something totally different, so you will have to make your own judgement on the value of what I say!
Be clear about what you want: is it to learn how to trade or to receive tips and alerts?
To learn to trade proficiently.
That goes without saying but you need to be more specific. That’s also easier said than done because, as a beginner you may have only identified that you are not trading successfully – that’s a start, but you need more detail. I would ask myself the following questions:
1. Do I have a set of rules for all aspects of my trading? – If not, then you should make some. At the early stage I wouldn’t get too worried about the specific rules because you may not have enough understanding to know what they need to be – that will come later as you continue to learn. It's quite possible that many experienced traders don't have a "list" of rules but nevertheless they will subconsciously know what's right and what's wrong for any given situation that they trade in. In the early days you have to start "by numbers" – experience will enable you to move on from there.
2. Have I followed my rules? You’re obviously familiar with Excel so do you note on your spreadsheet which rules you have followed and which you have ignored/disobeyed? Get yourself to the stage where you religiously follow all of your rules and look at your results. If the results are unsatisfactory then you need to change some of the rules. Only change one rule at a time otherwise you won’t know cause and effect.
3. As you progress and see the effect of your rules, re-evaluate them to see if they achieve what you want.
4. Are you able to specify what you are trying to achieve want? This of course will depend on your style of trading and in the early stages it’s difficult to know what to do. Most people trade FX – that’s not what I would do (I trade the SP 500 shares – loads of choice there with respect to volatility and price) but that’s only my opinion. The only way you’re going to find out is to try it for yourself (on paper of course – you don’t want to risk hard earned money at this stage: you can do that later on when you’re better equipped). I think most people would agree that it’s easier to see where you’re going when you’re trading the higher timeframes – I recommend daily EOD prices. Day trading is an expert’s game and there is lots of psychological pressure. (I note that you already EOD trade).
So, get your style of trading sorted out and make your rules. As far as I’m concerned that’s a basic building block. In my experience it’s essential to develop your own self-critical awareness of your trading. I don’t think any courses or even freely available information will tell you how to do that – the nearest you’ll get is a recommendation (like what you’re getting from me!). In the ideal world you have a best mate experienced trader sitting alongside you and telling you where you are going wrong – that’s the shortcut and if you can find someone like that who knows what he’s doing and has the ability to teach/mentor/educate you, then stick with him. If you’re like me (and I suspect most people) you’re going to have to make your own arrangements. You can only do it by a constant process of reiteration of looking at your results and analysing them carefully. Always ask the question to yourself what if....? I do this/that/other; would it have made any difference? Once I started treating myself in that way and noting the results (good old spreadsheet – best tool you can buy) I started making progress. All learning progresses from the known to the unknown/experimental – and the most successful people end up doing what they think is right and successful and not what somebody else tells them. Until you have confidence in your own trading ability – and not just a mental attitude, it’s got to be based on solid reliable results – you won’t be successful. This iterative phase (which actually never stops but tends to become less time-consuming) can be tedious and balls-aching but the road to being successful in anything is just that.
Before you ‘add to cart’ . . .
I believe that I understand most of the basics. I don’t want to spend all day in front of my PC screen watching prices. I did that one day and made over £200 on the FTSE100 and Dow indices, not long after I started live trading, which was very nice but I was a nervous wreck by the end of the day! Therefore, I want to swing trade LSE shares over the 0-4 wk timeframe (or longer if a trend is running in my favour). I am also playing with FX on 1 & 4 hour charts but only just feeling my way on this at present while concentrating on the shares..
If indeed you do understand the basics you are well-placed to analyse your own trading. Just be sure that you do understand: do you know what your indicators are capable of? What are their shortcomings? What are they providing that you otherwise would not be able to ascertain? Your paragraph has some “I wants” – are they based on solid experience or just wishes: only you can answer that. I believe it’s more important to base your trading on what suits your personality and capability – there are loads of different routes to being a successful trader. Just look at the personalities in the Jack Schwaager book “Market Wizards” – all remarkably successful and all using different methodologies. So it’s got to be the person and not the methodology that counts and that’s why it’s so important to find what works for you. Try lots of things – most of them probably won’t work but you will learn an awful lot.
Trading Journals
I have an Excel based one that I have developed in which I log my trades together with charts at open and close together with my reasons for opening and closing the trades. Each trade has a trade ticket that includes: the indicator that I based the trade on; the broker I placed it with; calculates my stops and limits based on an ATR multiplier and a reward:risk ratio, support and resistance levels. When I close the trade or it is automatically closed by stop or limit, I enter the price and then teh Trade Ticket calculates the profit/loss. This makes sure that I do not make a math error when placing my trade. A summary of each ticket is then copied to an overall monthly summary sheet that calculates the month's P&L.
In fact I have just noted one short coming of my trade ticket, and that is that I did not check when the company would be announcing its 1/2 & yearly results! Will be adding this to the ticket at end of month.
Good. And one of the beauties of Excel is that you can change it as you go along. I don’t see any mention of risk control apart from reward/risk ratio. How at this early stage do you know what your reward is likely to be? Do you have method for calculating it? Does it work? Regarding risk: have you set all your parameters for the amount of risk you can tolerate? Do you instantly know what your current risk is and what your account can withstand safely? And I just don't mean risk on individual trades – what happens if the market tanks or there is a black swan? Can your account cope with that? How many consecutive losing trades can your account withstand? Based on your results do you know the statistical probability of your losses/account wipeout? You mention trades being automatically closed by stop: is this an occasional thing or does it happen regularly? If it’s regular then something is not right. One of the things I found in early days (and it’s very easy to get sidetracked with this because playing with spreadsheets is actually quite good fun) is to over-concentrate on the results – working out ratios and profitability and nice graphs; but if the results are basically unsatisfactory no amount of manipulation will make it right. Use the spreadsheet to unmask the source of the problem.
A catch-22
I guess that using T2W will help to ensure that anything I am told will be peer reviewed by other traders. That may be so but you’ll probably get as many opinions as there are members. You then have to look at what is said and evaluate it for yourself (I hope you’re doing that with what I’m saying). The best peer review of what you’re doing is your trading results.
Trading Success is not easily duplicated
Understood! That’s why you need to develop your own methodology and rules.
Focus
Yep agree, I have been live trading small beer at present and slightly better than breaking even. A very generic term that I think states the bleeding obvious – if you don’t concentrate on what you’re doing as a trader then you’re doomed.
Patience
Definitely, ones perspective changes when live trading own money!
Patience can be applied in many ways: you need to be patient in achieving the objective to be successful trader – there’s no way that will happen overnight. You need to be patient in searching for trades: when you get to know the right entry setup (and that will take some learning) you then have to be patient and wait for it to occur or be patiently diligent in finding it since there are normally opportunities there somewhere. It’s very hard to be patient but it can be learned with practice. And of course, sometimes you will be too patient and allow the trade to run away from you because you either didn’t have a sensible rule or you ignore it!
Be Sensible
Understood – of course, aren’t we all? (But that’s a joke when you look back in history of one’s life isn’t it?)
Work Hard
Yep – just because I don’t want to watch prices 8 ½ hours a day doesn’t mean that I do not want to work hard to better my trading. Hence posting this at 22:20hrs.
There’s a difference between working hard and working efficiently – try to recognise the point where hard work is negatively outweighing efficiency.
Emotions
That is why I am end-of-day trading outside market hours and placing orders with stops and limits. I find this limits any chances for emotions to come into play. I can walk away from the screen, I don’t check the markets until about ½ hr after opening the following day to check which orders if any have been fulfilled by pre-market and early trading price movements. But if I have had to leave for work I am not constantly on the phone or laptop checking what’s happening, I just expect that either things will go my way or my stops will protect me. Maybe this is wrong but it feels right for me!
That’s important and it sounds if you’ve got a grip on it. If you’re end of day trading and can’t leave it on autopilot then the stress will wreck you.
Lastly – the bottom line
Last Christmas I decided to set a couple of months aside to concentrate on my trading but that has had to be shortened to 5 weeks from now. I decided this as I felt that I just needed that final push to get me consistently profitable but not with unrealistic, unsustainable goals.
If you decided that you needed a couple of months why do you now think 5 weeks will be sufficient? On what basis did you decide a couple of months? I’m not saying any of this is wrong but you do need to analyse specifics to know what it is you’re trying to achieve and how you going to do it. My experience is that learning to successfully trade is quite a long process and I don’t think I could ever have sat down for a couple of months and come out at the end of it as a successful trader. Perhaps that’s just me though?
Even though I’ve been trading for quite a few years now, I still feel that I’m learning and I still examine what I’m doing and try to draw some conclusions from things that go right as well as those that go wrong. It is a long, tedious and balls-aching process that when I started out I would never have believed.
