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Time and money for your first year or two.
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Time and money for your first year or two.

  #11 (permalink)
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sledmt View Post
Curious, would building (buying) an automated system be an option? This way the system could be setup and would still allow a person to work another job why the system is doing your trading. Would this be a ok way to start out?

I started several years ago with semi-automated systems (always having entry and exit orders in the market) at OANDA. I chose OANDA because their small unit sizes allowed the implementation of LTTF (long-term trend following) systems. I started off with $500 and added $100 per month. Needless to say my initial backtests were way too optimistic and I was a break-even trader for quite a while. At least the account grew due to the monthly additions.

In short, after several years, obtaining sufficient experience and designing better backtesting techniques, my systems had potential returns of 20%-40% per annum and drawdowns of 40%-60%. Not very appealing. In between I also used fxpsyder (sort of like ninjatrader for OANDA before they got MT4) and tested shorter term systems. I could not find a single system that worked unless I moved to daily bars for my entry / exit criteria. I tried for high winning % systems and none of them worked.

During 2009 I started subscribing to IBD as well. I wasn't trading equities, but merely running a virtual portfolio in the CBOE platform. Once I bought a share, I did not monitor this for several weeks (stop-losses were in though with stop orders). Funny enough, that portfolio outperformed my OANDA portfolio by several multiples. I latched onto some big winners with the virtual money and that more than made up for the losses.

In real life, I started trading this, and if I allow my stocks to run, I do well. If I try and micro-manage I don't. The thing is, you can even enter all your stop orders over weekends (using OTO orders for your stop-losses) and don't need to do much work at all. Most of the work is done over weekends, screening stocks and deciding on a plan of action. With a small account, you may only have 1 or 2 stocks and once you have them, you just need to decide on an exit plan. William O'Neil's book is absolutely crucial if you want to keep big gains.

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  #12 (permalink)
Market Wizard
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People think that daytraders can transform accounts with measly 5K into millions in no time...
This might happen rarely. But it is gambling.
As one can use heavy leveraged options, ETFs, futures etc. the account may have a swing up.
But mostly it is doing the opposite: ZERO! Crash...
You need to put a lot of time for reading, understanding markets, doing tests yourselfs. Not days
or weeks but much more. Search for the thread about the 10000 hour rule in this forum - you find
amazing help.
Try to imagine this: Nearly every adult can drive a car - having more or less accidents in the life.
Good drivers try to test speed on closed circuits. Giving high blood pressure...
But the very best - like formula one drivers are doing highspeed tests every week. And these
can not been easily been beaten by a newbie.
So trading is like every other job: A skill with a long learning curve. And train to trade with low
blood pressure! ***

GFIs1

***that was a little hint to our friend @ratfink - happy recovery!!


Last edited by GFIs1; February 24th, 2015 at 05:14 AM.
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  #13 (permalink)
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I know several day-traders who have way more than 10,000 hours experience and still blow out their accounts occasionally. In their hey-day, they may have hit a lucky streak and made massive returns in a very short period of time. They still talk about this period where they just traded perfectly and are constantly trying to recapture that. This means that no other avenues are explored and they are stuck in their own boom / bust cycles without even realising it.

The above paragraph is meant purely to show that even with a large amount of experience, not all traders become successful. Remember the 10,000 hour rule also carries a large element of survivorship-bias. Not that many aspiring day-traders can even reach 10,000 hours before their capital is depleted. Thus, those who survive may either have massive savings, an accommodating spouse, or are perhaps just naturally good traders.

Having done so myself, small accounts can become larger, but they require some things:
1. Capital additions - extremely important to get to critical mass; and
2. A longer term view with the aim of capturing large gains.

The methods I have described in my prior posts provide an above-average chance of not becoming one of the 95% - 99% who lose their shirts. Unfortunately most novices will ignore that advice and insist on transferring their wealth to the pros. Some of them may do so repeatedly like alcoholics who can not stop drinking.

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  #14 (permalink)
Trading for Fun
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My best advice would be to start with something that can be traded with a small account , like f.ex: the M6E or retail forex ( I trade retail forex, it's great) .
This will give you time to see consistent results from your trading. While doing this you can save up for a bigger account.

Focus on getting consistent results over time. Don't be in a hurry to make money.

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  #15 (permalink)
Trading for Fun
Kalispell montana
 
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grausch View Post
I started several years ago with semi-automated systems (always having entry and exit orders in the market) at OANDA. I chose OANDA because their small unit sizes allowed the implementation of LTTF (long-term trend following) systems. I started off with $500 and added $100 per month. Needless to say my initial backtests were way too optimistic and I was a break-even trader for quite a while. At least the account grew due to the monthly additions.

In short, after several years, obtaining sufficient experience and designing better backtesting techniques, my systems had potential returns of 20%-40% per annum and drawdowns of 40%-60%. Not very appealing. In between I also used fxpsyder (sort of like ninjatrader for OANDA before they got MT4) and tested shorter term systems. I could not find a single system that worked unless I moved to daily bars for my entry / exit criteria. I tried for high winning % systems and none of them worked.

During 2009 I started subscribing to IBD as well. I wasn't trading equities, but merely running a virtual portfolio in the CBOE platform. Once I bought a share, I did not monitor this for several weeks (stop-losses were in though with stop orders). Funny enough, that portfolio outperformed my OANDA portfolio by several multiples. I latched onto some big winners with the virtual money and that more than made up for the losses.

In real life, I started trading this, and if I allow my stocks to run, I do well. If I try and micro-manage I don't. The thing is, you can even enter all your stop orders over weekends (using OTO orders for your stop-losses) and don't need to do much work at all. Most of the work is done over weekends, screening stocks and deciding on a plan of action. With a small account, you may only have 1 or 2 stocks and once you have them, you just need to decide on an exit plan. William O'Neil's book is absolutely crucial if you want to keep big gains.

thanks for sharing your experience.

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  #16 (permalink)
Trading for Fun
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GFIs1 View Post
People think that daytraders can transform accounts with measly 5K into millions in no time...
This might happen rarely. But it is gambling.
As one can use heavy leveraged options, ETFs, futures etc. the account may have a swing up.
But mostly it is doing the opposite: ZERO! Crash...
You need to put a lot of time for reading, understanding markets, doing tests yourselfs. Not days
or weeks but much more. Search for the thread about the 10000 hour rule in this forum - you find
amazing help.
Try to imagine this: Nearly every adult can drive a car - having more or less accidents in the life.
Good drivers try to test speed on closed circuits. Giving high blood pressure...
But the very best - like formula one drivers are doing highspeed tests every week. And these
can not been easily been beaten by a newbie.
So trading is like every other job: A skill with a long learning curve. And train to trade with low
blood pressure! ***

GFIs1

***that was a little hint to our friend @ratfink - happy recovery!!

Good points.

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  #17 (permalink)
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If I had a 9-5 job I would look to swing trade on a weekly timeframe. That way it would take less time to enter and manage trades. You can check the chart on a weekly basis and decided to enter, exit, etc.

I would look at Forex, Stocks, or Stock Options as potential weekly trading. Forex you can trade spot forex and start with a smaller account size. With stocks if you trade on a weekly timeframe then you will be outside of the pattern day trader rule and can trade with a smaller account. And options are options and their own beast.

I would not start trading with less the $10k.

Luckily I own my own business and make my own schedule. Bar some client type of engagement I am usually able to trade the mornings.

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  #18 (permalink)
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I know several people posted about using retail fx to get started. I started trading at OANDA in 2008 and also joined myfxbook shortly after it started. The OANDA forums at the time were quite good and the myfxbook forums quite crap. However, myfxbook allowed you to track traders. I tracked several, and all of them would sooner or later delist their accounts. On the OANDA forum, you also had an established group of traders and the rest tended to turn over quite a bit. Based on this, I can only guess that most of them blew up their accounts. I would wager that a lot of this was due to martingaling while hoping that prices would revert to the mean. Thus, as can be guessed, I am not a huge fan of retail fx and I think it offers a below-average chance of success.

Regarding my own experience, I started using EMA crossover systems and a modified Turtle System. I would update all orders once OANDA started new candles (think it was 11pm ET). My backtests (on daily bars) showed that close stops would lead to high returns and low drawdowns. However, the use of daily candles meant I needed to assume that my stops would not be hit on the day of entry. Unfortunately this proved incorrect and the account was a net loser until I acknowledged that close stops were not working.

To counter the problem of close stops, I moved them further away. As you should guess, at this point the reward to risk became lower and I would be lucky to get 4:1 trades. With LTTF hit rates being around 30%, you should see that during this period I was a break-even trader. To increase my R:R, I started pyramiding into trades and closing up my stop (thus keeping the risk low), but this reduced my win rate. It was not uncommon to get 10:1 trades, but the low frequency of those meant that I was still a break-even trader.

Thereafter, I started using fxspyder and reverted back to the close stop systems, with the addition of re-entering trades that I got stopped out of. Unfortunately, this lead to several losers around the breakout point and not all breakouts succeeded. Thus, still a break-even trader. End of the day, after breaking even for so long, I withdraw the cash from the account and went for a nice holiday in Florida...

Now using stocks, based purely on IBD's analysis at the time, I had both LULU and BIDU in my virtual portfolio. Both went up about 5 times from the time I bought them and that was pretty much where I closed out. LULU collapsed sometime thereafter and BIDU doubled from that point on. For an initial risk of 8%, I was looking at 500% gains. Thus, excellent R:R. While the 500%ers are infrequent, there are several 100% each year. Thus, you can set a reasonable stop and still get a 10:1 R:R on your best trades.

Another issue with fx meant that it was difficult to identify whether a consolidation in price would lead to a nice strong breakout. Thus, this inherently meant all breakouts needed to be taken and this automatically leads to a lower win %. Using the basic CANSLIM rules, you can enter stocks that have the best bases and thus increase your chances of trades working. Also, using their Market Pulse allows you to avoid trades during difficult periods, thus further increasing the chances of success.

The above 2 combinations of the potentially higher R:R and win% made it a no-brainer to switch over to equities. Sometimes during drawdowns I wonder if there is something better, but when things are working, they work extremely well and my risk of blow-out is almost non-existent.

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  #19 (permalink)
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Jake G View Post
Hey everyone. I love your forum here. Tons of great info and insights. I'm new to this so I'm going to say things that don't make sense. That's what new guys are for; It's our job and we're damn good at it. And pardon the long windedness. Currently I'm reading a bunch of books, talking on forums and I want to develop great skill at swing trading and day trading. An aspiring trader needs time and money. Time to study, to learn, and money to cover expenses. Like equipment, rookie loosing streaks, research costs, normal living costs, etc. So, how do you maximize both at the same time? I'm sure other traders have figured out this problem better than I have, but here are the solutions I see so far.

1) I doubt this one will work. Hypothetically, it would be great to work for some company that is involved in trading, or maybe in the ball park. Meet knowledgeable people, learn a lot, broaden horizons etc. However, I have no back ground in finance or investing. My resume doesn’t looks appealing; my only strength is learning fast and being extremely motivated to understand the job well; learn everything possible about this topic. If i am wrong about this, if there are in deed such options, such jobs, please tell me. Until someone suggests otherwise, I'm considering this option a no go.

2) I expect this next option won't work, either. Work 3rd shift at a job you can study. Like a security guard. Eventually, start trading during day time. But, how long before you save up a trading account of 20k? Probably a long damn time. Some say accounts of 5k and below are pointless. Perhaps that is not fully true, perhaps there is some "angle" to trading which can squeak you by, generate a modest profit out of a 5k account, continue to work a full time job. Continue educating yourself about trading, save up, eventually accumulate a large enough savings to trade full time. Again, I doubt this 5k account "angle" exists, and if it does I don't know what it is. Do you?

3) This may sound odd but it's doable. Semi trucks. 35k to 50k your first year. There is a lot of down time where you are not driving. While driving, truckers wait for traffic to clear up, then listen to audio recordings. Truckers get degrees for online colleges this way or learn foreign languages. Save save save, learn learn learn. Make trades during down time. Eventually, stop being a driver; trade full time.

4) Maybe some combination. Such as first #2, then #3. Figure out what the whole strategy should be while working nights, (although I'm sure the plan will change) after that, if I'm 10K or 15K short of start up capital, go drive a truck until I save the rest.

Again, I'm new, and am sure other traders have confronted this issue, have thought up better ways to handle the first two years than I have. Any suggestions? Anything important I don't know about, that would change everything I've said here?
Thanks a million.

Jake you're going to find a lot of people who are bias who've made it. The reason being is that many of the people who had the resources to get through the learning curve probably saved up a decent sized cushion of money in the ball park of 50,000+ and then blew up. They might have had the ability to come back after that just because they either had more money for living expenses or the skills to acquire money fast. So why would they think anyone with 5,000 or less could do it?

What I suggest you do is start working full-time during the day where you get one day of the week off. Maybe this will require you to work 4 days for 10 hours a day or maybe 5 days using up one weekend day. You can always SIM the data for the day you worked at night for free. Once you get 5000 together open a futures account but continue to save. Once your SIM is looking nice and you're consistent then use your day off to make a couple trades but don't force it. Evaluate and continue.


Last edited by Itchymoku; February 25th, 2015 at 06:51 PM.
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  #20 (permalink)
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Itchymoku View Post
Jake you're going to find a lot of people who are bias who've made it. The reason being is that many of the people who had the resources to get through the learning curve probably saved up a decent sized cushion of money in the ball park of 50,000+ and then blew up. They might have had the ability to come back after that just because they either had more money for living expenses or the skills to acquire money fast. So why would they think anyone with 5,000 or less could do it?

What I suggest you do is start working full-time during the day where you get one day of the week off. Maybe this will require you to work 4 days for 10 hours a day or maybe 5 days using up one weekend day. You can always SIM the data for the day you worked at night for free. Once you get 5000 together open a futures account but continue to save. Once your SIM is looking nice and you're consistent then use your day off to make a couple trades but don't force it. Evaluate and continue.

Any recommended reading to address the advantage of futures over options or stocks? Particularly, advantages for the context i'm in?

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