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What should a beginner learn to trade first?
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What should a beginner learn to trade first?

  #61 (permalink)
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monpere View Post
I don't think a 10k trading account is unlikely to succeed. I think success depends on how good of an overall trading methodology you have. If you a bad method, 10k is just as likely to fail as 100K

Since this is a thread about beginning traders, the odds of success in the first couple years are overwhelmingly against any new trader who trades with high frequency and/or high leverage. I'm probably misquoting, but there is a saying something like, "How do you get a $1 million trading account? Start with $2 million." Monpere is correct that $10k or $100k, the odds of success has more to do with education, experience and psychology than account size.

At the same time, I believe when I inquired about the Futures World Cup competition, it started with an account balance of $15,000.00, and if my memory is correct, I saw the winner a couple years ago achieved 600% gains trading 2 contracts consistently on that size. That ratio of $7,500 per contract could bust a new trader easily in a month, or even a week, on a high volatilty futures instrument with high frequency round trips.

Futures trading is like taking someone who has never skied before, locking them into skis, and sending them over the edge of a double black diamond. They might make it to the bottom, but it's not going to be pretty. Ski instruction starts on nearly flat ground, and gradually progress to the "bunny slopes" (runs that would bore accomplished skiers to tears).

Taking the time to build an education can have far more initial economic value than trying to build an account.

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  #62 (permalink)
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Hi,


GaryD View Post
At the same time, I believe when I inquired about the Futures World Cup competition, it started with an account balance of $15,000.00, and if my memory is correct, I saw the winner a couple years ago achieved 600% gains trading 2 contracts consistently on that size. That ratio of $7,500 per contract could bust a new trader easily in a month, or even a week, on a high volatilty futures instrument with high frequency round trips.

Were the risks limited by the rules of the competition (for instance : no more than x% of the capital risked by trade)?
Otherwise, this 600% achievement is, in my opinion, not significant.
Take 1,000 competitors and have them all trade using a "flip a coin" setup and very high leverage and risk.
At the end of this random-based competition, there will always be one of the competitor with a 10...000% return.


Nicolas

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  #63 (permalink)
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Nicolas11 View Post
Hi,



Were the risks limited by the rules of the competition (for instance : no more than x% of the capital risked by trade)?
Otherwise, this 600% achievement is, in my opinion, not significant.
Take 1,000 competitors and have them all trade using a "flip a coin" setup and very high leverage and risk.
At the end of this random-based competition, there will always be one of the competitor with a 10...000% return.


Nicolas

I don't think there were limits in the competition, I passed more due to the commission structure than fear of blowing up. But the winner that year went on to win three years in a row. The point is not suggesting coin flip trading, it is suggesting educated and skilled trading. Professional traders who trade within their personal skill boundaries.

Since skiing seems to be my preferred analogy of the week; I cannot ski double blacks (extreme professional). I might be able to push my skill level to ski double blacks with persistance and training, but at my maturity level I have no interest in that amount of work and that amount of risk. Maybe when I was in my 20s, but at 43 I am happy with where I am and don't want to fall down. And, at this point in my life I spend a lot more time stopping to take in the scenery.

I can ski blacks (professional), but I sometimes wipe out on blacks and so I only do them occasionally and when conditions are right (good fresh powder for control, warmer temperatures so I am relaxed, when my muscles are fresh but warmed up). I can ski blues (intermediate) for months without falling down, and I avoid greens (beginners) because they are too slow for me. I have that level of skill from skiing for years.

The skill set of the competition traders could be analogous to the X-Games skiers. They don't pull off backflips on the same odds as a coin toss, but after having worked up to where they have a good chance of pulling them off. And while they might make it look easy, I'm not trying it.


Trading has similar levels of experience and insight that can make something that might hurt a beginning trader be relatively safe for a seasoned professional. Some people believe that trading is more luck than anything. I have found it is more skill than anything. When I make a trading mistake, I can almost always dissect "why" after the fact. I make a mental note, or journal it somewhere, and keep practicing but now with that particular lesson in focus.

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  #64 (permalink)
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GaryD View Post
But the winner that year went on to win three years in a row.

I fully acknowledge that this information makes my last message irrelevant for this specific case.

Nicolas

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  #65 (permalink)
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GaryD View Post
Some people believe that trading is more luck than anything. I have found it is more skill than anything.

In order to avoid any misunderstanding... I fully agree with you. In my opinion, trading is not a question of luck (even if luck can help sometimes!). It is more a question of skills. I am convinced that markets are not a random walk, and it is possible to have an edge.

My point was only that, by risking 25% of the capital at each trade, it is always possible that, due to luck, a very limited number of competitors show huge performance. But if the winner won three years in a row, this does not seem to be the case for him!

Nicolas

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  #66 (permalink)
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Cash -Reg T accounts

Here is a little more info on the Cash (RegT) accounts. At one time one of my accounts was a Cash (RegT) account. I was able to day-trade to a certain extent. The rule that would get you was the settlement date. The third business day for an Equity trade is the settlement date. For example I buy 100 shares of APPL on Monday and sell it a week later on Monday. The settlement day for that trade is Thursday (3 business days) but the funds are available in my account as soon as I sell the AAPL. Lets say I buy 200 shares of BIDU on Tuesday with that money. I did not wait till Thursday for the AAPL settlement date. Thus they were "unsettled funds". If I hold the Bidu for 3 days before selling I'm OK. If I sell Bidu before the settlement date (3 days) I have done what is called a "liquidation". RegT states that a "pattern" of liquidations MUST result in a restriction of the account so the practice does not continue. 3 liquidations in your account within a 12 month period results in your account being "restricted" for 90 days. Restricted means the funds in your account must be settled before you can use them to make another purchase.

Using the above example with a "restricted" account: When I sold the AAPL on Monday I would have to wait until Thursday (3 business days) before the funds would be available to buy the BIDU. Even with a 6 figure account it was a real pain to keep track of the settlement dates when you were short-term trading. I had two 90 day restrictions over a 5 year period.

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  #67 (permalink)
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A quick piece of advice from my experience is to pick "one" instrument and only follow it. Learn how it moves and all its little quirks. Early on, I thought it was sexy to say I traded the ES, NQ and YM....so I would try and follow all 3. Well, I learned my lesson pretty quickly. Since then I have really fallen in love with the 6E and have just started watching the TF. But even now, I prefer to just watch one of those markets....but maybe that is just me.

Hope it helps...

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  #68 (permalink)
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Adjust Expectation In Line With Ability

In the beginning we desirea certain result from our trading. To be consistently profitable, and to make x amount of dollars. We can measure by the week or the month and say that at the end of this period we want to be profitable and remain profitable for next week or month and so on.
A good way to measure our performance is using a detailed journal.
In the beginning write down in your plan how much you desireto make. Over time you will need to adjust that to how much you are able to make, and this will be more in keeping with your ability demonstrated by your detailed analysis of your trading and your results over time.
For example;
I have found that many traders want to make $400 a day from their trading. That is a lofty figure for a beginning trader and it also misses the point about consistently good trading.If you are trading one contract, this is going to be a pretty daunting task. You will go through a lot of hoops (frustration, disappointment, strategy adjustments, reality checks) as you try to get that number each day. Also, how many trades will it take? And how many winners are you able to get before you get a loser, and how many losers do you average per x amount of trades. Over time you will discover a certain rhythm to your trading, and a certain exhaustion point. By this I mean a certain point in your trading where you loose focus and start to lose. During the trading day you will have a peak point where you will be on fire, and a valley. So, once again, that journal is crucial. These are some of the hard facts you need to know about yourself as a trader.
The reality is that you do not need 40 ticks a day. You do not need $400 a day. What you need is to be able to consistently trade successfully until you hit your wall. For many new emini futures traders getting 4 ticks a day consistently is a tough task. However, once you know your success rate to x ticks on a consistent basis, then leverage can be used to increase your gains.
Your journal and analysis of your trading is crucial to help you determine your true consistent ability. Most smart traders will adjust down to be more in keeping with their ability first, then up as their ability and proficiency increase.
So set your goal in ticks. Once you are able to get x ticks consistently, then the magic of leverage will take you to the next step until you hit the next plateau or wall in your trading. This wall may depend on the liquidity of the instrument, the time of day as you increase your lot size, the amount of slippage on both ends for that lot size, and your psychological stamina as you make the adjustment to the new numbers

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  #69 (permalink)
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I really like what Boomer34 has to say about picking one instrument to follow.I tried watching several and only got more confused. I have been watching 6E now for several weeks and it seems to be finally coming together quite nicely.

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  #70 (permalink)
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Lower Risk Futures Instruments


If you are just starting to trade the Futures market, consider looking at the following 3 Instruments --> NQ, YM and DX...

Each of these are only $5 per tick, and generally have short quick moves that you can capitalize on. Don't over trade them though, try first to stop your losses, and get to break even. From there, you can build a base toward profitability.

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