There are a number of key mistakes which traders make and which can hamper their opportunities to derive value from trading the financial markets. They are common and taken together their impact could make the difference between a successful trade and a losing trade Lack of Discipline
Discipline is vital to success as a trader. Discipline means creating a trading plan that fits your needs and expectations and then sticking with it for the duration. Too many traders end up compromising with their trading plans, cutting back on their initial formulations in the heat of the moment. This is a common error because without discipline there can be no real success. A disciplined trader will trade the markets only when it’s right for them. If you’re trying to become more disciplined in your trading then practice doing just that:
To succeed in trading you first have to adjust your expectations and redefine what success is. Trading can certainly deliver you huge payoffs on the amount of time and money which you invest thanks to the combination of micro financing under leverage and volatility within the trading market. However, this combination often yields a result which is based upon blind luck rather than skill and as a result is just as likely, if not more likely, to lead to financial failure rather than financial success. If you want your trading to be about more than simple luck you will need to reduce your expectations – no-one who is a serious trader grows rich from a single trade, but by putting in the time and effort required to trade responsibly over a number of months it is possible to see an extremely attractive level of return from
No Trading Strategy
A trader without a trading method is like an explorer without a map. Without some sense of where you’re going or how you’ll know when you get there how can you ever expect to see success? There are of course a huge array of methods which can be employed in your trading, which can be based around the analysis of trends and patterns in trading data – technical analysis, or else based upon the analysis of important economic and financial data releases – fundamental analysis. Beyond the question of how you will analyze the market, trading method also relates to how you trade on a day by day basis. Some traders like to trade the market by exploiting perceived imbalances in prices which are at the level of just a few pips at a time and which occur for at most a minute. This style of trading, which is popularly referred to as scalping, is one of the popular ways to exploit the opportunities which the market offers. Another way to trade the markets is so-called range trading, where traders look for regular thresholds in pairs which keep them locked within a specific trading range over time. By trading the pairs within these range traders seek to exploit this regularly to achieve modest and predictable gains.
No risk management
One common mistake of traders is to risk large amounts to make big profits in just one trade. When a trader risks an amount too large his entire judgment is disrupted with things like fear and tension in the way of trading decisions. Trading mistakes under such influences include closing a trade to early to avoid loss or closing it too late because the trader simply does want to acknowledge he lost such a big amount. Decide what amount you can afford to lose in each trade and then set your stop loss accordingly. This will enable you to manage a trading strategy over time. Remember even the best trading strategies needs space for errors.
Focusing on too many pairs
Another common mistake done by traders is start trading all the pairs at once. This could be very confusing especially for beginners with no experience as each pair has its own complexity and dynamics. Focusing on too many pairs makes it hard to remember which dynamics effects which pair. Focusing on one pair for the first few months allows you to get familiar with the different factors and dynamics affecting the pair you are trading. Moreover resistance and support areas the most important aspects of technical analysis limiting your trading to one pair allows you to learn most support and resistance zone instinctively.
Thanks for info. To clarify, its for building a 100% automated black box stock trading system. Looking at the features here, Bloomberg Terminal - Wikipedia, the free encyclopedia, it appears to be mostly used for discretionary traders instead of system traders. But please correct me if I'm wrong and Bloomberg Terminal does provide automated trading strategies like TradeStation, MultiCharts or NinjaTrader..
So far, I have the following cobbled potential solution which is not ideal but seems to be the closest I can get to at the moment:
Using MultiCharts with Tradestation as the datafeed kind of gets me close but leaves some daunting manual tasks to be done on weekly basis. It partially solves some items in my original list:
1/2. Using MultiCharts scanner, I can run it weekly against full set of stock symbols provided by a TS datafeed. The resulting subset I would have to manually load into a MC trading strategy's set of instruments. This alone could be quite a daunting manual chore if the yielding scan results in over 1000 stocks.
3. Do not worry about stock splits. Let the datafeed worry about this. Not sure if this is wise but that is recommendation by MC person responding to my above set of issues.
Ideally, I was hoping for something like this..
Stock datafeed that could support all or nearly all of symbol universe. I would not hopefully have to manually load in every symbol that exists into QuoteManager for a given feed (will investigate this point further). That universe of symbols is then fed into a scanner which is run every X periodicity (e.g., scan could run once daily, or maybe as often as once an hour). The result of such a scan is a stock subset of entire universe. Would be great if we could name scans like we name indicators and/or strategies so could reference them anytime we need to provide symbol sets (i.e., trading strats needs sets of symbols to run against).
Then, have the trading strategy system (automated) reference the named scan for its set of instruments to apply the strategy to. Only when the condition of the strategy meets a given symbol's chart for periodicity Y (e.g., 5 minute chart is used for execution) of this trading strategy, then would a buy/sell signal be attempted for that symbol. Of course the portfolio backtesting engine would have to keep track of funds left in the account before allowing any new open positions, etc.
The account would be funded between 7-8 figures. Obviously its not my money
For a 1M account that gives you only a $20K/year budget for infrastructure and data if you follow the 2% rule and don't pay yourself. That leaves out most institutional-grade solutions.
Consider breaking your requirements down into components. Tick database and a data feed is perhaps your first building block. SQL procs or querries can handle all your scans, and the results of those scans can be made available as objects in an OO environment. Your database can also have the ability to "playback" data for testing.
For execution, you will need to decide if the API drives your choice of brokers or if your choice of brokers drives your choice of APIs. Goldman won't talk to you with a 1M account, so no need to code to the Redi API for example.
The deeper you dig, you will find you may want some sort of messaging and CEP on the front end so your trade logic and orders happen as close to real-time as possible (ie before they are written to the db). You will also find you really need to monitor your risk and depending on what size you trade you might need some sort of delta hedge capability.
If you know how to code and have a decent understanding of systems architecture, you could put something together using a combination of open source and retail-grade COTS products. Tradelink and Marketcetera are open source and might give you some architecture ideas. There are small shops that use Ninja, Tradestation, etc with some additional home-grown infrastructure and as much reporting/risk management as they can get free from their brokers.
If you have 10M or more to trade and your systems definately make money, look at the institutional products instead.
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