Registered: Jul 2011
07-21-12 04:59 PM
There are multiple steps that are needed for anyone to move over from the side of losing money to making money. This will be a very short thread from my side, I will write them down here real quick my observations and leave after that.
1. Get a working system - Could be v. simple as a moving average crossover - something like 50d crossing over 200d or so. Could be buying selling high/low of last 40 days or 80 days. Do it over multiple markets and you will have a winning system. Or could be complex stuff like reversals, momentum, range studies, market internals etc. Or, could be super complex - an automated market making system, vol arb system etc. Point is get a working system in place. Use edge test, test the model over other markets, walk forward, backwards etc. to make sure that system is just not curve fit rather captures a real market behavior.
2. To get the working system in place, you will need to model the market using a tool. Multicharts, Ninjatrader, TS, Amibroker, Matlab, Excel are obvious choices. OK for a start. Get a tool, lean its intricacies and start playing with data.
3. Get money management strategy - choices are a fraction of Kelly, Optimal f etc. If you are traditional advice seeker, go with 2% risk a trade rule - which I consider to be sub-optimal.
4. Alright, now a working system has been developed. Start trading it without modifications and don't trade anything else. This step is important. I have been successful in first 3 steps, but have failed miserably step 3. I had my first system working from Q2 2010, had I been trading it on a real account, my account would have grown at least 5x times by now.
5. Keep developing more systems. Start working on portfolio management - a system of systems over multiple markets is the holy grail. Challenge would be how to implement multiple systems over a single market and then how to implement multiple systems over multiple markets. Next challenge would be how to decide which systems-markets to trade and which to cease trading.
6. Finally, move to next level - co-location, data farms, opm, customized developed software etc. etc.
I have covered ground till step 4 and am currently in step 5. However, I never made any money, because I never followed step 4 without fail. That has been my sore point.
Finally, learn from others failures and successes. There are many prominent wannabe traders on this board who have been successful at times, but have not been able to move to a professional always successful level. They have faltered at one of these steps. Just analyze these steps, and success is guaranteed.
Finally finally, the toolset that is needed for success in this businesss is screen time, statistical analysis of markets, programming (at least easylanguage), risk appetite, determination, perseverance etc. Good luck to all.