A message to those that are failing....

Discussion in 'Trading' started by short&naked, Jul 27, 2008.

  1. There seem to be a lot of beginners on ET posting stories about their failure to becoming traders. If you build on a few basic rules it really isn't that hard:

    1. Don't try to be an innovator... keep it simple!

    2. Start with a strategy that blends investing and trading (i.e. stay away from intra-day trading).

    3. Don't fight the trend, ever!

    Think about it, if a stock or commodity has been trending for a while, there will be much more momentum in the direction of the trend, increasing your chances for a good entry point if you follow that direction. Fighting a trend is a recipe for disaster.

    4. Use only basic indicators (stochs work well for trending stocks) and the main MAs/EMAs (200, 65, 50, 20). I have also found that 150 works very well on strongly trending stocks.

    5. Become friends with trailing stops. Once your trade moves into profitable territory, seal off your profit with a TS. It is always better to walk away with a small profit (or no profit) than a loss.

    And in case I didn't mention it: Keep it simple!

  2. newtoet


    I bet my intraday trading is far less risky than your strategy.
  3. Possible. Although without knowing details it is hard to make that determination. However, the shorter the time frame, the harder it is to make consistent profits. This is a statical fact.
  4. The scary part about trading is that there are some people on elitetrader that have been trading for years and know the charts inside out and still fail.

    There are many hedge funds out there that have blown up where there were ivy league grads and seasoned money managers.
  5. That's mainly due to the fact that most traders in that particular situation you've described have either forgotten or underestimated that there's much more to profitable trading than just knowing the charts.

    Profitable trading is like a book in which chart reading is just one chapter in that book, same for entry signals et cetera.

    There are a few good past threads here at ET about all those other things that's needed to be profitable.

    Yet, as usual, such threads are short lived (get very little replies or participation) in comparison to a typical thread here at ET where traders talk about chart reading.

    Anyways, regardless if the discussion is about the reasons for failure or success...

    It usually has a finger pointed at the charts and what's being used on those charts. :(

    True in some cases but not most cases.

  6. all is well, EXCEPT...

    investing and trading require two different mind sets.

    i don't understand what you mean by "a strategy that combines investing and trading".

    either you speculate the dynamics of price case in which you are a speculator (aka let's say "trader")..

    or you are an investor, don't really care much about the price at which you buy or sell, but rather care more about yields, dividends, interest and you have a lot of money to make it worth the effort...

    you can't assume both roles in one go.
  7. By blending investing and trading I guess the OP means that if the trade goes in your direction its a trade and if it goes the other way you've become an investor.

  8. Should have been clearer...

    Investors are indeed interested in the things you mentioned above. However, they also seek out long term trends. It is very possible to trade short term with the long term trend which can pick up your trades when the short term trade goes bad (unleveraged of course). For example if you had bought the EUR at 1.4 and sold at 1.6 would you be considered a trader or investor? Now consider simply trading intra-day in the direction of the trend (long EUR) starting at 1.4 and ending 1.6. Are you a trader or investor? The lines between these two are clearly blurred in this case.

    "Trade your investments!"
  9. Nope. Wrong.
  10. no. i don't think the lines are blurred.
    if you bought at 1.4 with the clear goal of selling it when it's higher in value, in your case at 1.6, you are a speculator.

    your initial goal was to profit from price dynamics.

    just because you hold it longer, doesn't make you an investor...

    you didn't invest "in" the euro... really...

    see, this is one problem with traders and one reason many of them fail. they don't really know their place

    A way of investing in the euro would have been if let's say you like the yield spread, you put your money on the line and collect interest and when the euro drops in value so that it defaults your interest payments, you get rid of it. A good investment doesn't care about the price at which you buy ...

    my 2 cents here.
    #10     Jul 28, 2008