I have gone back to tried to work out why I lost money (one of the reasons I ended up here). The reasons were fairly obvious in hindsight - excessive leverage (10 to 1) and buying in too early. My trades were not short term plays, but mid-term predictions based on economic and political data. Exactly what I predicted would happened did happened and for the reasons I predicted, however, until the news filtered down the market went in the opposite direction and I got stopped out. I have learnt two important lessons: 1. Watch the leverage because even if you are right random movement can blow you out of the water. 2. Wait until the market tells you that it has finally noticed the data. Being too far ahead of the market risks having your trades stopped out because of random movement. Both of these are fairly obvious, but having not thought about trading enough before jumping in (I guess I thought all that mattered was being right) I made some silly mistakes. I hope to avoid making such mistakes in the future.
From where do you get that data? My experience is that the market is many months ahead of the current "economic and political data". If you want to be a value investor you will probably not find advice here on ET. If you want to trade what you see on the chart you must forget your economic and political opinion. Just use it to chat on the boards but when you enter a trade ignore your opinion and analyze the charts. It probably takes a good amount of time and money to execute a pure economic and political opinion trade. You must be ready to wait 2-5 years for the trade to play out. You must be ready to take a big move against you. The market has the bad habit to f*ck with smart people. I don't know why.
I am not a value investor (only an involuntary one via my pension). My experience has been that I can "see" the future price direction of some stocks 2 to 3 months out with a very high success rate (actually 100% on the 22 predictions I have made over the last three years). I never had an interest in trading, but my best friend is a trader so I have been giving him my opinions. He has ignored all my suggestions (he is a short term trader), but he did write them down so that he could prove me wrong. After sitting around taking about everything I thought that I should put my money where my mouth is and actually start trading on my predictions. This of course didn't go so well, but at least I was smart enough to realise this and stop before I lost too much money. I agree that the market tends to make fools out of both the smart and the dumb. It is for this reason that I am being rather cautious - I know enough to know I know almost nothing
For me it's easier to go after volatility or a breakout of a range with limit (not stop) orders, instead of trying to determine the direction of the asset/market... Please reference the thread entitled: Pabst on Trading Success, by Marketsurfer, as he has a hyperlink to an article in Trading Makets called "For Trading Success Be Open to Every Possibility". This article gives an acute reminder that sometimes we don't even know what we don't know... therefore, anything is possible. Again, I believe that it's best not to even try to guess the direction with a given "edge" because most "edges" only work for a specific time within a specific set of circumstances. The only constant with the market is change... It's always changing. Therefore, breakout plays off the support/resistance thresholds, with patience, is the key...edge Walt
I wasn't suggesting that the approach that I have taken to date is the best, in fact the more I have learnt the more I think it is poor, hence my other posts. The first problem is I have no idea of the validity of my mid-term predictions. Just because they have worked to date doesn't mean anything as I may have just been lucky. The second is they only enable infrequent trades (a bit over 6 a year on average). It is possible that if I put in more time I could identify more trades to make, but infrequent trading requires a large capital basis (which I don't have) to be viable and as I found out you can't use high leverage on a play that takes three months.
Your on the right track. You will quickly find this board in the present is largely filled with idiots and there is not much point in trying to have an intelligent discussion. Search for System Developement with Acrary in the archives, its a very long thread about what you originally posted.
Thanks for the heads up on the thread - I guess I have a bit of reading ahead of me I case anyone else is interested here in the link to that thread http://www.elitetrader.com/vb/showthread.php?s=&threadid=33654