I have been a long term investor for a number of years now and have decided to make a journey to become a day trader. My plan consists of three years to raise capital, study, train, and paper trade before trading my own money. I have read the latest book by Dr. Tharp, "Financial Freedom..." I have convinced myself from his reading and an other book I am reading called "The Mind Map Book" (Buzan) that I should start off with self-analysis and Psychology to form a personalized trading system that centers around my beliefs and concepts, coupled with paradigms shifts that will result in a complete, step-by-step, computer generated mind map. I also have an interest in Dr Kiev's book, "The psychology of Risk." This is the belief I have formed so far to start my journey. Do some of you feel it is more important to start off with tech analysis, candlesticks, graphs...etc..., or do you recommend something completely different that I am overlooking as a newbie. Thanks in advance to your answers and insight.
In my opinon absolutely nothing will prepare you for real trading. Find someone who knows what theyre doing and trade along side them. Watch for awhile then trade small.
So... you have a system based on your belief and mind. Great... so where's the edge? You're going to trade the market not trade yourself. Market edge then Self Edge. It's not about self, self, and self. It's the relationship between the market and yourself. To be in a comfortable relationship, you need to know yourself equally to knowing the market.
What do you mean by long term investor? Personally, I think all that self-analysis stuff is a waste of time. Holy moly, by now I suspect you know yourself well enough to decide whether or not you can pull the trigger quicker than every once in awhile. Don't be mislead by all that stuff. You can acquire the technical tools for trading in a weekend at stockcharts.com or clearstation.com using the education sections. They have all you need to know. Then take a look at a gazillion charts to see how it works. One of the best exercises if you can do it is to print a bunch of charts in different times frames of different stocks. Except, have the price scale, the time frame, and the name of the stock covered up. Then you will truly see that a chart is a chart is a chart. There will be no time frame bias, volatility bias, or brand bias. You will just see how different indicators work, and how price patterns work. Three years? Maybe three months! And paper trading is important. This allows you to become intimately knowledgeable of your method's mechanics and nuances. Papertrading will not however expose you to the self-doubt of real time trading. No book can do that either. It can tell you about it...which is way different than experiencing it. That's why you should papertrade your method so you know it works. And papertrading does not require the same focus that real time does. The esteemed trader Nitro pointed this out on another thread. Focus is missing from papertrading. Good luck!
I agree with everybody. Especially Hawkeye about having a plan and inandlong about charts and Gann about it being more than just yourself. But the fact that you are even considering that there may be more to trading than just external knowledge about the market puts you way ahead of the pack. inandlong, If a guys head aint right, he won't see anything in the chart that will make him money. I didn't thimk I had any problems till I started trading. Then I saw I had all kinds of problems. Which came first? The problems or the trading? hawkeye, the more knowledge you can gain about yourself and the markets before you plunk down your first hardearned dollar the better. But it will only take a few trades on margin for you to realize that nobody knows what they are talking about and the only way you are going to make it is to create space and time in some godforsaken uncharted territory where nothing ever existed before. At least you will first learn everything, and then after you trade, you won't have to then try to learn everything and find out that none of it is worth learning.
Ron. I agree with InandLong to an extent but from what you ask, I agree completely. You're starting at the wrong place. Mind Map System??? Get the market edge first. Because you asked about where to start with the technical side, I'm assuming you don't know much about trading. The only thing you are doing is assuming what trading is and creating a mind map before knowing what trading is, which is very dangerous. Get the edge first. Paper trade and confirm that the edge is viable. Working with a trader is one of the best ways to learn. But don't expect the experienced traders to teach you, steal their skill(technically and psychologically) from them by observation.
You know, I was just thinking about this. See if anybody agrees. A really good way to learn to trade, would be to open an account with Ib at the minimum $2000. And trade one contract of es. If the account falls below es margin, which is I think about $1800, you mail a check to Ib to bring it back up to $1800. It takes about 2 weeks for a mailed check to clear. That gives you about two weeks after every trade to come up with maybe $200 and think about how it is and what happened and what you need to fix. And then one of those times, you won't need to be sending them any more money. And you can go around and tell everybody about how you made your bones.
Yes, you need to have your psychological house in order. 90% of futures traders lose all their money in the first 6 months. Being successful means sticking with your system when it's in the midst of an enormous drawdown. When you talk about trading you essentially talk about a complicated game where money is at stake -- this is not an easy game, and if you don't know what you're doing you'll be swept aside quickly. That being said, at the end of the day you need a trading system with a positive expectancy. And you need to know, REALLY KNOW, that the system has a positive expectancy and won't fail. Otherwise, how will you convince yourself to stick to it when the big drawdown comes? Drawdowns come frequently -- how will you survive as a trader if you can't trade through them? I recommend starting with computer backtesting -- invest in some quality software and a subscription to a data service provider and start checking out some of those systems you've been thinking about. THAT's the place to start -- if the system tests well and you know it works then you can start trading it real-time with a small portion of your funds. This will give you the experience you need. Then when you are successful you can ramp up your investments. - DR. N