Back to the Basics

Discussion in 'Educational Resources' started by Brandonf, May 18, 2003.

  1. Brandonf

    Brandonf ET Sponsor

    Over the last month or so a surprising number of newbies have been starting to come into the market, more than anytime I can remember since early 2000. Maybe it should not be such a surprise given that the bull is back and all (This according to Barrons, Cavuto, Joe Battataglia and all those others people and groups that have performed so well over these last few years)

    What has been pretty surprising to me though has been the genuine lack of basic knowledge that many of the people coming in have. Things like trends, support, resistence, money managment, basic entry techniques, order types, choosing brokers etc. So, with that I'd like to start a thread going over the very basic aspects of trading. This will be useful for Emini or stock traders, swingtraders, daytraders etc.

    I will get my first "real" post up in about an hour or so.

    Brandon
     
  2. Brandonf

    Brandonf ET Sponsor

    Much is made of the very high rate of failure in the short term trading industry. I would like to briefly touch on this. I will be the first person to admit to you that most people who give very active trading a try are not going to find the success they had hoped for. There are many reasons for this. I feel one of the primary causes of failure amongst traders is a lack of education.

    Let us look at this in another manner. Lets assume for a minute that you and I want to go into business together, we want to open a restaurant. If you call the small business administration right now, they will tell you we have about a 90% chance of failure, much the same as in trading.

    Now lets assume for a minute that neither you or I know how to cook, or how to run a business? What in the world are we doing starting a restaurant in the first place? If however you are one of the best chefs around, and I have very good business skill, our odds are obviously above 10%. There are many resources available to traders, unfortunatly most are not fully taken advantage of. There are numerous very good websites out there that offer a wealth of free information (Hardrightedge, Elitetrader) and even some pretty good "for fee" education providers (Myself, Linda Rashke and Chris Terry, Realitytrader, Jens Cleber from Daytradingcoach, Alan Farley, and Tony Oz are some that come to mind off the top of my head) However you go about it though, make sure you are not opening a deli without knowing how to cook, wait tables or keep accounting books so to speak.

    Brandon
     
  3. Brandonf

    Brandonf ET Sponsor

    Toni and I got involved with mentoring traders in September of 1999. During that time I have seen a number of traders, both those who have made it and those who have not. I have also been fortunate enough to meet many people who have been in the game for decades, some of whom have been very generous in sharing knowledge. Among the people who fail a common thing I see is the desire to be the "Jack of All Trades" and catch every single move. Unfortunatly the Jack of all trades is really the master of none, and in trading you truely need to have in depth knowledge of something in order to compete.

    I have always thought, and this has been confirmed time and again by seeing how those who make it trade vs how those who do not trade, that you need only have a few very reliable patterns in order to make a very nice living in the market. The professional will study these patterns inside and out and know how to act in any given market situation with in the context of their setups. It really does not matter what these setups are, but you should do something consistent with a core philosophy. Some people do better with trend following methods, others with reversal type trades, some people with spreads and things like that. The key is not in what you find, it is in that you find it.

    Brandon
     
  4. Is this a legitimate thread, or an advertisement for your site? No offense, but it sounds a lot like an advertisement.
     
  5. Brandonf

    Brandonf ET Sponsor

    Totally illegit. All I want is to sucker you poor souls out of more of your hard earned cash. I'm the devil. Ask 777 or DanielM, stay away from me and don't fall for my crap.

    Brandon :D
     
  6. Thanks for clarifying.

    Hey, I know I am new here - so no offense. But, when the predominant message in your post is about yourself and your url is attached to every message, it made me wonder.

    If I am off base, I apologize.
     
  7. Brandon, my experience has been the same as you've mentioned.

    I started with some knowledge of the markets and some trading experience, but it wasn't until I picked up on one strategy that clicked for me and then worked at it relentlessly that I've made consistently good money. No matter how hot the method was, I never relented in trying to improve on it and never got casual about it. It's been a steady money machine for over a year now and I could make a good living doing just that one strategy.

    But I realize that if youve got a one trick pony and your horse dies, then you're in trouble. The markets go through cycles, and so do certain trading methods. I think that you should always have ideas in development and never give up on learning new things. Don't feel that you've got the market licked and you can rest on your laurels and rake in cash forever because you have one good idea that's working now. It took me another year of searching and backtesting and number crunching, etc to come up with solid method number 2 and it's performing even better than method one.

    The journey to trading success is filled with many dark valleys and you will stumble many times, but the hard work is worth it if you keep at it.
     
  8. You are mixing "patterns" and "methods" in your message.

    On the topic of "patterns", what are some of the popular few among successful traders?
     
  9. Brandonf

    Brandonf ET Sponsor

    No need to apologize.

    I will clarrify a few things anyway just for everyone. My URL is attatched to all of my messages and under my name. The reason for this is that I am a site Sponsor (I sponsor Chit-chat where Candle has all of his polls). This helps keep ET running and because I have my banner up and my URL in my posts I get some exposure here on ET. For a long time I posted as a member and did not sponsor the site but I think its only fair that since I use the site to generate membership that I pay for that. A lot of people don't and that is their own business. So this is, I guess, a long rambling "Yes, I do post here to get membership to my site". That said I mentioned a few other resources here that I think are very good and I get absolutly no compensation at all if you go there, and I think if you review my post history you will find that most of what I post is pretty useful.

    Brandon
     
  10. Brandonf

    Brandonf ET Sponsor

    I think that the first thing a trader should give serious consideration to is MONEY and RISK MANAGMENT. It will be the single most important issue in a trading career success regardless of the method you finally decide to implement. I don't claim to have the worlds best method, what I do have is good money management. If you also have good money management you are far ahead of 90% of the guys (and gals) out there.

    One thing is more important then any method of trading anyone could ever teach you. That is money management. If you have poor money management skills, you could have the best trading system in the world, one that is right 90% of the time, and you will still lose all of your money. On the other hand, with good money management skills, you could have a fairly inaccurate system, and still get respectable returns. Money Management is so important that studies have shown that up to 90% of the variance in fund manager performance can be ttibuted to money managment.

    My primary concern in trading is to be here tomorrow, and if every day I guarantee my tomorrow, I'm going to make a lot of money. I don't worry about making millions of dollars a year, I take small, well calculated trades, knowing that this will build my account slowly, with small. My concern to be here tomorrow will eventually ead to my "small" gains, basically if you think of this in baseball terms I am trying to win the game by hitting singles and doubles and stealing a few bases, be rather large. I think the most commonly touted "Maximum Risk" is 2%, I find that for myself this is too much and I'm not generally comfortable risking this much on one trade. Whatever number you do choose though, the wise ones who came before all of us seem to have established 2% as the max. tollerance on a trade for potential loss. This is your insurance policy to insure a long career. By risking a small amount you can take a large loss cluster (and you will have them) and still be on your feet at the end of it. If you combine this money managment with good setups, good entry and exit skills you should be able to trade for as long as you wish.

    Brandon
     
    #10     May 18, 2003