It's funny, I always thought with pair-trading (especially short-term) you would buy the stronger stock and short the weaker one. Made sense to me. Then I realized people were taught to do the opposite . . .
Another good post.I think you can only fully appreciate this when you junk most of what you think is important and have failed a few times. The biggest part of learning to trade is the disadvantage you suffer in the learning curve compared to say medicine,where you focus on learning exactly what is required hence the success rate (i assume) is better. The problem for the OP ,which i don't envy is the amount of time he will waste on useless stuff,I suppose it's essential to know it's useless in hindsite,frustrating nevertheless.But at least he appears to have better instincts than the usual piker.
This is what i meant by saying everybody plays it differently,but the basic premise is appealing,After all,we are not concerned with being right but in getting paid or not losing.
YUP definately i thought much the same. And if i lost a leg i could still learn to walk again... if i lost all strategies i could learn to trade again...money management,all else fails without it. After your first blowup,focus soley on not losing-winners are less of a problem,right? Just by keeping your money you will feel you have taken a massive step forward-you can trust yourself. Then you will trust the market,to do what markets intrinsically do.THEN you are ready to make money. In bomber command WW2,the life expectancy was so short that on your arrival they told you (not me i wasn't even born) to think of yourself as already dead.When you approach it like that it takes all the fear out of it.We are talking about guys in their 20's who never believe it will be them anyway. What's that got to do with trading? When you are ready,take a reasonable,but losable amount and write it off from day one.That takes the pressure off pulling the trigger and gives you a motivation to just break the ice.(if you gamble it all away in 1 or 2 trades what would that tell you about your suitability? What if it takes weeks? how do you feel? you just don't know those answers right now. I just think it's essential to get an early idea/feel for what it's like in the trenches,you know? After you lose this money -which is a dead cert,you can continue from an improved angle of perception.(or not) The sooner you can get to that point the better imo.Agonising over methods can last forever if you let it and it is not the most important thing on your list to do.No trader ever stops learning or seeking to learn more. Just hope that didn't come across as a lecture but i just feel it's the best advice.
I think it's good and fair advice. I will be trading with a small enough pot that I don't need to feel stressed about. I do realize this will help.... I have seen many scrap together as much as they possibly can from sources they shouldn't be dipping into, because they hear that most new traders are undercapitalized. The issue of course is, they blow that larger amount up anyway. Well, it certainly may be true that new traders are undercapitalized, but it is almost axiomatically true that they are putting too much pressure on themselves should they pool together enough funds to feel as if they are well prepared. My initial stake will not break me, but I believe it will be enough to learn some things with. It won't be enough to make a living from should I succeed rapidly, but it won't be too little to not give myself the chance. I will try to see the money as already gone as suggested, but even if I fail in that effort, I won't go postal if it should completely disappear. I still have a lot of preparation to go, but I think I'm getting somewhere here between my own research and the help I'm getting through this thread.
Good to hear.Be interested to see a journal.I never asked for help when i started out so i have no idea how that would have changed things for me.Probably not much as i am a slow learner and always learn the hard way lol. But,it seems that for you,this is helping,so a journal seems logical when you start trading. It helps in that you have to be honest infront of others. (any bull is easily detectable!)whereas completely on your own it's easier to let discipline slip.I've always thought i could probably trade other peoples money better than my own as you would have to justify your trades to someone else. You can increase your capital if you pass the tests you set yourself.Good luck
A journal isn't a bad idea. I will seriously consider it when the time comes. It definitely can help getting some live feedback. I figue I'm still a few weeks out from going live with some basic ideas, but it's coming sooner than later. No promises that the journal will be part of my first few live trades, but I won't rule it out completely either. Thanks for the bid of good luck.
Thanks Knight. The point being the following: You are on vacation with your beautiful girlfriend far away and you suddenly bump into a friend of yours. He looks very surprised for this "random" event. Then, after a week, while you are back home, you go to a restaurant with your beautiful girlfriend and there he is, the same friend looking very surprised for the "random" encounter. After a month, you go to China with your girlfriend and while visiting the famous square you bump again into the same friend. Now you start wondering what is happening. You go back home and while at the movies, your "friend" suddenly comes in and sits next to your beautiful girlfriend. Well, you say, this can be explained with law of probabilities. The probability is tiny small but nevertheless never zero. The following day, you beautiful girlfriend tells you it is time to break up. Next thing you know you see her and your good "friend" having drinks and kissing in a bar. Now you know the difference between theory and real life. Tiny theoretical probabilities correspond to almost certainty in real, limited life. You should have taken action to protect yourself and keep your profits (girlfriend) but you relied on the stupidity engraved in your brain by those professors of statistics and probability. You deserved it. Something that happens enough times is not any longer random but it is important how you and others involved handle the situation.
Money/position mangement is a good way to describe it. If I may, it's like a football team where you substitute players whenever possible. The more the merrier. I won't pretend that getting the bias right is a given. At times, I correctly sense the swing but it's short lived and I have to reverse - or at least get back to neutral - quickly. One never knows when the ideal time to inititiate the position is. You execute it when the numbers are attractive but that's no guarantee that the spread won't widen against you. Often, that means adding to one side, or both. I've generated pretty large losses on one side but as long as the other side generates more gains, it's no biggie. It's all in the numbers.
I've never seen a thread where so many people show up to say so little that's understandable, this is a tough gig