Discussion in 'Professional Trading' started by jaronimo, Sep 28, 2004.
I would have more start capital
I would expect less profit.
I would have taken the time to learn statistics and how to apply statistical studies to the characterization of markets. Also I would have taken more time to learn how to implement money management strategies. Finally, I started trading with real money too soon. I would have paper traded first. Lefty.
I started my first commodity account with 3k. Made a few little hits, 4-6 hundred. Had a few loses of similar value. Hit big with a handful of gold options I paid 70 and 90 dollars, plus commissions. Then gold spiked up a few weeks later. Sold them for 2700-3200 each. Thats when I realized "this is easy".
Got the account to 24k and then took out half of it for a really nice vacation. Stupid move. I stopped trading for a while, because nothing looked good. Got back into 6 months later. Got the account up to almost 50k. Then I was looking at stocks.
It was a great bull market, so I pulled 40k out and started trading stocks. Did great. Thought it was my expertise and never gave any credit to the bull market. Then over a short period, I closed my stock account out because there was only about 5k left in it. I have not been back to stocks since.
I slowly got the commodities account back up. Then 9-11 hit and I could not read any of my favorite markets after that. Maybe the main traders were now gone and I could not read the new guys? Maybe it was me? The account went down for about 4 months so I took a break for about a year.
Got back into it when I felt I could read the markets again. Slowly got the account up to a nice amount. Then started building a house. Like an idiot I took money from the trading account to pay for stuff on the house. I figured that I would put the money back in once I got the draw from the bank. Obviously that never happened.
So the account is now low again, but I am slowly building it back up.
Whats my point? You can start with a small account. In my case I think it actually helps. It makes me much more careful of the trades I take. I will not take trades without confirmations. I also have a long term outlook on my trading. I realize that I will not take 5k and turn it into 1 million in 12 months. I think many people, even though they wont admit it, hope they can do that. By having that mentality I believe it affects their trading because they are always "swinging for the fences".
Just my 2 cents.
ps: I am going short everything today. I chased a bear away from my garbage cans this morning. Obviously thats gotta relate to a bear day in the markets.
That was quite a story. I found it interesting. I was sharing how it was for me without the story. Your point is taken about starting with a small account and being more careful. Your longer term expectations are reasonable too.
With the two lines that I posted you were able to read between the lines and realize the "thought" I put into those two lines. I was going to write a long list with a story, but I see it was not necessary.
P.S. I have always traded the hard way, and tried to refrain from gambling. Taking out of the market what it is willing to give is hard work in my world. I find that I do not get the tops and the bottoms but work hard at catching the middle of things
Your description of how to learn to trade independently may just be the most accurate assessment I've ever read.
You may now consider yourself the victim of a chronic case of plagiarism.
It seems that few people have actually attempted to answer your question properly.
If you looking to start developing a trading systems you should do the following.
1. Watch the price action of the market you wish to trade.
2. Right down your observations about the market you wish to trade
3. Compile a list of specific things you notice about the market behavior.
4. Identify a market inefficiency that you can profit from.
5. Create a set on quantifiable rules that define how you can trade that inefficiency.
Once you've done this, you need to code the rules for back testing and forward testing.
If you can't program. Hire a programmer to do this.
6. Once you've coded your system, run some back tests, but much more importantly, watch it trade forward and see if is doing what you expected it to.
7. Refine the rules/logic of the system until it does what you expected it to do.
8. If it makes money. Trade it.
9. If it doesn't. Return to step one and repeat process until you have a system that makes money.
In all honestly, you will need to repeat this process at least 6 or 7 times before you come up with something marginally profitable. However it is well worth the effort.
Even if you only come up with something that tells you when to definetly not go short or definitely not go long, it will dramatically improve your discretionary trading. But keeping out of stupid trades.
Separate names with a comma.