Someone asked this question in a thread. Thought it might make an informative thread for some traders just starting out. I guess that after studying TA (price & vol.-not indicators) for 2 or so years I would have focused on only 2 or 3 setups that worked well in my plan rather than having spent so much time trying to find a setup to fit every single price movement under the sun, or the 'perfect' setup, in order to create the perfect trading plan. All that study took time away from real time trading that could have been used to reach my financial goals much much sooner. But at the same time I've truly enjoyed these 40 years of study, and will continue studying TA until that morning when I go face first into my pancakes!
If I could start over learning, day 1: start up a sim in the ES, and run two experiments where you flip a coin 20 times, heads you go long, tails you go short. Experiment 1: risk = 10 ticks, reward = 10 ticks. Experiment 2: risk = 10 ticks, reward = 20 ticks. Both will get win rates in the 35%-45% range, but the first experiment tends to be a loser and the second tends to be break even. Realizing that random entries could be break even / profitable with the right risk-to-reward ratio was one of the biggest breakthroughs for me.
If I could go back in time and teach myself the most profitable day trading lesson I learned so far, it would be this: Wait for a well-defined trend where price has made at least two new highs or lows on the day and then buy or sell the first break of a 1-min price bar in the opposite direction of the trend. This is where the counter-trend traders feel they're gonna miss the reversal and their stop losses will trigger your nice profit.
Don't day trade, don't use leverage. Make time to your side and your friend. For those who are new to trading, Future and bucket shops (spread betting, CFD and etc) are leverage.
Trade small until you are consistently profitable spend at least one year doing so and getting experience, then build a plan and keep trading small until you prove you can stick with it no matter what last but not least, keep your losers small, always! winners will come, with experience... IMHO
1# Learn to Program. 2# Buy all the data you can afford then get a loan and buy more. 3# Use weekly data. 4# Watch Transportation Index for overall economy-they not hauling if it not selling. 4# Defined Trading Plan 5# Stayed with dividend stocks ONLY, only buy and exit. 6# Concentrate on Exits and less on Entries 7# Learn to steal using Options 8# Don't day trade=years to get decent, more years get good and gazion hours to learn about controlling yourself and all the bad habits you never knew you had, LOL. For Newbies= if it is cheap to get into, The Sharks luv Bait.
If you don't mind, could I ask you to explain #3, use weekly data? I found that as I extended the timeframe, I got better results, but I have stopped at daily. For my system, as I get higher, my stops naturally get wider and position size reduces. At some point it becomes too little waiting for too long to get a return, so I am really curious about the detail of your comment.
My method is based on deep retracements with overall trend of being up and use weekly data, I never trail my stops after I get a nickel beyond breakeven stops. All my back testing shows trailing stops hurt overall profits. Longer I have traded stocks, for longer term systems, where you get in matters much less than I use to think, being the case, why not just enter at a SMA? I use options and debit spreads instead of stops. I generally trade stocks but also like SPY and couple other ETFs cause of heavier option volume of selling options around my Long ETF or stock positions. I do sell short stocks/ETFs but only on Non dividend stocks, but my entries have to be more precise since overall market is in Bull run.