Most noobies lose money, but that is exactly what they should do

Discussion in 'Psychology' started by triggger, Sep 25, 2008.

  1. I recommend a newb open a trading account with $5k. Then trade 'til your hearts content. You'll likely lose it, but it will be the best education dollars you've ever spent.

    The real education comes from losing. And winning early can really fuck you up.
     
    #11     Sep 25, 2008
  2. The problem is that they first attempt to trade.

    They should first learn to invest.
    Investing is completely dependant on market conditions, which leads to an macroeconomic/fundamental/sentiment analysis; the road to profits.
     
    #12     Sep 25, 2008
  3. Simulators and instruction are good mentors, but cash is the only way to build real trading skill.

    Success.
     
    #13     Sep 25, 2008
  4. There is a lot of self selection that goes on in trading.

    For whatever reason since day 1 I was always associated with winning traders.

    Looking back, the reasons were probably obvious:

    1. Affiliated jobs

    We all worked in cutting edge areas at IBM.

    2. Fields of study in college

    About all of us were EE's with advanced degrees. Dominant schools were MIT and RPI.

    3. Instrument selection.

    We only traded what became known later as "high beta" stocks. We fought with each other to have the "best" stocks for the day and the next days. Lunch time in conference room to plan next open.

    4. Common all in strategy.

    In 1957, "no one" in the financial industry could understand anything we did. ALL IN was unknown.

    5. Knowing the exponent on the compound interest formula was most important.

    100 was optimal for a year in stocks. We were mostly at 40. We learned to get in and get out and get in without letting capital be idle. We tried to do 10% deals over and over and as fast as we could. Some weeks we made 20%.

    6. Having a 6 month chart (EOD) for decision making.

    We drew our own (brownlines) and did swapping as blueprints. IBM had blueprint service on all floors and all divisions. Annotating was done as color overlays (channels and volume)

    7. We all used the P, V relationship.

    No chart that didn't conform was ever traded.

    8. 8 trades doubled capital.

    One trade out of 8 was a wash.

    9. We always added 50% of salary.

    IBM paid very well and promoted fast. We were all fast tracked employees.

    In about two or three years our cover was blown at brokers, IBM local and at IBM World Headquarters. I now understand what our broker was doing. And what they did was very helpful to us.

    We did trading by phone only and money by mail only. Since we were doing 10 to 20 percent a week, the broker became aware of us and that we all originated out of IBM and we sent in money every two weeks. Driving a new sports Mercedes to work after a vacation in Europe got attention. (IBM paid for an extra weeks vacation).

    The beginner losing money type events never occurred to us since the trades were always available for the taking. And since, unknown to us, a network unofficially set up by the broker was following our trading with more and more capital.

    We bought a stock at 4 and it hit 22 in a few days. we sold it as usual because of the exponent. In 1960, that kind of runup was unusual. We all traded it. The CEO of IBM was investigated as was the CEO of the stock we bought and sold. SEC did the look see. The CEO's made a joint statement and the stock fell back to under 10.

    I went through another SEC cycle when mainframes became part of SEC monitoring.

    The common ingredient has always been how using a pencil to plot stocks, etc which connects the mind intimately to the market via the instruments. Brokers, employers (I only worked for a while back then), regulators and observers really "don't get it". No matter where any one of us would have run accounts, they would stick out like sore thumbs. They attract people who have various kinds of interests. If I move here or there, it always shows up. In Greenwich it was Fairfield Bank and Trust and the collateral on my sailboat (interest only for two years, then payoff). I had a free sailboat so to speak and I needed stocks in street name and substitution priviledges. It freaked out observers.

    When I read your posts I understand a little of where you come from. You could be typical of a smart person and educated person.

    The process of begining an activity that is financial, however is foreign to you as a consequence of your heritage and, now the consequences of the beliefs you hold. I read your posts for a while when you first got here.

    None of the persons I palled around with were not so afflicted. We were open minded person doing cutting edge computer stuff at a place that had an 80% world market share. There was a WSJ that had a page on the back. HLC and volume and high and low of the year to date (I hated that screwup of the WSJ). We only had Magee fourth ED. Yellow pads and steno pads and it was over!!!! This stuff goes up and down every 6 to 8 days and it does 20%. We take half!!!

    What happened was we plotted and our brains got build. We drew CHANNELS. This is so foreign to you and your ilk.

    There we were ripping new ones for mainframes and telling the CEO's of the world how they worked (in front of a final test mainframe we had rigged up to print Santa on a sleigh at Xmastime or other season delights like bunnies or sexy chicks). But we had our lunch in a conference room that was off limits when the door was closed.

    Day 1, anyone can start making money. Today, there are PC's and they have screens and there is software.

    Recently, a thread was started on doing a logical thing: make an ATS that trades an instrument. This is the definition of a n00bie learning to trade. That is what we did in 1957, etc.

    Get a paper>>>>look at last page>>>> Chart >>>> annotate >>>>> make money >>>> use the compound interest formula.

    Today, it is a shorter trip Buy PC >>>> Get platform >>>>> get charts >>>>> Annotate >>>>> make money >>>> use compound interest formula.

    Attached is a one page summary of 1957 but on a 30 minute chart instead of ECD. It is set up to use a PC which most people have. It makes it easier to do 100 trades a year rather than just 40. Also there is a 77 page document* with 30 snagits that shows how a PC display works as a replacement for the human mind. There is no way a person on day 1 cannot start to make money if he uses the attachment (a few exceptions where the mind is destroyed).

    What is it like doing 100 cycles per year at 10% a pop. Its slow and not leveraged. So now we have futures indexes that work the same old way as stocks but faster and leveraged. What took 6 to 8 days in 1957 unleveraged, today can be done 20 to 40 times a day and be leveraged. Making 3x the daily ATR is the way it turns out since the PC and the instruments were created.

    A lot of people relate to N00bies being losers for the most part. I don't. Losing is not a requirement for building the mind to be able to trade. It never has been.



    *Putting the Pieces Together
     
    #14     Sep 25, 2008
  5. Where is this document available?
     
    #15     Sep 25, 2008
  6. DHOHHI

    DHOHHI

    To be honest I made money most every day my first 3 weeks at All Tech back in 1996. But, I was trading 200 shares per trade as they recommended. As I recall they gave us some discount during the first month if we only traded 200 shares. But once I migrated to 1000 (or more) shares I did lose some money. Funny, but having more $$$ on the line does eat at you and puts you on emotional roller coaster at times. But over time you adjust and become used to it.
     
    #16     Sep 25, 2008
  7. 4XQs

    4XQs

    Agree with most here apart from the JH-gibberish:

    I discourage anyone who considers trading by themselves.

    Demo is for learning software, or at the maximum to develop a slight feel for a particular market.

    It takes real cash to get in touch with your feelings vs losing money and handling the psychology of earning or losing money.
     
    #17     Sep 25, 2008
  8. Simulators should only be used to test or familiarize oneself to a new trading platform.

    A typical trader can accomplish the above in 2 weeks or less.

    Further, a simulator should NEVER be used while developing a new strategy.

    Simply, develop you new strategy via backtesting (code or manually) and then test your strategy with real money only via a small position size.

    There's just too many traders using a simulator too long and then can't overcome the real trading problems.

    Thus, do not use a simulator while trying to resolve trading problems because such does not require a simulator.

    Mark
     
    #18     Sep 25, 2008
  9. I tried to send you a copy but your email is blocked, sorry.
     
    #19     Sep 25, 2008
  10. I believe I was one of the noobs that had the lowest DD when I started.

    Not because I was a bad ass.... or because I was smarter than others, but mainly because I was petrified off blowing out..... all that kept swiming through my head was "97% fail.......97% fail......97% fail" so I always kept my loses short. However that does not mean once in a while I let a small loss turn into a whale.

    I had over a year of monthly losses.... but in just 3 to 4 months I got all my money back plus added a few K on top!

    Ofcourse since then I... like everyone else here (with the exception of JH) have experienced painful draw downs...... its all part of the business we're in.
     
    #20     Sep 25, 2008