when I started learning about trading I heard from some smart people that trading was 90% psychology, 9% money mangement and 1%your system or edge. wow! now I see as never before how true that is!! Douglas is right, the next frontier in trading will be psychology (before it was technical analysis and fundamental analysis). thanks everyone for sharing such intimate stories.
Babak As far as I know, form of the futures trading was practiced in the old Egypt (2-3000 years ago) and so far people haven't wised up. If Mr.Douglas really said that, I am surprised because it's a non-sense. It would imply that common people actually have real insight into something(anything). After 150 years people are still searching for the best indicators (their combination) and will never stop. Besides emotions, the whole problem doesn't get beyond tape reading skill (support,resistance,trend). Anybody not agreeing please do not respond and go on testing.
Part One: The Newbie Stage I grew up in China where the concept of the stock market didn't exist. I made it here to the U.S. when I was 12 years old and my family never had any real money to invest in stocks. About 3 months after I landed in New York, I got into an confrontation in school mostly because I didn't speak English, I was wearing glasses and some kid smashed it, the wound left quite a few stitches on my right eye. Our family sued the school and ended up with $10000, ir was blood money, but it ended up as my starting capital many years later . . . My mother did buy a few thousand's worth of a small company based on the advice of some broker friend but she sold later for a very small profit and never returned to the stock market again. To most Chinese people, the stock market is pure gambling where people eventually jump off buildings after they lose everything. And about 4 years ago, I read an article about day traders who made mid-high six figures a year scalping stocks, come to work at 9AM and go home at 4PM, I was a little intrigued and thought this is an awesome career, but the conservative side in me made me want to stick to computers, where you are almost guaranteed to have a nice, stable job. When I was 19 years old I found a job working for one of the four horsemen brokers (GS/MER/MWD/LEH) and I was assigned to the M&A group, and I worked on graphic presentations with Powerpoint. For some reason, I had this incredible passion about my job although come to think of it, I was nothing more than a tiny little screw on a big corporate machine, yet I had such pride working there and I eventually dropped out of college simply because I couldn't keep up with school and work at same time, and I hated college education with a passion because of its slow pace and inefficient output. A friend at work started talking stocks, this was the beginning of 1999 and there were a lot of M&A activities. He taught me that if a company gets acquired by another company, its stock price will go up! While the document we prepared were codenamed (Company A is named Princess, Company B is named Frog, you get the idea), I started to look for clues, such as the name of CEO's, to find out which company really is being acquired. I opened a Datek account with $2000 and first trade, I went double margin and doubled my money on a sure deal. I thought I found a gold mine! I immediately send in rest of the troops, that $10000 I received from that nasty incident. This is just too easy! I really thought that I could make a million dollars doing this! I mean we had a few of those kind of deals every month and that's like a few confirmed kills a month! Next day, I talked about this with that co-worker in a coffee shop, and he told me what I did was flat out illegal. He said while I could get away with this trade, the SEC will put a pair of shiny bracelet around my wrist! It was like a cold bucket of water that woke me up from a sweet dream. I was stunned, I thought I had a gold mine, now it is gone. I said to myself, I can learn the stock market on my own! I can do this, without cheating! Then I started trading Datek, every night, I would put in a limit order to buy a popular name, say IBM, Compaq, Dell, Microsoft, and when I come home, if the order gets executed, I would put in a limit order to sell it, and I had no tolerance for pain whatsoever, I come home, if the stock went down I would put in a market order to sell it next morning! Looking back, it was absolutely hilarious what I did, but even during this time, when I didn't even know what a chart is for, I didn't have a problem cutting losses, and I think that was a key trait in my personality which carried over to this day. I quickly lost the $2000 profit I made. Then I read about this wonderful strategy called buy a quality company and hold, I looked everywhere, and Microsoft/Cisco seemed to be the best companies, so I split my $12000 account into 2 stocks, and for a while they just seemed to climb! My money grew into $15000! Of course the summer hit and I took some hits, I started to jump in and out of stocks, I would say to myself, "oh Nasdaq went down 100 points today, time to buy!" and I would sell for half a point to a point, gain or loss. By October, I had exactly what I had before I did all this, $12000. By this time I did some entry-level consulting work for a few more brokerage firms, and on one lazy afternoon I read an article on MSN Money Central, by a fine journalist named Jon Markman, and I saw this amazing mechanical investing system that generated like 10000% last 15 years or so. In 1999. at the time, the system was up 400%! I immediately sold all of my positions and went long in his system, and as the system worked like a charm I went double margin. On the first day of January 2000, my account reached its all time peak of $50000, and I thought I was amazing! I mean I quadrupled my money in less than 3 months! I thought this Markman guy was a god send! Then the market corrected, and my double margin account didn't hold up well as it had momentum stocks near their peak. I got out because I couldn't take the heat when my account was at $30000, I jumped back in only to get hit again, then I figured that I should "stick to the system". So I bought, held, and rebalanced my portfolio at month end, market made one more leg up, and by March I had almost $42000 in my account. Then as we know it, I got hit, hard. I jumped out of the market in March at the first sign of weakness. But I didn't know what I was doing, and I jumped back in. Then I bought this very nice stock called MSTR for $220, I thought it was an incredible bargain since just 2 days ago it was trading at $300! I bought it on a fateful Friday and next Monday I saw the stock splitted, except I didn't get twice as many share . . . That was the critical hit. I basically ran Markman's screen for the latest momentum plays, but what happened was I got hit every time I jumped into a stock that hadn't correct seriously, yet . . . By the end of March 2000, I had $12000 left, exactly where I started one year ago, and I pulled out of the market completely, fortunately, I stopped before I lost my principle, for had I got blown out, I wonder if I would still have took my current path.
Part Two: Road To Profitability I just spend a year with zero progress in my account. I was lost. By then a lot of other people got blown out of the water thanks to Markman's screens, which really is not his fault as everyone thought they were smart in a bull market, but it made me wanting to tweak his system. I started to experiment with technical indicators, and I thought I found this magical indicator called stochastics which would give me the precise tops and bottoms of a stock! I mean how can you not make money with something that looks so accurate on a chart! Next thing I know, I started to stay many hours after work, and pretty much dedicated myself to re-inventing the wheel with a program called http://www.qp2.com. Like a farmer boy who never saw the big city, I thought the script I wrote were never seen before, and I wrote screens that scanned for everything from EMA crossovers to Cup and Handle detections . . . Yeah, I got a few hundred signals a day, but my trading went nowhere because I had no idea what technical analysis really was. Then after reading my journals, a man named Terry Bedford (www.baresearch.com) approached me and offered to be my mentor. He even gave me a free subscription to his day trader's service and while nowadays we trade in completely different fashion, what he gave me was TA in action, something you can't get from books, I actually saw how he used it in trades, coupled with stops and targets. It was valuable, but I still got nowhere. Then, like a wounded wolf, I looked for opportunities. I was deeply into this game, I shattered my relationship with management at work because I was trading stocks every day. I realized that I loved the game so much that I want to do this full time, on a team of professionals, and hopefully be all I can be someday. I faxed my resume to many many firms, and finally I got a phone call from Worldco. While I didn't have the education credentials they were looking for, I called them back after the receptionist said no, and I told her I really really wanted it. From their perspective, I am just another guy who may or may not make it, and if I have a strong passion for this business, my chance is as good as any. I got the interview, I got the job, I got the licenses, I started at Worldco. Just like that, October 18th, I was doing it, full time, trading with other people's money, and I have to tell you, it was a wonderful feeling. Actually, it wasn't so hot, because no matter how many hours I put in a day, I lost money after commissions on a daily basis. While I was seated in a room full of senior traders, all of them were busy making money and didn't even bother to talk to me. That was possibly the toughest stretch in my life, as I never had a backup plan going into this business, because I put myself in a situation where it was do or die, I saved up one year's worth of living expenses, unless it ran out, I would not consider anything else. I got beaten down, day after day after day after day after day, I lost money 19 out of 20 days, and I found myself a lot more tired after 6 hour's worth of trading than 12 hour shift's at my IT job . . . Late December, a senior trader who was on a bad streak threw a mouse onto my monitor because I was typing a trading journal and the noise from my keyboard was bothering him. He called the management and moved me to another floor, I had the darkest Christmas I ever had, down $4500 in firm's capital. I have read just about every single trading book, I thought I was a lot more prepared than most other people coming into the firm with my previous experience, but somehow, I just couldn't make any money. Thankfully, I have never had any trouble with cutting losses, so I didn't dig myself as big a hole as a lot of my co-workers did when they first started. January 2001, I meet two other traders who were profitable but relatively new to the firm. They were willing to share, and that saved my career. I was actually a lot closer than I thought, and all I needed was a style that I was comfortable with, and what they taught me was hardly anything I didn't know, but knowing it and doing it are two completely different things in trading, and only after I watched them trade, I started to put the puzzle together. That was the first profitable month in my professional trading career and I finished with three thousand dollars, no matter how far I go, that month will always be remembered as the most important month in my career, January 2001, that was when things turned around for me, and I turned profitable a few days into February. I can't tell you how many times I thought about whether I am good enough for this business, how many times my parents called me and said I should go back to college and get a real job, how many times I walked on Wall Street with my head down feeling like the biggest loser in the world. When you are doing this full time, full commitment, you will feel the heat. This is as challenging a business as it gets, the market will always punish your weakness, whether it is physical, mental, emotional, it is the most ruthless enemy there is. But for now, I can call myself a profitable day trader, with $41K in the black YTD. Will the market take it all back, or will I continue to mature as a trader, and take more blood out of my enemy? I don't know, that's why we play the game, that's why we love the game, every day is a challenge, every day is different, every day is an opportunity, yet you have total freedom over your fate. I do know one thing, there is nothing else I would rather be doing.
TraderKay =) thank you for sharing your story.. it certainly sounds like you are on the right track.. failure is simply the price of success.. i would encourage you not to try and re-invent the wheel.. find a strategy that is already known to work and learn to employ it successfully.. probably one of the best swing books out there is "The Master Swing Trader" by Alan Farley.. one of my favorite motivational speakers, Les Brown, always says "If i fall down then let me fall on my back, because if i can look up, i can get up." huby =) good ole Wade Cook.. i read one of his books before i got started too.. and the one by his cronie, "Rolling Stocks".. what a bunch of nonsense.. before i tried any of his strategies, i looked up his stock chart.. when i stopped laughing, i threw the book in the corner and havent touched it since.. all that glitters isnt gold.. congratulations on your graduation =).. are you thinking about working for Bright? i think it would be so cool to sit next to a seven figure guy and learn for a while.. oh yeah, one more question.. how exactly did you tell your wife about the lost money and live to tell the tale? =) blueem =) thanks for sharing your story.. ya know.. if you did it once, you can do it again.. Gene Brown once said, "Today's opportunities erase yesterday's failures." rtharp, geeze man, 5% both ways? talk about raping and pillaging.. sheesh.. and then i bet you guys sold the order to a MM huh? lol.. Hitman =) ni hau =).. great story man.. glad you didnt end up with the bracelets.. way to go with your persistence in getting the job with Worldco.. and congratulations on becoming profitable so soon.. its really quite an accomplishment.. i can see how your parents would want you to go back to school.. i spent a couple months in China last year as an english teacher.. i was really supprised by how much of a status symbol education is there.. what part of China are you from? the last part of your story reminded me of a quote from Bob Dylan, "A man is a success if he gets up in the morning and gets to bed at night and in between does what he wants to do." everyone, thanks again for sharing your experiences.. good trading.. -qwik
That used to be the norm. Can you imagine paying $8000 to buy a stock than sell it 6 months later and it cost you $9000 more because it went up a few grand. Let's just say I got out of the industry rather quickly. http://communities.msn.com/Rtharpsl..._Message=712&LastModified=4675329434610460632 here is mine. I'll add more later rtharp
Hi Hitman and everyone, Itâs nice to have everyone sharing each other life story, we might be different in all aspects but all of us have to struggle through market âtuitionâ period basically the same way. Some of course are more fortunate since they got someone to guide them but others just work through their own. Some fail some succeed. Here is the side of my story: I am currently 24, and I came from a country from South East Asia currently staying in UK. My grandparents were from China just like Hitman. Ni hau ma? I started investing in my country when I was 15 (1992) at that time it was the era of âAsian Tigers and Dragonsâ. Markets shot up to the heaven, just like the âex-internet stocksâ. Everyone was talking about shares, tips were everywhere, you could hear people shouting âJackport!â all the time. From hawkers, taxi drivers to highest ranking CEO, everyone were acting just the same. Then as you suspected in 1993, came the notorious âAsian Crisisâ. The local share markets started to show sign of fatigue, âsmart moneyâ was moving out. But those naïve laymen, like me were still happily invested. Then the Crisis showed itâs through colour soon, all the local currencies were devaluing so fast, dropping like a 3 Tons ballast. As the desperate move to save their own (government) cronies who are so excessively in debt, the countries leaders started using their propaganda machine to âencourageâ their citizens to invest, saying that it was a patriotic thing to do. So the idiots and me, invested all our life saving really hoping to contribute something to save the country economy. What a NOBLE thinking, but what a shame, it did not work in a UNPERFECT, SAVAGE world. Needless to say, all of us were using the âbuy and holdâ principle and I found out 1 year later all of my âhard earn life savingâ disappeared, I mean it really turned into ZERO, nada. So did all my parents and all the innocent âinvestorsâ savings. LOL!!!! Stupid me! Stupid! Believe me, I came from a poor family and that it was that moment that I was shaken from my âbuy and holdâ principle. I am not blaming anyone, but my own stupidity and ignorance. I came to UK a few years ago to pursue my future, as the future in our country looks very bleak. Since I have been keeping some saving from my work, I saw this recent Nasdaq correction as another opportunity not to be missed. Immediately, I started investing again on February 2001 with $13.5K using online broker (CSFB and DATEK). Believe me that is a lot of money to me. My account went down to $12.5K. Hence, I started to get very frustrated and commenced revenge trading by buying and selling penny shares. I managed to get my account up to $17.K before it went down to $13.8. (Easy come, easy go) It was this time that I realised that I was GAMBLING and not TRADING. Without knowing where to seek for assistance, I found Elite Trader web page, and tried to reveal my problems, in the hope that some seniors could give me some advises. And I found some very understanding seniors who really trying to guide me. Although I am still basically break even, but I felt that I have really graduated at least from a GAMBLER to a very novice TRADER, and there is a very significance difference between both of them. I finally found a profession that I really love and I will never ever give up my dreams to be a Professional TRADER just like some of our seniors. Good luck for you all! Joy Trader
Greetings from sunny Croatia everyone! A friend of mine from another group, Knnyt, alerted me about this thread, ad THANKS KNNYT you did so! It is one of the greatest things a young aspiring trader could look for and also where "older" experienced guys can post thoughts and exchange ideas. Let me introduce myself first. My mane is Alexander Strbac and am 21 year economics student from Croatia. I have had a passion for investing since 8th grade. Since we were a socialist country, you can imagine what was the level of knowledge about stockmarket and theese things in my country. I did however get the hold of Kostolanys, Richardsons and Soros' books and that was the world to me! That was the thing I was gonna do in my life. Then, some 3 years ago I found out about online investing, you know, Etrade, Schwab, Datek ... I thought it couldn't get anybetter than that. " years ago I found a site that changed my entire life philosophy - DAYTRADINGSTOCKS.COM, ran by Chris Wheeler. And gradually, I learned about the indicators, Tradingmarkets.com, patterns, papertrading, EDAT brokers, ECNs and stuff like that and now I guess I am at the point where I should put it together in a meaningful picture, like a jigsaw puzzle and I got the pieces. I started paper swingtrading, I keep a journal so we'll see how it works. However, couple a days ago I learned about the new September Reg T rule about 25k to daytrade...I mean, I was simply devastated, I'm never gonna come up with that kind of money!!! Its like 8 years sallary in Croatia. WITH A COLLEGE DIPLOMA! I guess Ill start swinging with 2k IB acct and just trade 20 shares try to learn and preserve my money. I also sent a letter to some proprietary firms it is in my next post but I doubt it'll have any effect. So , Thank you all for listening and keep up the good work, you truly are an inspiration to us newbies, Hitman, Babak, Praetorian2 and the rest of you! TLC, Alex_The_Croat
Here's the letter I sent to the daytrading firms. Hello from a country called Croatia! My name is Alexander Strbac and I am a 21 year old economics student. Since I was in 8th grade I have been fascinated in equity markets (stocks and futures in particular) but have been very limited in literature and materials available to me.I read L.Richardsons book and A. Kostolanys and Soros' and it was whole world to me. It was only three years ago that I found out about online investing and became very VERY commited to learning how to do it and start my own venture. Then some two years ago I stumbled across Mr. Chris Wheelers website daytradingstocks.com when I became almost "obsessed" with daytrading. Next two years I will spend reading and re-reading materials from that website, from TradingMarkets.com by Mr. Kevin Haggarty, Jeff Cooper and others and paper trading every day almost a couple of hours every day. Now I got a job aside from studying, trying to make some money to go live with my trading. My business plan was to open a IB acct with 2k $ and start swing trading only small lots (10-30 shares) and TRY TO LEARN AND PRESERVE MY CAPITAL. Than , if successful, I would add to it. But just a couple of days ago I found out about the new Reg T and 25K$ minimum for daytrading acct. I gotta admit it to you - I WAS DEVASTSTED! I mean, 25 000$ are 8 yrs sallary in Croatia. And my dream got crushed. Now, I know that it is impossible for you to say to me Sure, Just hop over across the "pond", you'll get your 20000 acct and trade as long as you like, I mean it would probably drive you out of the business right?! Besides, I am just a little guy from a far away country without the Ivy league diploma and sufficient funding so I will understand if you don't reply to this e mail; I just wanted to let you know there is someone immensly interested in trading, so if you ever find out about something or someone that could get me started or help me in any way, i would be utmost gtrateful to you if you were to notify me. I am very reliable and hardworking and determined to succeed at it. I wish you all the best in your trading and many many greetings from sunny Croatia! Sincearly , (MY INFO)
ALEX It looks like you can still daytrade with a cash account that is under $25,000. The new rule only applies to accounts that are enabled for margin. A plain cash account doesn't have the leverage of a margin account and you can't short stocks but other than that there is no difference. Here's a link to a discussion about the new rule. The discussion is called "Deathblow to Daytraders". http://www.elitetrader.com/vb/showthread.php?threadid=1051