esepich, I hope you realize you have just received about $50,000 worth of advice, considering what all the books, tapes, seminars and coaching to get this much knowledge would cost you. Every single one of the above comments had great, time-tested advice. My advice is do three things. One, step back for a week or so and recover from the shock. Two, come up with a set of four or five rules you follow with great discipline. One rule might be, no position over 5% of account size. Another might be never carry loser overnight. Three, make sure you are picking trades based on a method that has some chance of success. Reading about stocks in the WSJ does not qualify as a good plan. Many great traders blew up in their first forays into the markets. You have learned an important lesson already, namely that the market will hand you your head if you are careless.
Its amazing how hard it is to make 45% in a month, but it sure is easy to lose that much. I wouldn't trade another share until I had an entry and exit plan that you live by, and then trade only a small % of your account. I don't risk more than 1/2% per trade (10% position x 4% max loss). The most important thing is an absolute exit strategy. You can make money virtually with any entry point with a good exit strategy (over many trades), but you can be killed with a good entry and bad exit strategy. Start using the probability mentality in your trading and plan on having a % of losers each time knowing that they always happen and must be confined to your loss parameters. If you are letting your losers run and taking profits early means your letting emotions control your trades. You need a system to reprogram your brain to do the opposite of what comes natural and eventually, after experiencing success, your belief system will change and you will join the ranks of profitable traders. Get a profitable system on paper, then trade small to train your emotions. Paper trading doesn't work on your #1 enemy, emotions.
At all costs you have to preserve your capital. And the only way to do that is to manage your losses effectively. I'm a relatively new trader myself but every trader I've ever met and every book on trading I've ever read have emphasized that managing losses is what makes you a successful trader. NO money, no trading. It's as simple as that. In the beginning it's hard to accept your loss and you may try to avoid it by not selling when you should. I did that sometimes when I first started trading and let me tell you, it's amazing how good that 10 cent loss per share looks when your stock has now come down over a point! Once you've entered a trade, there are 4 possibilities: A big loss, a small loss, a small gain, a big gain. If you eliminate the big loss...... Again I'm no expert, but it seems like you need to do some SERIOUS re-evaluation of your trading methods and execution, especially setting and adhering to SMALL stop-losses. If you continue the way you are, people like the pros on this board are going to be scooping up the remainder of your money. Lord knows they took enough when I first started! Like Tony Oz says, "Trade Smart."
esepich, When I started I had similar drawdowns and I'd like to offer a few specific points that have helped immensely (In no particular order.) 1) Enter trades at points that you know QUICKLY if you are wrong. I've found developing a clear understanding of support/resistance and patterns are critical. Remember S/R is more involved than a simple, flat horizontal line. Read your charts until they jump out at you. 2) Trade with the general market trend. Tony Oz can make money going long in a falling market, but you and I probably can't. It's still OK to short during pullbacks in a rising market and vice versa, but you'll make out far better following the near term trend. 3) While some traders can gain from trading low probability setups that offer exceptional gains, imho, you should be picking correctly at least 60-70% of the time. If not, rethink your setups. 4) Never allow yourself to get in the position that your waiting for the market to come back to you. If you are, YOU'RE WRONG. I see trades that I'd exit out of turn around and go my direction. This serves to give you false hope that it will happen again. Get out with a small loss (or large loss if it's unavoidable) and re-enter if the print turns your way. NEVER REVERT TO HOPE. 5) Sitting out is an option. If nothing looks promising, don't force it. If you have to really search for good setups, they're probably not there. 6) Learn to read intraday charts as well as daily charts, there's plenty to be learned from each. 7) Look for news/earnings on the stocks your trading. I've had trouble with this and even as recently as a few weeks ago I posted a trade that went bad because I didn't check first to see that earnings were coming out while I was holding overnight. 8) Lastly, learn from people who know. I'm still impressed by the caliber of many of the participants on this site and they've opened my eyes to issues that I didn't even know were issues. Logon and learn. Good Luck and Big Profits.
I feel for you, for I too was not far removed from your situation about 2 years ago. I traded a $25K retail account down to $14K and stopped for 1 year. I went at it again and am able to grind out between $250-$400 daily trading remotely with a professional firm. Here is how I was able to turn it around AS A SHORT TERM DAYTRADER. 1. I traded small with the RIGHT broker/firm - YOU NEED TO TRADE 100 SHARES AT A TIME WITH A BROKER THAT CHARGES PER SHARE. Even if you trade small, getting whacked with $9.95 per trade is going to kill your confidence because your PnL will still be negative albeit at a slower rate. You need to book plus days, even $50-$100 days. And that you can do trading 100-200 shares at a time. 2. I practiced risk control and thought in probabilities. Cutting losses short is a SKILL much like most of trading is. In my early days, I have actually flipped coins to initiate my buy and sell signals on 100 shares and practiced losing no more than 1/8 and running winners to 1/4 and 3/8's. I needed to prove to myself that being right ALL the time is not the key because I know that even with my 50% coin toss system, I most likely would be positive or not deeply in the red given a reasonable number of attempts. Doing the coin toss kinda TRIVIALIZED THE TREND IDENTIFICATION PART OF MY TRADING WHICH reinforced the importance to me of the risk control aspect of trading WHICH IS PARAMOUNT! 3. Once I demostrated that I was able to do risk control AUTOMATICALLY I worked on my trend id game. I have read scores of books, 70% of them is garbage but you still need to read garbage to ferret out the gems. ONE BOOK CHANGED IT FOR ME-the 1930's book called "tape reading and market tactics". As I write this reply, I am panicking because I look around here in my trading desk and CAN'T find it..I usually read it once a quarter. Finally, you said in your post that you can't fail. Does that mean that you are the sole breadwinner and can't afford losing days? If that is the case, forget all that I said on top. You need to remove yourself from this situation because trading is not like a job that pays regularly. Trading is a tough business where possibly 80% of the money is made 20% of the time. Please remember that the markets have been here 200 years ago and will be here for you the next 200 years. Don't put too much pressure on yourself. Life is so short. It is not worth it. HOPE THIS HELPS
This is a great post ! you put in a few sentences the hard core points to succeed at this. It is not about entry, it is not about secret of the market. It is about systematic approach, hyper discipline, repeating, money and size management. Trading is simple. it does not mean it is easy. Successful traders usually keep it very simple though, because that's the key. It is difficult because of all the things I mentioned and you described well above. I usually say that I suck at trading, and it must sound silly. However, I am not bad at discipline, math (probabilities) and systematic (software engineer). These eventually saved me after a tough time looking at my accounts deflating very fast. Because then I understood all the money I made in the bull market meant nothing. It is easy to win when everyone is winning and the market always goes up. This was not trading. Any newbie should follow what you describe. I would add the need to be market neutral. Be willing to go long or short anytime (well, I think it is implicit in your coin flipping entry, I just want to make sure it is clear). A trader who can only trade one side is really missing a lot (at least) and maybe can't succeed in the long run (although I know some who can be always long). Also, we always hear 'psychology-psychology-psychology'. Your post does outline that aspect : by the total lack of emotion in the 'trading' you describe. Emotion is the enemy. I don't see how you can allow it in trading. I am still amazed by the adrenalin filled trader super excited you see make money sometimes. But my money is still on the cold blooded ones coming from Vulcan. And to finish, you mention your learning about trends. Indeed. That's the edge. It is known for ages. It is no secret. And still so few know what a trend is and they try to trade ! :eek: tntneo
Excellent post GAT... let me add to that by saying that savings on commissions are vital for newbies but, with more and more experience, what counts is choosing the correct trades and doing them with relatively large share size... the larger the share size the less is the proportionate effect of commissions on the debit side of the P&L ... but you are right: by definition, newbies are not gonna be consistently profitable, so all that counts is minimising losses (and low commissions will help in that endeavor)... moreover wise newbies will be trading small, so higher commissions become a very significant proportion of the P&L. I would say that if anyone is paying in commissions more than 15%-20% of their gross profits (while maintaining a high winning trade rate) they are probably paying too much in commissions... but this is unlikely to happen with a per share broker.
I hope i am in the correct thread. Long time reader, did some daytrading in 96-97 on a 2k acct. I worked it between 2.5k and 1.2 k for about 6 months paying $9.95 a trade. A lot of reading and truly appreciating the vast wealth of knowledge on this site, has brought me to try again..yet I only have 10-12k to start. Am I still too early to try..What direction,sector, arena, place should I begin. My first post. Thanks in advance for any reply.
Great posts by all! Genesis, Keep in mind that there is the new 25K rule which will keep you out of intraday trading if your account is under that amount, unless you swing trade. Another option might be to look into a prop firm of which many threads have been generated.
I commend all the replies and advice. They have been excellent.. Thank you Here my 2 cents worth.. I am no big shot and the other replies are much more valuable than my observation but... HOLDING AN EMPTY BAG..One of the biggest errors you can make as a trader is holding onto a losing position and adding more capital to your losing postition. In fact, this is where I lost most of my money. When I first started trading I would buy a position in some beaten down stock thinking I was getting a bargain. I would not set any stop loss price and I would just hold on to the loser. In fact, the more the stock went down, the more I would buy. More and more of my capital was tied up in a sinking ship. I am not saying not to buy on the dips. I am saying to set up a reasonable exit point and do not add to a falling stock. Holding on to a loser is psychologically paralyzing. Your precious capital is beaten down and tied up, making you afraid to make any move.