Hi traders I have been lurking on Elite Trader for a few months and find it very educational. Read a lot questions asked by new traders and replies to the questions asked. Now when new traders ask a question "how do you get an edge" they get various replies and this "Depends on your Style & Personality" type of an answer quite often. So my question is how can new trader know what is his Style if even if he knew that there are Styles that do exist,and what Style would his Style be? I hope this makes sense. Next Personality. If I have a cheerful personality or grumpy personality,harsh personality, gentle personality etc...... How can I apply this to choosing an edge in trading. Please forgive me if these questions are naive. tamvik
you'll discover your edge (and more about your personality) as you go (as you trade). some things make sense to you right off the bat...that might be the place to look...check out your 'gut.' i think you're mixing up 'personality' with 'emotions' or emotional expression. When traders talk about personality, I think they usually mean, short term, risk averse, not risk averse, long term, fader, follower, etc. the emotions have to be controlled. not supressed. acknowledged and mastered. that's your homework for tonight. my .02.
Fair questions. Don't risk much until you can answer them. One of the Market Wizards said that the markets are an expensive place to find out about yourself or something to that effect. My advice is to papertrade and keep asking yourself, how would I feel and how would I handle this if it were real money? A friend of mine has done well in the markets but he freaks if he loses $100. He has to have an approach that is slow, steady and sure. That's his real personality and that's his trading personality. I have another friend who can handle tremendous drawdowns without breaking a sweat. He sells tops and buys bottoms, a tough and dangerous approach but he has the nerve and skill to do it. The first guy will say things like, "That cost me the price of a new car." The second guy never thinks that way, he thinks," I could make a million off this trade."
Buy 1000 shares of IBM. You'll find out real fast if you are a risk taker or not; your tolerance for risk. Or try many different styles (sclaping, position, arb, etc) small until you find something that just sits right with you. As Chas said, the markets will tell you more about your personality than years with a shrink. They may cause a need for a shrink. Be aware of all the outside influences in your life too. They may affect your perceptions of risk and trading in the short term.
If you want to save yourself a lot of time, make sure you have a basic understanding of all the techniques and strategies and philosophies that are common. Then, make sure you have a basic understanding of your personality. If you don't know where to start here, compare yourself to basic descriptions of your zodiac sign. Try www.astrology.com or something like that. Then mix and match the 2 together, and you might get something of a new age trading style just kidding, but if you try to get something to fit your personality, you will save yourself lots of time. Style is outcome of meshing your personality with different trading techniques and strategies. You can't just get a style, you already have a personality, and you can choose which techniques and strategies you want. Heres an example of my personality/strategies&techniques/style. My personality: I'm quick thinking, but sometimes a bit too quick on acting Like alot of action Stubborn when I think i'm right Quick to change when i think i could be wrong Very creative and i take great pride in what i create Logical mind Everything is either black or white in my mind, theres no grey area. My Search for techniques went in this order: I started as a level2 bandit, but it was too discretionary for me. Then i moved on to indicator based trading like stoch's and bb's. I liked the idea that it could be mechanical, but it was also had grey areas that i didn't like. I then moved on too classical chart patterns and candlestick patterns. I liked this because it allowed me to be creative, but it also relied on too much discretion. From there I moved to the outer fringes of technical analysis such as elliot wave, gann, and fibonacci numbers. However my research in those areas turned up this fact. IT DOESN"T WORK OUT OF THE BOX. From there I decided to come up with my own stuff, so I started from scratch with a blank chart. I came up with the following home grown indicators. Volume Reversals Various bar patterns Various customized fibonacci methods My own wave pattern that i use to determine the overall trend. (this is one of my more dependable ones) Chaotic Trendlines (a more organized version of psychotic trendlines - see hardrightedge.com) Gap patterns And over 10 mathematical patterns in the markets. I realized that because of my personality, i would never trade based on indicators made by someone else, and I would always be searching for the holy grail. Although many people say don't search for the grail, i think you should... however, you should have a plan for trading while searching. It has to be practical, something that works. My style: Anyhow, I now trade off of daily and weekly charts using my custom wave pattern and daily high/low pivots based on gap patterns, chaotic trendlines, and mathematics. I like the solid feeling I get from the daily charts. What i do for action is constantly average in and out of positions to increase profits and minimize risk. ( i used to scalp alot, but i overtraded, and decided there was a better way to get action but not become controlled by that need, i've found this to work very well) I use very tight stops, and I use the different techniques i came up with to verify eachother. Along the way, I think i've developed a unique style, attitude, and philosophy in trading that make me the trader i am. we're all newbies, and I never stop searching, and i beleive this is what makes me better, keeps me fresh and on top of the changing market conditions. if i would have studied my personality and learned the basics of different types of trading/techniques, I could have saved myself a year that I wasted on Mr. Stochastic and friends, and Mr. Elliot, Gann, and Fibonazi. hope that helps, gluck. edit: i didn't make it clear by the above, I'm a contrarian or a pivot trader, not a breakout/breakdown trader. those are the 2 main types of traders... important to decide which style suits you best, or if you can do both, thats great. I like the low risk of a tight stop on a pivot entry... i can buy at the bid and sell at the ask using limit orders put in well ahead of time.
If you're the kind who's capable of being completely unbiased about the names you trade and don't care where or how you pocket your gains, then trading intraday in a broad number of stocks or indices would be preferable. Being familiar with a great number of various stocks/sectors will increase the chance of finding a trading pattern you can profit by while decreasing the risk of forcing trades in a few concentrated names which might not be too volatile on certain days. You can then tailor trading styles and time frames by your own strengths and weakness regarding money management and emotional stability. Got fast reflexes and hate watching open profits melt away on the inevitable pullbacks? Stick to riding momentum and offering/bidding out of trades on the way up/down. Getting frazzled from level 2 volatility or specialist tricks, while a frequent sufferer of seller's remorse? Trade 15-60 min chart patterns, scaling in and out of positions. If you get more out of the intellectual aspect of the market and see it more as puzzle solving, turn off the level2, use just daily charts and get used to position sizes and stop levels as percentages of captial. And so on and on. Needless to say, it's hard sticking with what style best suits you during the inevitable drawdowns, and I would think that it's MUCH harder to try and change your stripes to suit market conditions. Anyone out there flexible enough to trade 2 or more styles simultaneously? Would be curious to hear your experiences.
Tamvik, This is a great question. Consider yourself. Sports is a good place to start. Do you like fast paced sports or slow? Do you prefer taking your time to think about your next action like in golf or just react like basketball? Would you rather run a marathon or a sprint? Trading is an extremely lonely craft. And if you dont have a discipline, a "edge" your self talk will play mind games with you. The only way you can define and shape what works for you is, unfortunately, to trade. I say unfortunately, because it is when you start out with real money that you are most vulnerable. Paper training is beneficial but there is no simulation for trade execution and risk management real time. What about the spread? What about volume? What about slippage? What about risk? What about trading only the choice set up markets? How are you going to get in? More importantly how are you going to get out? These important questions are seldom asked (if at all). Instead, you see in newsletters, and chat rooms: "Buy here, sell there" inevitably at near perfect points. When you take the next 'signal' and its a loser, you say, "What about here?" To which you hear, "Well, that wasnt qualified. And besides I had a tight stop" What's a stop? Also, do you need to be right? Or would you rather make $$$? There are many methodologies that provide an "edge" but though they are profitable they may be 30-40% accurate in terms of wins. Can you handle that? Do you need to trade every 5 minutes or is 1x/day sufficient? Larry Williams is a master at this. I am not going to comment regarding his ability as a trader, that is for another thread. That said if you have received any of his promo's for his seminars he provides Tradestation printouts of "systems" demonstrating low drawdown, high avg. trades wins, highly accurate percentages. I can see the dollar signs dancing in your pupils. Yet, it's only when you go to his seminars do you realize that his "system" trades maybe once or twice a month. Do you have that sort of patience? Starting out my advice to you is to read. Alot. Then you have a choice. You can become market specific. Or technique specific. By that I mean you can trade just one market, and learn everything about it or you can learn one or two simple patterns and apply them over many markets trading just that one pattern. But I do not believe you can do both. Too psychologically damaging. Then paper trade and make it as real as possible. No fudging entries/exits. Learn what sort of loss you can accept because you're going to lose alot. Think about that. Who has lost more money than George Soros? Except maybe Warren Buffet. It's just their upside is alot more in the plus column when they win. Keep a journal of your trades. We learn more from our failures than our successes. Once you can view your trading with the same detachment as a professional gambler sitting at a black jack table knowing his has the "edge", work on improving your trading platform. Professionals do not trade using 56k modems. Or by having data with more bad ticks and excuses than consistent performance. Or having their order have to go through 3 people before it gets to the floor. Hope this helps.
I didn't think I would get so much response to my questions I really appreciate all the replies from traders, there was good advise in each post that I read. Funny it sure feels different when you get a response from traders to your personal question than lurking and reading almost identical answer to somebody else. I don't want to single out anybody for a praise, I got good sincere advise from every post that I would need to digest. But the the one with the sports illustration kind of opened up my eyes or should I say clicked in my mind. I guess for some new traders we need(I need) somebody to lay it out in simple illustration or comparison to something. Once again thanks a lot everybody, if there is more to come please keep it coming tamvik