well....for everybody that trades successfully there's a different system for it. There are people the trade w/ a combination of technical indicators, people who use moving average crossovers, the woodies people who are almost cultlike about the CCI, people who get signals from candlestick patterns, people who trade off of news (a prop trader I know makes a good living doing that), people who follow trends, people who fade trends, people that use alot of fundamentals. I think what I was trying to say, is you have to figure out witch of those you fit with the best, and learn to live and breath it. For me and my personality, I've found that chart watching using trendlines and a price volume analysis is the best fit.
I prefer the term simulated trading to paper trading, but yes. A few months ago, I decided to go into trading full time. With my lack of experience, I didnt have any luck getting into a Chicago prop firm. Given that no one else wanted to give me an opportunity, I decided to create one for myself. I had a month off from school over the holidays, and I used the time to set up a simulated trading environment on my PC. I'm using X Trader going against a TT Sim Server and eSignal for my charts. (Thanks to Mark from Velocity Futures for being kind enough to give me a login to their TT Sim server !) I'm doing my best to treat this exactly as if I'm running my own independent trading business. I know how much money I have available to trade on my own if I were to trade independently. Since I know that, I'm using that to size my trades. Additionally, I keep a trading spreadsheet which update daily. It tracks my results for the day by day and tells me how much is in my "virtual" account. I also track contracts I hold at any given time, length I hold a trade, etc. in case I ever want to run statistical analysis on that. I also took the time to price out my internet connection, TT Fees, commissions, charting software fees, exchange data fees, etc. With that, I can calculate monthly what it would take for me to actually trade independently. That way, not only do I know if my trades are profitable, but also whether I'm profitable as a whole after paying the piper. So, in a nutshell , it is paper trading. But I'm up every morning doing it. I'm also keeping in the mind that each losing day I have , the losses could have been coming out of my own pocket had I been foolhardy enough to trade futures with real money before gaining experience. Hopefully with sticking to this, 5 months or so down the line I'll be able to develop a trading style that fits my personality and is profitable for me. -Tony
With all due respect to your efforts, it is highly unlikely that 5 months will be enough to trade profitably and consistently with real money. Unless you are the exception to a pretty solid rule, more like 5 years, with substantial losses and frustration during that period until you really learn how to trade and how the markets really work. That truth being said, I hope you are the exception. Best Wishes, Paul
You definitely have the right attitude to succeed. If I may, I'll share my 3 core trading rules with you. Learning the true meanings of these rules took me many years of losses and many hard lessons. Rule 1: You have to learn to control yourself before you can stop the market from controlling you. ( this is the "holy grail secret" of the market) Rule 2: Cut your losses quickly and let your profits run (...yes a cliche' you read everywhere, but took me a long time to "get it" and follow it consistently ) Rule 3: Trade to trade well and trade to stay in the game. (The longer you manage to stay in the game, the bigger your % probability of being consistently profitable) As for the winning characteristic traits of the more sucessful traders; Discipline, Consistency and Perseverance are the 3 most important ones. As for trading itself, the most important thing that made the difference for me was reducing position size and learning to wait for the correct reward/risk patterns. Also, after a large profit or after 3 consecutive stop outs, I take a break from the markets. Taking a large profit or loss skews the psychology and rule 1 comes into play. It's also important that you look around and find the right market and time frame that matches your personality. And most importantly, you need to develop a passion outside of the markets. I hope some of the above helps you in your trading. Good luck.
I am making tweaks to my trading style this week. I am making an effort to focus less on technical indicators and more on the price/volume relationship and trendlines. I am using the 30 minute chart to determine the higher order trend. I am using the 5 minute for trading decisions. My method for trendlines is as follows: Trendlines from my 30 minute charts are bolder than trendlines from my 5 minutes. A weaker trendline is in blue, whereas an area I feel will have strong support/resistance is denoted in black. Going into the day, there were two trendlines on the 30 minute showing possible support, and one area of expected resistance. The day started well. ER2 "kissed" its weaker 30 minute trendline and showed support. Prints on the T&S were bullish and volume looked fine. I went long on the price retracement ~ 9AM and caught the upwards price breakout. Bought 1 @ 61760. This was about the end of the good part of my day. The 30 minute showed I could expect stiff resistance around 62500. The 5 minute also showed each successive run up to be on lower volume. Around 10 AM, I kept looking for a reason to go short. I felt that the daily uptrend was ready for a correction down to the blue or black trendline on the 30 minute chart. Continued attemping to make short plays the rest of the day. These plays killed me. Reasons for my logic: 1) Continuous violations of 5 minute trendline on uptrend. 2) Each repeated run past the 62500 resistance on weaker volume. Flaws in my logic: 1) Although they were minor, higher highs and higher lows were made throughout the day. This is evidence that the bulls were in a slight lead over the bears. 2) The corrections during the day were on even lower volume than the failed advanced. Attemped selloff at 13:45 met with stiff opposition from buyers. Tactical Errors: 1) Early buy in was correct decision. Sold at 62180. Why sell at 61280 when I'm expecting resistance at 62500 ? 2) I became convinced that the market was ready to correct itself. I gave away my profits + an extra $1000 trying to catch a downtrend which never happened. Lessons Learned: 1) Continue to work on holding winning trades until they fully mature. 2) When approaching stiff resistance on a chart, be aware a trend may not reverse. There may be enough buyers and sellers on both sides to send the price sideways for awhile. 3) When making a trade, put it on and keep it on until the market proves me wrong. I lost lots of money repeatedly trying to get into a short position, closing out when the market wiggled, then going short again. Instead of just taking one loss for being wrong, I took many.
Taking the day off from trading to get caught up on school work. However, I did have a couple thoughts for the day: I want to define my terminology before I begin writing. I have not read any books on swing trading. In this entry, I am using the term "swing trading" to refer to a style of trading where a trader trades off of 5 min/60 min charts and will hold positions for a few hours-several days. If this is not swing trading, please let me know. First Thought: The average investor will use daily and weekly charts to make trading decisions. I belive there are 360 trading days per year. So 1 year of daily chart data will yield 360 bars. Of those 360 bars, a small amount of good trading opportunities will materialize. Half that for the typical investor who sits out on the sidelines for short opportunities. Now, take the situation of a daytrader who uses 5 minute/60 minute charts for trading decisions. The stock index futures contracts trade actively for 6.5 hours per day. Thats 390 5 minute bars per week, or roughly equivalent to the 1 year of data the non-active investor uses to trade off of. The magnitude of price movements in 1 week will obviously be smaller than occurs in 1 year. However, the leverage from a futures contract acts as an amplifier to this. In essence, for a swing style trader, 1 week = 1 year in the life of a daily position trader. Here, I belive lies the key to successful day trading. I don't have exact figures, but I belive the very best money managers earn 25-30% on the returns averaged annually. For the worst individual investors, there no limit to how much they might lose in a year. The day trader must realize that the power of leverage works essentially as a time accelerator. If you can trade successful as a daily position trader, then you could expect to earn percentage returns similar to your yearly take on a weekly basis. For the poor investor, you can expect your yearly losses to start being taken weekly. Therefore, two things are key: A) Do not attempt to daytrade with real money until you are comfortable you have perfected a trading style that will be profitable. Otherwise, you can just expect your losses to come that much faster to you. B) Just like in position trading, swing trading requires waiting for the best possible setups. A position trader can have a work life and not always be looking at screens. The swing trader needs to be in front of screens during the trading day. It is much more difficult to look at a screen and not do anything. You have to be like a jungle sniper, willing to stalk your quarry for days if necessary waiting for the right setup. Unlike the sniper, please don't install a canteen and a potty bag to your trade station. That would be weird. Those are my thoughts for the day. They came about because impulse control is my greatest barrier to success right now. I'm taking sub-optimal trades, and often attempt entry like 4 times into sub optimal trades. Thats eating all my profits. One final thought of the day: Even with perfect trading, the market will only give you what it wants you to have. It will, however, take from you all you are willing to give it. -Tony