Trials and tribulations before becoming a consistently profitable trader

Hi All,

For the consistently profitable traders out there: How about sharing with us the trials and tribulations you went thru before achieving your current state of profitability?

I have yet to become a consistently profitable day trader or swing trader and would appreciate learning more about the path you took to reach this end.

Having the proper expectations will certainly make my journey less frustrating.

Some general things I have learned so far:

1. There is no holy grail.

2. You're not going to find how to day trade or swing trade properly by just reading a few books or attending a few seminars.

3. You've got to find what works for you, not what works for someone else.

4. Experience, especially losses, is the best teacher.

I look forward to hearing your story.

Thanks.

-- Punter.


P.S. Here's my intermediate term trading story, by the way:

I floundered with trading my account for about 6 months in late 1998/early 1999. After getting fed up with losses, I turned to CANSLIM via Bill O'Neil's books (How to Make Money in the Stock Market). I didn't follow all the rules to the letter, but by the end of 1999 I made up for all my losses and had some chunky profits. I got out of the market in April 2000, a bit on the late side, but still had a good portion of my gains. Since then I've been mostly in cash. If I had followed his rules more closely, I would have gotten out sooner with more of my gains intact.

In my opinion, with discipline to follow all the rules, you can be a CANSLIM trader in a few weeks or few month's time. Works great in a bull market, but in bear markets like these you've got be patient and willing to sit in cash until the Bull returns.

 

Stalk like a cheetah, and only strike the young or frail prey i.e. trade selectively. 90% of your time should be stalking, in my humble opinion.

 

Candletrader,

Thanks for the reply.

What kind of trading do you do?

Can you elaborate on how long it took for you to become a profitable trader, and what you had to do/go through to reach this end?

Thanks.

-- Punter

 

Well, for me, I was lucky to have started trading during the bull market (I was part of the mass of dumb money, throwing darts and making great money at will in the bull market)... my greatest losses came AFTER I became consistently profitable, during summer periods and during the bear.... so that's how I learnt to be selective. I was lucky to have made enough during the bull run to take care of my 'learning curve' which ironically happened later...

If I was starting today, I would be VERY selective, even if that means waiting for a couple of cherry picks a week for either swingtrading or daytrading. Remember you are NOT compelled to do a certain number of trades per week... sometimes its better to keep the gun in its case, and wait, wait, wait... when you see something compelling, then take the trade.

As for what styles of trading I am currently doing they are:
1) Very selective swingtrading for larger gains (maybe a couple a week) based on Tony Oz set-ups (Nasdaq and NYSE) ... these trades pay my food bills and living expenses.
2) Some intraday sector trading (NYSE) ... my style is similar to Hitman's but I believe I choose trades for different reasons to him.
3) Some intraday momentum trading with larger than usual size (Nasdaq) ... this is focused on using Level II, and I need a much higher degree of confidence in the trade than usual to put these trades on. This category of trading can be the most profitable, but I still find it the most scarey by far! I do not recommend that you do this style with large size shares, when you are starting out... this style will wipe out a newbie faster than any other style, in my opinion. I think it's because traders try this style over others that the failure rate amongst the trading community is so high. But, when done right (and ONLY when done right), this is the best trading style in my opinion.

On styles, I think the key is to remain flexible and open to the various ways of trading... be highly selective, but be a jack of all trades, in order to keep the cash registers at least ticking over in most market conditions.

Get rich slowly and carefully!

 

SP,

If you haven't already, you should read the thread "my story" from back in July. The link to it is http://www.elitetrader.com/vb/showthread.php?s=&threadid=1670&highlight=my+story

It has the stories of some of the traders here that I have great respect for. One of my top ten favorite threads of all time.

Kirk

 

WHy can't you just reverse the CANSLIM logic for a bear market? IE determine overall trend is down, find the weakest companies in the weakest sectors quantified by earnings and relative weakness, then look for institutions to be dumping the stock and finally enter a trade at a good technical level such as a bear cup, loss of support or short a retracement rally etc.

 

I buy bottoms.... Very plain and simple. At first I would have trouble I wouldn't get the exact bottom... and I would be averaging down for 2-3 points til I finally got it. I would then sell the bounce and only break even.. or even loose. After about 6 months. I think I got pretty accurate, but still I would have that one tradea month that would cost me 2/3 of the gains from that month. About a month ago, I finally developed a ratio, which using a number of calculations would lead me to getting very close to where a large percentage of the sellers were eliminated. I think my biggest strugle now is not in reading the tape, but in not trusting my ratio enough. My ratio is more accurate than any mm deception, and I need to learn to rely on it more once my initial tape reading shows that Im right about something. All trading is a learning process though.
I think the other thing I've learned is not to force a trade. I didn't make a transaction at all on monday. Tuesday, I added only 3500 shares to one of my longs that had shaken a bit. It wasn't until wednesday that I even traded size. But then from wed afternoon til the close on friday... I traded almost 400,000 shares. The point is that you have to find your spots, and make the most of them. Don't try to force trades. I still do this sometimes. I say, eehhhh it's so/so. Let me just do 2k shares. But the problem is that you loose a half point on a trade you don't believe in, and you don't have the courage to average into it then, cause you didn't believe in it, so you end up taking the 1k loss pointlessly. It's better to just choose good spots, and throw all your capital at those trades.

 

The single most important thing, for me was this. Never get into a move after its well under way. Wait for a retracement or consolidation. This is old news but an extremely hard habit to break is chasing moves that are already under way. When you learn to let the market come to you, the odds improve greatly. All of the other rules are important but I feel this is the one that made a difference for me.

 

Nico,

Interesting post... I would qualify it by saying you can chase, but only in a lower timeframe than you are trading.... e.g. if you are playing for a swingtrade for several days, you can chase on the 5min candles.

Candle