I’ll listen to almost anything. There are so many ways to trade, and I know people are profitable on polar ends of approaches (huge position very short term, wide portfolio long term). Here are 2 things I think newbies should avoid and/or will never work. 1) let your losers run, cut your winners — “I have a great win ratio” If you have unlimited time and money, you will always be right and never take a loser. Unfortunately, you don’t have unlimited time or money. If you've read a book or have some experience you should know that holding a loser and/or averaging down will work, maybe even 80% of the time. And when it doesn’t, you will lose more than you made on your majority winners. I still see people who are genuinely confounded by this. They've probably read the book AND experienced it and still can't get over it. "What?!? I have 8/10 winners!" But the winners are X and the losers are 5X+. If you get winners by taking heat, if you are risking 3X to make X and you think your win rate will save you, I think you are doomed. (Consider inverting this. Risk 1 to make 5 was huge for me. Flip the above. Take many small losers to find that one true winner. When you actually learn how to trade, THIS PAYS.) 2) the earnings gamble “The chart pattern indicated…” This is a sucker bet. You’re struggling, you don’t have a lot of experience, and your eye is on the prize, so you take a pre-earnings gamble on a high-priced, fast-moving stock like NFLX or LNKD. Whether you’re wrong or right, this is just a joke. The chart has nothing to do with how the stock will react to earnings and you don’t have a fundamental edge. I actually think I’m open minded, in that IF YOU’RE INSANE (or a pro, YEARS of experience (and profit)) you can attempt to trade these things in the after hours AFTER the number comes out. I don’t. But I’m open to the idea that it’s not impossible. (I'm also open to insane trades, if the risk/reward is right.) If your strategy is to take a position before the number and pray you’re right, I honestly think you are much better off buying a lottery ticket. Much better risk/reward. (Note that the difference with pre-earnings is the risk/reward is not favorable, it's ?/?) *** Ok so fair question is what DOES work. Here is where it’s a frustrating answer. I’ve always felt if it was “just do X, Y, Z, then you make money,” well that would be quickly exploited, programmed, and is no longer a way for a regular guy to make money. The ugly truth is trading is super hard. It takes ages to find any kind of edge or real skill. In my mind, fair analogies are learning a language or instrument. You can’t use sheer willpower to get great at it quickly. You get good with experience, and life isn’t fair. How do you get full time trading experience while working a job that funds your trading, which is 99% likely to be initially unprofitable? This is a huge stumbling block, and almost certainly why prop firms exist. (They will allow you to pay rent and eat while (hopefully) learning how to trade. They also probably want a proven track record.) I don't have a solution to that Catch-22, but if you talk to experienced successful traders I think you’ll find a theme in their responses. It’s different for everyone, it depends. It truly does. And a huge element is eliminating what doesn’t work. What does work is the magic, that’s what you find. I am genuinely trying to help by pointing out 2 things I think a lot of new people do, that are total red herrings. People want success immediately, which is easy to achieve if you never take a loss or if you take a giant gamble and happen to be right. Neither of those things will help you in the long term. All those trading cliches exist for a reason — they’re true. Amateurs focus on how much they can make; pros are concerned about preventing losses. Cut your losses, let your winners run. Easier said than done but so is everything worthwhile. Accept that there is a huge learning curve, start small, and look at your mistakes as learning opportunities. All the unglamorous stuff that no one wants to do, read the tape, review your shitty trades, keep a journal, etc — that’s where the real improvement happens. As someone fortunate enough to make a living daytrading, I firmly believe that it’s not what a stock does, it's the set up. The one that jumps up 3 points and you think “fuck I wish I was long that” Who cares? What was the set up? Would you get long the next 10 times you see it? The little trade where you confidently risked 2X and knew you had a good chance of making 10X (or more) — THAT’S the one to worship. Lastly, if you want to be told what to do, sorry, but get a normal job. There is no shame in doing something that is actually useful to society!
1. The "idea" of averaging down sounds great. In the book. But, if you're going to do it, you better be in the immediate family of the CFO. Otherwise, as Peter Lynch said, "Spend at least as much time researching a stock as you would choosing a refrigerator." As to the win rate, there needn't be only two choices: high win rate and low profit or low win rate and high profit. They are of course high win rate and high profit and low win rate and low profit, all of which depend greatly on whether or not the trade has any idea (a) what he's looking at and (b) what to do with it. But that's another subject. 2. As to the second, why not, if you're trading OPM. But beginners aren't going to be trading OPM. Otherwise, I couldn't agree more.
Hmmmm..., mkt/ price tells me what to do every single day (well except weekends/ time off ) Very True RN
I never ever recommend others to average down day trading as I do and reason why is they will not do back testing as I have and especially in S&Ps/Emini trading for 30 years, so I know every component of the refrigerator. But I have been trading so for several years, but I know the numbers well and certainly have an "Uncle" point. Over the course of a years' time of trading, I have 1.75 full winners (eight-nine price levels) to 1 full loser (nine price levels), so it is micro managing risk/reward, and yes, I have had three full losers in a row and takes up to handful weeks to recover, but it is part of the knowing the math of the past and predicting it will continue into the future. Timeframe is often spoken as which is best and yet so few understand the whys of so many minute(s), many think one minute is less risk, but for the inexperienced means more false signals. To me, smaller timeframe means I will be in trade smaller time, I can't remember last time I was in longer than four minutes in standard signals. Way too may people talk about "Win rates", trading is NOT about winning in my book, it is all about learning how to not/or not often lose. So let's discuss Loss rate, Breakeven rate, both true breakeven(in/out same price) which after fees/time is a loss and breakeven plus one tick(if this covers fees/time), does anyone concentrate on any of these? You don't read about it much, newbies find it boring, it is all I think about now. Hard work, long hours of testing and study is the "Edge". There is ALWAYS trade offs in trading, but as your experience increases, tradeoffs change, you find ways to change the risk, what newbies have little clue as most only see big profits, that part of the chart to the right of current bar. "Imagine yourself playing golf by 10am or sitting on a beach with your laptop", that might work on the real dumb newbies to entice them into opening an account, but the guys/gals who have labored long hard years of not knowing what time it is or if it rained this month know better. I am very happy it is harder than hell to learn how to trade. Starbucks time.