Advanced math is not necessary. I am an engineer with advanced degree and took more math classes than I can count (pun intended). I never use anything more complicated that 3rd grade math in my trading (with the exception of indicator calcs like stochastics, but it's automated through charting programs, and the math is algebra simple if you even wanted to calc it yourself). Read, read, read, read. After you've traded for a period of time, re-read the better stuff. You will continue to draw more out of the books as your experience grows. First and foremost, understand money management... risk to ruin analysis, position sizing based on stop and max loss, etc. Believe it or not, reading about gambling helped me in this field more than anything else. Bankroll necessities for blackjack card counting, texas hold em, etc. The idea is that when trading you are essentially placing bets with a +EV (positive expectancy, aka "edge", aka over time the odds are in your favor...a simplistic example might be buying at support). Money mgmt in all it's incarnations such as position sizing is THE single most important thing IMO. Read Van Tharp and others. Fake trading is no substitute for trading with real money. Psychology is half the game, and without substantial money at risk, you will not learn those lessons. For sure, simulations are useful, but will not teach you about the pysch end of things. Study technical analysis. Books by Edwards and Magee(sp?), Pring, and Murphy are standouts in the field. Journaling your trades is very important. Before you enter, know why you entered, what your position size will be (and why), what your stop loss is, what your exit scheme will be (will you trail stops and if so, when will you move them, will you trail a std % or dollar amount or alter the stop based on other factors?). One simple money mgmt scheme would be to risk no more than 1% of your equity on any trade, and to sell half your position when you've covered the intial risk while moving your stop to breakeven. (ex: account size 10k, buy XYZ at $15, stop loss at $14. 1% of 10k is $100 and since the stop is $1 below your entry (stop at 14, entry at 15) your position size would be 100 shares. So if you get stopped out, you lose a max of 1% of your account. Trade goes your way and XYZ trades up to $16 covering your intial risk. You sell half (50 shares) at $16 and move your stop loss from$14 to $15). Now you have locked in profit and are letting the other half ride with no downside risk because your stop is now at break-even. I don't use that exact scheme and it's just for illustration, but the basic principles are all there. This is the type stuff you'll get out of money mgmt study. Read the original turtle rules, available free online. (google it, you'll find something). It will give you an idea of how to design a total system, from a group that absolutely killed it and showed traders could be made/taught..you don't have to be "born with it". Finding "edge" aka "odds in your favor" aka "positive expectancy" is probably the biggest challenge aside from dealing with emotions and psychological aspects. Learn about intermarket analysis, breadth, market, internals, statistical arbitrage, etc. Keep reading and learning. Trade what you see, not what you think. NEVER EVER IGNORE YOUR STOPS. NEVER. Let me say it again, NEVER IGNORE YOUR STOPS. finally, I'll leave you with Gartman's 13 rules of trading, gleaned from over 30 years of market experience. Come back and read these rules again after trading for 6mo, 1 year, 2 years, 5 years. They will always make you go "DOH! why didn't i listen" ------ R U L E # 1 Never, ever, under any circumstance, should one add to a losing position ... not EVER! Averaging down into a losing trade is the only thing that will assuredly take you out of the investment business. This is what took LTCM out. This is what took Barings Brothers out; this is what took Sumitomo Copper out, and this is what takes most losing investors out. R U L E # 2 Never, ever, under any circumstance, should one add to a losing position ... not EVER! We trust our point is made. If "location, location, location" are the first three rules of investing in real estate, then the first two rules of trading equities, debt, commodities, currencies, and so on are these: never add to a losing position. R U L E # 3 Learn to trade like a mercenary guerrilla. The great Jesse Livermore once said that it is not our duty to trade upon the bullish side, nor the bearish side, but upon the winning side. This is brilliance of the first order. We must indeed learn to fight/invest on the winning side, and we must be willing to change sides immediately when one side has gained the upper hand. R U L E # 4 DON'T HOLD ON TO LOSING POSITIONS Capital is in two varieties: Mental and Real, and, of the two, the mental capital is the most important. Holding on to losing positions costs real capital as one's account balance is depleted, but it can exhaust one's mental capital even more seriously as one holds to the losing trade, becoming more and more fearful with each passing minute, day and week, avoiding potentially profitable trades while one nurtures the losing position. R U L E # 5 GO WHERE THE STRENGTH IS The objective of what we are after is not to buy low and to sell high, but to buy high and to sell higher, or to sell short low and to buy lower. We can never know what price is really "low," nor what price is really "high." We can, however, have a modest chance at knowing what the trend is and acting on that trend. We can buy higher and we can sell higher still if the trend is up. Conversely, we can sell short at low prices and we can cover at lower prices if the trend is still down. However, we've no idea how high high is, nor how low low is. R U L E # 6 Sell markets that show the greatest weakness; buy markets that show the greatest strength. Metaphorically, when bearish we need to throw our rocks into the wettest paper sack for it will break the most readily, while in bull markets we need to ride the strongest wind for it shall carry us farther than others. R U L E # 7 In a Bull Market we can only be long or neutral; in a bear market we can only be bearish or neutral. In a bull market we can be neutral, modestly long, or aggressively long--getting into the last position after a protracted bull run into which we've added to our winning position all along the way. Conversely, in a bear market we can be neutral, modestly short, or aggressively short, but never, ever can we--or should we--be the opposite way even so slightly. R U L E # 8 "Markets can remain illogical far longer than you or I can remain solvent." The University of Chicago "boys" have argued for decades that the markets are rational, but we in the markets every day know otherwise. We must learn to accept that irrationality, deal with it, and move on. R U L E # 9 Trading runs in cycles; some are good, some are bad, and there is nothing we can do about that other than accept it and act accordingly. Thus, when things are going well, trade often, trade large, and try to maximize the good fortune that is being bestowed upon you. However, when trading poorly, trade infrequently, trade very small, and continue to get steadily smaller until the winds have changed and the trading "gods" have chosen to smile upon you once again. R U L E # 10 To trade/invest successfully, think like a fundamentalist; trade like a technician. It is obviously imperative that we understand the economic fundamentals that will drive a market higher or lower, but we must understand the technicals as well. When we do, then and only then can we, or should we, trade. R U L E # 11 Keep your technical systems simple. The greatest traders/investors we've had the honor to know over the years continue to employ the simplest trading schemes. They draw simple trend lines, they see and act on simple technical signals, they react swiftly, and they attribute it to their knowledge gained over the years that complexity is the home of the young and untested. R U L E # 12 In trading/investing, an understanding of mass psychology is often more important than an understanding of economics. Markets are, as we like to say, the sum total of the wisdom and stupidity of all who trade in them, and they are collectively given over to the most basic components of the collective psychology. The dot-com bubble was indeed a bubble, but it grew from a small group to a larger group to the largest group, collectively fed by mass mania, until it ended. The economists among us missed the bull-run entirely, but that proves only that markets can indeed remain irrational, and that economic fundamentals may eventually hold the day but in the interim, psychology holds the moment. And finally the most important rule of all: R U L E # 13 Do more of that which is working and do less of that which is not. This is a simple rule in writing; this is a difficult rule to act upon. However, it synthesizes all the modest wisdom we've accumulated over thirty years of watching and trading in markets. Adding to a winning trade while cutting back on losing trades is the one true rule that holds--and it holds in life as well as in trading/investing. > Dennis Gartman: This is what I have learned about the world of investing over three decades. I try each day to stand by my rules. I fail miserably at times, for I break them often, and when I do I lose money and mental capital, until such time as I return to my rules and try my very best to hold strongly to them. The losses incurred are the inevitable tithe I must make to the markets to atone for my trading sins. I accept them, and I move on, but only after vowing that "I'll never do that again."
you'll be a good trader if you are/have humble tolerance for extreme psychological pain(learning phase), this part will teach you all the rest of skills you need to become a good radar opps I meant trader
Thank you all. I'll cut my simulator time down. elcap, thanks for the generous post. I'm going to copy and paste the 13 rules.
expect the unexpected, your plan could take a detour, keep open mind for diff path... If you can be profit on Ninja sim using live data feed then I say you will be success in real trading, guarantee.
Extensive programming knowledge... Hopefully with some advanced university level math and stats... (Not to code complex strategies... But to quickly discard strategies that are a dead end... Almost always due to insurmountable levels of randomness). You should gravitate towards quantitative analysis and pairs/basket trading. And start building the software infrastructure... That will allow you to discover and exploit inefficient stock market niches. Through artful analysis of historical data. Learn how to build well hedged, market neutral portfolios. In the end... how well you trade and structure a portfolio will be paramount. I think you may have what it takes... If you don't get stuck in a dead end for a few years.
Is quantitative analysis and pairs/basket trading what you do? How can I best avoid getting stuck in a dead end for a few years?
Kovacs, Don't worry about tying your programming skills to your trading. If there is a need, of course tie it. But don't try & retrofit one to the other. (I have an IT background too). Take up this suggestion only if your personality suits it and if you are young. Cut the entire timeline to begin trading real money to a few weeks or months. Trade enough real money that it hurts you to lose. It is important to note the emotions you experience as you lose and as you win. These will serve as personal markers on how you will be affected by the swings in trading when you do it full time.