What should a newbie trade?

agree mostly but....

CME's FX Futures is on a regulated exchange. ^_^
IB's ideal pro isn't but they're honest.

i do FX over bonds and stuff because i can only trade a few hrs a day and so trade intraday. another reason for doing intraday is i can't stand holding positions through 100 tick news spikes. T_T

if i were to start over again though, i'll stick to a simulator at the beginning. XD

 

cool, sounds like a really good opportunity to fade support/resistance or trade range systems.

i mean, most of the time range system fails during trending periods. HKD doesn't trend. I'll be damned! ^_^

now lets check out where i can get me self some hkd/usd....

 

what should a newbie trade?

There are two answers to that question.

1. if you have a bunch of money and want to be done trading forever pretty quickly, trade whatever you feel like. Then once you lose some money, trade something else. Do this until all money is gone or until you think the markets are a scam and you will never try trading again.

2. Paper trade. Pick any market that you want, and paper trade it until you understand how it works, and until you are finally profitable. That does not mean profitable for one day. That means profitable for a consistent period. weeks or months.

If you do it that way you stand a much better chance of staying in the game for the long haul.

You wouldn't go into the Meadowlands and try to get on the field with the Giants, or Jets, without a ton of practice, and without building up your strength to levels higher than the average man. Then why would you jump into the trading field with professionals without extensive training and practice? Accurate paper trading is the way.

 

If my plans were to become a futures trader, and I was not planning to spend much time paper trading first, I think I would start with a 100-200 shares of an ETF like the nq which has a relatively small share value and could be traded at that size for relatively small risk - my primary objective would be to work on my method and getting into/out of each next trade timely as signaled. This assumes that the PDT rule is not an issue.

If I was planning to spend an adequate amount of time paper trading, and wouldn't real money trade until I was profitable on paper where the profit amount was measured as a percent of the potential profit in a given trade and not an absolute amount, I would trade the 30 year bond or the euro fx. Considering the current average true ranges of these contracts and the additional flexibility of trading times with the euro fx - this is where I would start, I think that a lot of bad habits would be made trying to learn to trade a market that spends so much time inside of congestion.

I only tried to trade stocks for a short time and it just wasn't for me, I always felt distracted by looking for a different stock to trade, especially when I would see a high/low or volume list for the day and my stocks weren't moving. I am trading the us and euro, so my thoughts are also biased by those experiences.

 

So you kind of base your trading style on "if I was going to spend an adequate amount of time paper trading" ???

In my opinion thats a big problem with a lot of people starting out. Why would anyone knowingly spend an inadequate amount of time trying to learn? It happens every day. I think thats why there is such a high failure rate in trading.

Its crazy when you think out it. I mean if I crashed the flying simulator time and time again, I would never think, maybe real flying is different. I think I will take a real plane up.

I know most people think paper trading is boring and a waste of time. I used to think that. Not anymore. I papertrade more now than I ever have. For instance if I learn/read about a new technique I will paper trade it until I feel confident in the method. I think it makes me more money in the long run.

 

I have always thought that paper trading done in a certain way is extremely useful and necessary, I also understand that there are varying viewpoints where many think that paper trading is a waste of time because there is no emotion to it, and thus the best way to learn is to trade very small size where money isn't supposedly an issue.

I have known and know many traders who have never been able to paper trade profitably, so based on that I would think that honest paper trading is not so easy and may be involved with a lot more than emotion of losing money. What about trader who can't paper trade profitably and it is emotionally based, what if a loss of self-esteem of not being able to do something that many say isn't of value to even do is the underlying emotion?

Also, you can add emotion to paper trading, just go into a chatroom and post your trade entries and exits as timely and honestly as possible, and see what kind of emotion is involved when the rest of the room sees you falling on your ass.

Something else that I think is done less than optimally when paper trading is the way profitability is viewed. If you are day trading a futures contract and your signalled trade goes 4 points before it reverses to the opposite direction, and you gain 1 point, are you profitable. Technically the answer is yes, but what happened to the remainder of the potential of the trade, why didn't you realize more? I would think that when real money is involved and the additional emotions are in play, that you would probably lose trading with only gaining 25% of potential on paper. Raise this rate to 60% and then consider yourself profitable before trying real money.

 

Thats another reason why paper trading is good, less emotion. Thats the way you need to trade with real money, less emotion. If your running with too much fear and greed I think it makes it harder for you to be successful in the long run.

Most of the time you see newbies trying to trade. They read a few books, read a few posts, and think, "I can trade using moving average crossovers, its so easy". That works fine when the market is trending nicely, but then they get caught in some nasty consolidation and can't figure out why they are losing most of their account.

Then they read something about stochastics and think if they add that to the MA they will be fine. Sometimes it works great, then they lose a bunch again, and are not sure why.

My point is you can really learn a lot from trading on paper. It will tell you if your system works. It will tell you when your system works. It will tell you why your system works.

I know most don't like to use it, or use it for long enough, because they feel they are losing out on making the real money. I am in this for the long run. My goals are out 20 years. I think most read about Zanger making something like 42 mil in 18 months from a small account and think they can do that.

I just think its easier to exorcise your demons on paper, so it doesn't cost as much in the long run.

 

Funny how no one mentions slippage on here. I disagree on ever using paper simply because the results and timing aren't real. Why trade paper when you can trade as small as is allowed amounts and get a better feeling for fills & stuff. I have never seen the point of demo-trading. Paper is instant vs when it's real then the market sometimes takes a couple seconds to execute your order + other anomalies.

 

There are thousands of different types of traders, hence thousands of different techniques. Maybe its just me, but I feel that losing money on paper is better than losing it for real. I also think that I would rather work out my system on paper rather than losing a bunch of money and then finding out it doesn't work. But hey, thats just me.

Yes, slippage can be a problem. But if slippage is the reason between your system being successful or a failure, maybe you need to look harder at your system? I add slippage into my paper trades. Depending on the market I may add a tick or two to entry and exit. That will usually give a more accurate feeling for the trades. Some markets I may add more ticks. Depends.

I bet many people think they can't learn by paper trading. They think that real money is the only way. Thats great, you gotta do what works for you. I am not even close to being arrogant enough to possibly think that my way is the best way. Maybe once I cross the 1 billion dollar mark I may become an arrogant asshole, but we are at least 2-3 years from that goal.

I also think that it needs to be put into context. An experienced trader with good risk management techniques can probably get by without ever paper trading. This post was about newbies and I think if they are not disciplined and patient enough to do something as simple as paper trading, how will they ever survive in the real world of trading?