# Evolution of a (Day)Trader



## baby_swallow (14 April 2010)

I got this from another trading forum, I thought I share it with you.
This, imo,  is a very accurate picture of a trader's evolution.

"Evolution of a Trader" 

Author - Unknown 

1. We accumulate information - buying books, going to seminars and 
researching. 

2. We begin to trade with our 'new' knowledge. 

3. We consistently 'donate' and then realize we may need more 
knowledge or information. 

4. We accumulate more information. 

5. We switch the markets we are currently following. 

6. We go back into the market and trade with our 'updated' 
knowledge. 

7. We get 'beat up' again and begin to lose some of our confidence. 
Fear starts setting in. 

8. We start to listen to 'outside news' and to other traders. 

9. We go back into the market and continue to 'donate'. 

10. We switch markets again. 

11. We search for more information. 

12. We go back into the market and start to see a little progress. 

13. We get 'over-confident' and the market humbles us. 

14. We start to understand that trading successfully is going to 
take more time and more knowledge than we anticipated. 

MOST PEOPLE WILL GIVE UP AT THIS POINT, AS THEY REALISE WORK IS 
INVOLVED. 

15. We get serious and start concentrating on learning a 'real' 
methodology. 

16. We trade our methodology with some success, but realize that 
something is missing. 

17. We begin to understand the need for having rules to apply our 
methodology. 

18. We take a sabbatical from trading to develop and research our 
trading rules. 

19. We start trading again, this time with rules and find some 
success, but over all we still hesitate when it comes time to 
execute. 

20. We add, subtract and modify rules as we see a need to be more 
proficient with our rules. 

21. We feel we are very close to crossing that threshold of 
successful trading. 

22. We start to take responsibility for our trading results as we 
understand that our success is in us, not the methodology. 

23. We continue to trade and become more proficient with our 
methodology and our rules. 

24. As we trade we still have a tendency to violate our rules and 
our results are still erratic. 

25. We know we are close. 

26. We go back and research our rules. 

27. We build the confidence in our rules and go back into the 
market and trade. 

28. Our trading results are getting better, but we are still 
hesitating in executing our rules. 

29. We now see the importance of following our rules as we see the 
results of our trades when we don't follow the rules. 

30. We begin to see that our lack of success is within us (a lack 
of discipline in following the rules because of some kind of fear) 
and we begin to work on knowing ourselves better. 

31. We continue to trade and the market teaches us more and more 
about ourselves. 

32. We master our methodology and our trading rules. 

33. We begin to consistently make money. 

34. We get a little over-confident and the market humbles us. 

35. We continue to learn our lessons. 

36. We stop thinking and allow our rules to trade for us (trading 
becomes boring, but successful) and our trading account continues 
to grow as we increase our contract size. 

37. We are making more money than we ever dreamed possible. 

38. We go on with our lives and accomplish many of the goals we had 
always dreamed of.


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## akkopower (14 April 2010)

seems fair enough, anyone know of any books that I can read to help me skip steps 3-36.


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## skyQuake (14 April 2010)

akkopower said:


> seems fair enough, anyone know of any books that I can read to help me skip steps 3-36.




see step 14.5


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## Wysiwyg (14 April 2010)

akkopower said:


> seems fair enough, anyone know of any books that I can read to help me skip steps 3-36.




Please refer to step 1)  though don't feel too guilty,  I'm still at step 4).


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## ASPwild (6 May 2010)

I am up to no.6 at this stage.  Successful trades since November last year encouraged me to quit my job to pursue day trading in March this year.  Saw fantastic returns then lost half of my entire earnings in one ill-fated trade a few weeks ago.  Now back with new knowledge and rules for an assault on mining stock - bought the day the proposed tax drove prices down.  Thank god today turned out OK for mining.  Last night the stock market haunted my thoughts and dreams - a first.  I even checked the US market progress in the dead of night.  I need this to work - must eat.:screwy:


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## ASPwild (6 May 2010)

Finished step 7 today and am now in step 8.  

I wonder how the employment market is now?


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## nulla nulla (6 May 2010)

Steps 13 and 34 seem to pop up every time I think I can see some direction in the market.


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## weird (6 May 2010)

Found it interesting reading the steps, perhaps more responses if did not mention (Day), as believe it is mostly applicable to all traders.

Suffering a bad year, perhaps then followed by another bad year , and then even perhaps another ... is something that a lot of successful fund managers or traders have had to cope with to then see annualized nice returns kick back in (hence why I mention successful)  ... guys that can weather that ... wow ... without wanting to be sexist ... steel ones.  

Knowing when a system is not broke or just being stubborn (my post is not interested in fools though) as opposed to giving up  ... well, that is a different topic, I guess only a few would be  warranted or listened to when giving an opinion on that. I guess you want a system that you have proven to yourself is robust. Not easy getting to that stage and also living it ... but some do.


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## ASPwild (12 May 2010)

Completed step 9 yesterday and re-entered the market.  Today looks promising.

These are the tools that I now understand and implement - all of which was ignored at my first attempts at being a day trader.

1. Diversify - I invested in one organisation in the past.  Now I am in 4 different stocks.

2. Stop - loss:  I shall implement a 2-3 percent stop loss.

4. Charting tools - averages, stochaistics, bolingers bands, candles, MACD etc etc - WOW these are handy - never knew about them before - If I made money without these tools than surely with these tools I'll be rich in no time!!!

fingers crossed.


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## professor_frink (12 May 2010)

ASPwild said:


> Completed step 9 yesterday and re-entered the market.  Today looks promising.
> 
> These are the tools that I now understand and implement - all of which was ignored at my first attempts at being a day trader.
> 
> ...




After reading that post I'd say that you were still at step 2.


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## professor_frink (12 May 2010)

professor_frink said:


> After reading that post I'd say that you were still at step 2.




Actually scratch that, it probably doesn't matter what step you are at, might be an idea to stop donating and start simming after reading your other posts


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## ASPwild (12 May 2010)

Yeah, I think I started at step -5...but that wasn't on the list.

I am simming....with real money....


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## professor_frink (12 May 2010)

ASPwild said:


> Yeah, I think I started at step -5...but that wasn't on the list.
> 
> I am simming....with real money....




Simming - simulation trading(paper trading), call it what you want, you aren't doing if you have money on the line

If you want to make some real progress, why don't you start a new thread and discuss some of your trades? You might get some decent feedback on what your doing and learn a few things


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## Bronte (12 May 2010)

baby_swallow said:


> I got this from another trading forum, I thought I share it with you.
> This, imo,  is a very accurate picture of a trader's evolution.
> 
> "Evolution of a Trader"
> ...




Nice one baby_swallow,
As for the author..........it wasn't me.
I did type this out word for word six years ago on a forum. ( tech/a was there )
It was emailed to us on: 26th Jan 2004 by a member who does post here at ASF.


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## tech/a (13 May 2010)

Yes I remember that.
I think we had just attended the launching of the ark.

Frankly I think Day trading the easiest to master.

It doesnt need 38 steps either.

(1) Make more than you lose.
(2) Choose an instrument you can trade both ways Long and Short.
(3) Chase volitility.


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## MRC & Co (13 May 2010)

tech/a said:


> (3) Chase volitility.




Or counter-intuitively, go harder in low volatile periods fading ranges!


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## ASPwild (14 May 2010)

tech/a said:


> Yes I remember that.
> I think we had just attended the launching of the ark.
> 
> Frankly I think Day trading the easiest to master.
> ...




Great tip.  I know I must exploit short trading once regular trading is deemed successful. 

I sold off my shares yesterday!!! and today is down.  Profit of $500 is very poor, and is a poor wage, but I was very conservative.  And I stuffed up one order by punching in purchase 1300 units instead of 13000 - else this week would have been $1000. ($30,000 is the available capital)

The problem is diversification - it is reducing my maximum gains.  Must reduce diversification in a bull market.  Those charting tools are fantastic but I think price is still the most important indicator.  Stop-loss was the most important lesson I have learned so far.

I consider myself a swing trader - some shares today look promising but I think I will wait till Monday because I hate having shares in the market over the weekend (no control for two days and who knows what can happen!).


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## ASPwild (14 May 2010)

MRC & Co said:


> Or counter-intuitively, go harder in low volatile periods fading ranges!




Care to clarify?


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## Bronte (14 May 2010)

tech/a said:


> Yes I remember that.
> I think we had just attended the launching of the ark. *Yes, a long time ago*
> Frankly I think Day trading the easiest to master. *agreed*



We have been (Day) 'Trading the SPI' for over 14 years now.


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## Bronte (14 May 2010)

Bronte said:


> We have been (Day) 'Trading the SPI' for over 14 years now.



I just located our old trading statements, its actually well over 15 years.
Our first trades were with: Perth Commodities and Futures Brokers Pty Ltd
Forgot about these trades, way back in 1995  

With regard to the Evolution of a (Day) Trader list, we keep going back to stage 1.

1. We accumulate information - buying books, going to seminars and
researching..........  (also logging onto trading forums)


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## MRC & Co (15 May 2010)

ASPwild said:


> Care to clarify?




We had a huge move down in 'risk' then back up sharply.  After a period like this, we were probably going to get 3-5 days of consolidation (which we did).  Considering one would now be expecting low volatility, you can sell daily highs and buy daily lows on larger volume than you would be doing when chasing volatility.

But probably need a good read of the market and know when it's going into consolidation mode to do this effectively, maybe not good for the beginner.


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## ASPwild (17 May 2010)

MRC & Co said:


> We had a huge move down in 'risk' then back up sharply.  After a period like this, we were probably going to get 3-5 days of consolidation (which we did).  Considering one would now be expecting low volatility, you can sell daily highs and buy daily lows on larger volume than you would be doing when chasing volatility.
> 
> But probably need a good read of the market and know when it's going into consolidation mode to do this effectively, maybe not good for the beginner.




Thanks for the tip!  That is a really interesting way to look at the movement of "risk".  I have yet to set up a shorting account so this may have to wait.  I have been considering a tactic of buying on a panic day selling at a very low price and sell later in the day when the overreaction is corrected, e.g. a stock opens at -6% before slumping within 15 minutes to -8%, I buy at -8% and the stock by mid-day improves to -5 %.  If I sell then that is still a gain of 3%, this figure will pay for a lot of bills. (This is a occurred recently)

This I will look out for today.

I am not sure where the general trend is heading, these few days of consolidation may be the beginning of a swing up trend or a major pullback of a downward trend - 50/50 I don't know.  The lowest the Dow hit was on  February 8th of this year (for the year) - I don't see why the current "feeling" of negativity can't bring the dow below that level.


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## Julia (17 May 2010)

So, ASP Wild, how did you go today?  Did you achieve your buy and sell as you outlined above?


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## ASPwild (18 May 2010)

Julia said:


> So, ASP Wild, how did you go today?  Did you achieve your buy and sell as you outlined above?




Nope.  I jumped in 15 minutes after open on the huge falls, thinking they should come up slightly through the day.  They fell further during the day.  I suspect the opening and evolution of the Asian markets afterward dragged the ASX further down.

I held on to the shares.

On a brighter note, the European stocks were in positive territory and as of now the US has Dow has not fallen further.  Nevertheless I am packing ****.


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## brty (18 May 2010)

ASPwild,



> I buy at -8% and the stock by mid-day improves to -5 %. If I sell then that is still a gain of 3%, this figure will pay for a lot of bills.






> I held on to the shares.




Small limited gain in exchange for large unlimited loss. good plan 

Can you see a potential weakness in this plan??



> Stop-loss was the most important lesson I have learned so far




Seems to have been forgotten about..



> fingers crossed




There is no need, the market will do what it wants to do, your job is to learn to take a chunk of it according to a plan of action that you have worked out is profitable in the longer term whilst being able to stay in the game.

I would suggest that you are still in stage 2 and about to hit stage 3. The absolute worst thing that can happen to you now is for your current strategy to work a few times in a row.

brty


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## MRC & Co (18 May 2010)

MRC & Co said:


> But probably need a good read of the market and know when it's going into consolidation mode to do this effectively, maybe not good for the beginner.




ASP, I said the above.  May take a few years full-time to gain that good read!  

Yours sounds like random punting!


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## ASPwild (10 June 2010)

Is it safe to invest again?


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## Trembling Hand (10 June 2010)

What a woeful list. If thats the path hopeful traders set themselves on I'm glad this game is zero sum.

If you're still on that list after about step 4 my guess is you will be one of the 95% and never get to step 38..................... EVER.


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## ASPwild (10 June 2010)

Well then, just as well I am still simming....as realistically as possible...:


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## Huitzii (11 June 2010)

Hi all I'm new to this sort of investing and just found this thread so I thought I may as well jump in feet first and see what you all have to say.
Im a semi retired gentlemen (still in business but it more or less looks after its self), and I have always wanted to play with the stock market so here I am.
Over the last 4 months I have read at least 6 hours a day ,researched many companies and spent many hours daily trying to foresee trends lol (not so easy)
Anyhow 2 days ago I started paper trading (step 1)
The 3 stocks that I chose (after a lot of research and looking for a viable entry point) were UXA.AX , NOD.AX and CRK.AX
The reasons for choosing these 3 stocks were based on financial statements,debt consolidation ,viable gain (140% reachable profits based on previous history and low entry ,and medium to high risk and volatile).so in saying this stocks that have been at least 200% higher in the past with potential to return to the same...
Dangerous territory you say and I agree.
Over the last 2 days with my experiment I have returned approximately 30% on my outlay of $30,000 ($4,600 profit)so now im soon to experience STEP 2 hahahaha
Cheers huitzii


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## Huitzii (11 June 2010)

Edit for the last post to approximate 15% profit


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## Julia (11 June 2010)

So what's your plan from here on?  What will you do if the market turns down, rather than up as has happened in the last two days?


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## Huitzii (11 June 2010)

I plan to hold at the moment ,CRK is going through a tough time right now as is UXA and I believe that both of these stocks will do well medium to long turn.
If NOD turns down anymore than 15% then will be traded as I still dont know what is happening with their short term debt consolidation or even if it will be renewed by their financial institution but in saying this if they have organisedthe debpt issue they will also be held for the time being.
Can anyone give me a little heads up on the CGT before I go and visit my accountant, so I will have some basic knowledge in this area before speaking to him, realize that its payable on any profits within a 12 month period but how is it calculated in stock trading?
Cheers Huitzii


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## tech/a (12 June 2010)

Trembling Hand said:


> What a woeful list. If thats the path hopeful traders set themselves on I'm glad this game is zero sum.
> 
> If you're still on that list after about step 4 my guess is you will be one of the 95% and never get to step 38..................... EVER.




Totally agree.
People here are way way off line when it comes to trading profitably.
38 conditions or parts to a plan are just plain crazy.

*No plan* is worth jack if you have no idea if it will be long term profitable.

How often do you see "Stick to your plan?"

"Stick to your plan" *ONLY* if you can prove Positive expectancy.
You can determine Risk to Ruin from your expectancy AND you can increase your frequency of trading.(ADDING MARKETS OR INSTRUMENTS)

If that's all good *THEN* add Margin and *THEN* investigate the power of compounding.

You MUST have the numbers---the blue print---without it you are JUST GAMBLING.

*So there are 3
(1) Risk to Ruin
(2) Positive expectancy
(3) Frequency*

If you know that then you have a plan---whether that has 3 or 103 components to it!

If you dont you have 3 or 103 *useless* *theories/components *in making a profitable trading plan.


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## Wysiwyg (12 June 2010)

tech/a said:


> Totally agree.
> People here are way way off line when it comes to trading profitably.
> 38 conditions or parts to a plan are just plain crazy.
> *No plan* is worth jack if you have no idea if it will be long term profitable.



Wise words again thank you Tech/A but what were you like 15 years ago?


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## ThingyMajiggy (12 June 2010)

tech/a said:


> Totally agree.
> People here are way way off line when it comes to trading profitably.
> 38 conditions or parts to a plan are just plain crazy.
> 
> ...





Good points tech, but as far as I can tell, a plan or any mention of a plan wasn't brought up in the original post, and no one has said its a plan, its just what someone perceives to be the "Evolution of a Trader". I guess its what 90% of us go through.


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## tech/a (12 June 2010)

ThingyMajiggy said:


> Good points tech, but as far as I can tell, a plan or any mention of a plan wasn't brought up in the original post, and no one has said its a plan, its just what someone perceives to be the "Evolution of a Trader". I guess its what 90% of us go through.




Sam yes your right.

Most are on a circular journey.
Try this then that,read this,subscribe to that.

Thats fine but armed with the above "3" when you do brings the whole circular thing into a line.

W
15 yrs ago I was looking for the above. Ive only seen it in such clarity around 6 yrs ago.
(By Radge). No matter how we think we can side step the "3" it is impossible!!


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## brty (12 June 2010)

The 'evolution of a trader' path is something I was on for many years. I made lots of mistakes, especially in the '80's and early '90's.

The reason for this was a lack of information and real knowledge of what to do. Most of the information available was either books or courses, often trying to sell something and not really about 'trading'.

In modern times there are great resources like this forum where ideas can be bounced around amongst traders/investors. Today there is no excuse to go through something like those 38 steps, you can glean the knowledge of others that have been through the wringer, and some who hit a winning formula straight away.

It seems that every other day I read a topic about someone asking about "the ABC course/school/program" charging $XXXX with the "Is it any good". Granted many are just spammers, but those that are not, clearly are not learning anything from the mentors on this forum.

brty


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## Huitzii (13 June 2010)

@ tech/a, ThingyMajiggy and brty wise words from all of you.
There is one thing that newbies like me have now that we all didn't have 15 years ago was the web there is so much knowledge/discussion and forums like this one for those that wish to put in the hours, the fruit is there, one just needs to sort the good fruit from the bad fruit (also the good fruit that is turning bad)
If a newbie trader like me doesn't have a plan I would guess that he/she is just gambling and may as well just go to the Casino, as tech/a says 3 basics MUST be followed RISK,FREQUENCY and EXPECTANCY if these basic rules are not followed im sure that ruins will follow, also having a buy/sell plan in place is a must and these rules must be followed with a high level of personal disipline which im sure requires nerves of steel, a trader that panics will bring himself undone.
brty how do these spammers convince people to let go of the hard earned cash to learn something that is for free if you just apply yourself and set out to learn as much as possible by putting in the hard yards of research.
Its a given fact that there is no substitution for experience, in saying that a professional in any field is only a professional because he/she has made mistakes and has  LEARNED from them...some never learn from their mistakes and will never be a professional at anything.
Personally for me after a lot of deliberation/study I have chosen 8 stocks to watch and papertrade with 3 of those 8, if I can see a potential change I may incorperate 1 or 2 of the unused stocks.
4 out of the chosen 8 are for mid to long term and 4 are for a shorter term of trading.
Well thats me for now 
Cheers Huitzii


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## tech/a (13 June 2010)

> Personally for me after a lot of deliberation/study I have chosen 8 stocks to watch and papertrade with 3 of those 8, if I can see a potential change I may incorperate 1 or 2 of the unused stocks.
> 4 out of the chosen 8 are for mid to long term and 4 are for a shorter term of trading.




Sadly rhetoric and deafness abound.
Theory nothing more
Absolutely no idea


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## brty (13 June 2010)

Huitzii,



> how do these spammers convince people to let go of the hard earned cash to learn something that is for free if you just apply yourself and set out to learn as much as possible by putting in the hard yards of research.




Firstly let's call them 'educators' not 'spammers' as some actually believe they are selling something worthwhile.

It is very easy. In the advertising they are promising 'the secret' the one magical ingredient that makes you rich. Many people who have been trading without success look for 'the secret', instead of analysing what they are doing and how the market works.

I am probably going to upset you with the following, so I will apologise in advance.



> Personally for me after a lot of deliberation/study I have chosen 8 stocks to watch and papertrade with 3 of those 8, if I can see a potential change I may incorperate 1 or 2 of the unused stocks.
> 4 out of the chosen 8 are for mid to long term and 4 are for a shorter term of trading.




That is just garbage for a trader. You have to have a plan. You have to have something that shows a positive return, no matter what stock if technical. Or if fundamental, certain stocks will turn up on the radar according to some type of defined criteria that has shown a positive expectancy.

"Good stocks" go down in price a lot of the time. "Bad stocks" often go up in price. Choosing some "good stocks" to trade is fine if you have certain criteria as to when there is likely to be a price rise. However you might find that "Bad stocks" have a greater rise given the same criteria.

Choosing 8 stocks means you have some type of attachment to those over others, yet others may offer more opportunity, why limit yourself??

Find a plan that makes money, not stocks you like.

brty


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## Huitzii (13 June 2010)

tech/a said:


> Sadly rhetoric and deafness abound.
> Theory nothing more
> Absolutely no idea




tech/a would you like to elaborate and educate me?
I have owned many businesses throughout my life and to this stage I have done well in all of them and sold at the right times ,some will say I've been lucky but I say that you create your own luck, at the end of the day this is just another chapter of business.



brty said:


> Huitzii,
> 
> 
> 
> ...




Firstly brty I'm not easily offended ,I just want to learn 

Only 1 of the 8 stocks that I have chosen has an attachment to me (gut feeling and am prepared for the long haul and even prepared to loose that portfolio fund if it comes to that ...lets call it a hidden faith lol) ,all the others are variable and have a fair track record for a reasonable gain and will hopefully cover any short losses on my priority investment.
Most of my choices will statically provide +22% pa but my prime investment has a lot higher potential given the correct circumstances.
In many cases you need to take a gamble for high returns if this doesn't happen one needs to have it covered does this make sense?
Cheers Huitzii


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## tech/a (13 June 2010)

> tech/a would you like to elaborate and educate me




No need plenty here to work with and way way off topic ---My fault---apologies.


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## Julia (13 June 2010)

Huitzii said:


> Only 1 of the 8 stocks that I have chosen has an attachment to me (gut feeling and am prepared for the long haul and even prepared to loose that portfolio fund if it comes to that ...lets call it a hidden faith lol)



What is the basis for this mysterious attachment?  I'm not sure what you mean when you say you are 'even prepared to loose (sic) that portfolio fund'?
Do you mean if you buy $10,000 worth of this stock for which you have some sort of emotional attachment, you will be prepared to watch your whole investment disappear?



> Most of my choices will statically provide +22% pa



Again, what exactly does this mean?  That you buy a stock and without any action from you you will passively achieve more than 22% p.a.?
I'm sure we'd be very interested to know more about this.



> but my prime investment has a lot higher potential given the correct circumstances.
> In many cases you need to take a gamble for high returns if this doesn't happen one needs to have it covered does this make sense?
> i



Well, perhaps I'm a bit dim, but no, it doesn't really make sense to me.
Perhaps you could explain exactly how you intend to have covered the stock which doesn't make your anticipated 'high returns'.


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## So_Cynical (13 June 2010)

brty said:


> Find a plan that makes money, not stocks you like.
> 
> brty




So is it ok for me to make money going in and out of the 17 stocks i like?



Edit: i really shouldn't comment in day trading threads.


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## wecanallinvest (13 June 2010)

Right on the money baby_swallow! 

Personally I think you need to make gains and losses (sometimes many times) to learn what type of trader you are and eventually get ongoing success. Nobody can teach you this - you just have to experience it for yourself to understand.

The most valuable lesson I have learnt, is to protect your capital base to be in the game tomorrow - and yes this means learning to sell at a loss and moving on from a dud trade long before it wipes you out.


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## Wysiwyg (13 June 2010)

wecanallinvest said:


> The most valuable lesson I have learnt, is to protect your capital base to be in the game tomorrow - *and yes this means learning to sell at a loss and moving* *on from a dud trade long before it wipes you out.*




Interested to know when you consider a dud trade is so? Duration below buy price? Percentage below buy price? Dollar value below buy price? Percentage of total equity? Or other?


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## brty (13 June 2010)

Huitzii,

You are heading down the typical newbie trader path....

"I have been successful at......"

Wrong attitude. Trading is a humbling experience, you have to assume your thoughts are wrong.



> Only 1 of the 8 stocks that I have chosen has an attachment to me




So why choose the other 7 and not a plan??



> gut feeling and am prepared for the long haul




What makes your 'gut' as a newbie, better than other traders opinion on these stocks??

Does 'the long haul' mean that if the price goes down you will hold until they come back and make profit, because your gut must be right and they are 'good stocks'??



> Most of my choices will statically provide +22% pa




Does this mean that you have research that shows that stocks that have gone up 22% pa over X years will continue to go up Y% over the next Z years??? Or is it "gut feel" that they are 'good stocks'???

The essence of the above is the difference between successful traders and losers, you need to do the work that proves your theory correct to yourself. Then and only then do you have something to START working with.



> In many cases you need to take a gamble for high returns




When you have a statistically proven edge, and appropriate money management, it is not a gamble, just another trade on your way to success, win or lose.
If you believe it to be a 'gamble', don't do it.

brty


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## Huitzii (14 June 2010)

Thank you for finally giving some positive input and something for me to work with.



wecanallinvest said:


> Right on the money baby_swallow!
> 
> The most valuable lesson I have learn't, is to protect your capital base to be in the game tomorrow - and yes this means learning to sell at a loss and moving on from a dud trade long before it wipes you out.




wecanallinvest, when do you think of bailing out to take that loss,is it a percentage based loss or or based on a particular amount of continuous days of downtrend or other based decision making?



> Does this mean that you have research that shows that stocks that have gone up 22% pa over X years will continue to go up Y% over the next Z years??? Or is it "gut feel" that they are 'good stocks'???
> 
> The essence of the above is the difference between successful traders and losers, you need to do the work that proves your theory correct to yourself. Then and only then do you have something to START working with.




In particular I have concentrated in finding stocks that have a fair to good past history and trying to pick a low point for entry which as you know is easier said than done,trying to pinpoint a change in trend is not so easy,understanding the volume and how it will effect a daily price etc

Nothing is ever a certainty imho but knowing when to exit is something that only the experienced will read and know exactly when to do.



> Huitzii,
> 
> You are heading down the typical newbie trader path....
> 
> ...




Thank you for bringing this up brty I only posted that to try and get something to work with and I really do appreciate the input that has been given.
Im not trying to play a game of 20 questions as it appears that some may think, im only trying to see the how and why of the path of other traders to get a baseline for myself.



> What is the basis for this mysterious attachment? I'm not sure what you mean when you say you are 'even prepared to loose (sic) that portfolio fund'?
> Do you mean if you buy $10,000 worth of this stock for which you have some sort of emotional attachment, you will be prepared to watch your whole investment disappear?




Julia the amount invested is not important.
$10000 to one person is a lot of money but to another it isn't ,its more about the experience than the cost, but in saying that who wants to loose any amount of money.....I certainly don't but in saying that if I loose my own money with my own stupidity I wont be cutting my wrists over it ,i will just sit down to a nice cold beer with my mates and have a joke about it.



> When you have a statistically proven edge, and appropriate money management, it is not a gamble, just another trade on your way to success, win or lose.
> If you believe it to be a 'gamble', don't do it.




I'm hearing you loud and clear brty and thank you for your input now i will go back and reassess what I have already done to see if I can make any improvements to my plan with my new found knowledge 
Cheers Huitzii


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## Wysiwyg (14 June 2010)

Julia said:


> Again, what exactly does this mean?  That you buy a stock and without any action from you you will passively achieve more than 22% p.a.?
> I'm sure we'd be very interested to know more about this.




That is a grate[sic] return hey. The answer is between the lines with this new act.


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## Julia (14 June 2010)

Huitzii said:


> Julia the amount invested is not important.
> $10000 to one person is a lot of money but to another it isn't ,its more about the experience than the cost



Good to have something so obvious pointed out.  Of course the amount of itself is irrelevant.  I was, however, enquiring about what principle you are adhering to?  I just couldn't believe that you would have so much 'gut feel/emotional attachment' to any stock that you'd watch your complete investment go down the drain.

But hey, if it proves something to you (what?) then I suppose that's up to you.

I'd still be interested to know, as previously asked, the meaning of your +22% static investment.


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## Twiddle (15 June 2010)

tech/a said:


> Totally agree.
> People here are way way off line when it comes to trading profitably.
> 38 conditions or parts to a plan are just plain crazy.
> 
> ...




Hi tech/a

What you wrote above is very sound advice and makes perfect sense. 

However; and please don't take this the wrong way, as I am looking for understanding, not trying to be offensive: Isn't that akin to saying to a basketball player: 

-You must be able to put the ball through the hoop successfully more times than not.
-You must be able to do that in any situation.
-You must be able to do it frequently.

Do that, and you will win basketball games.

One might legitimately ask "I realise I need to do that, but How do i acquire the skill to do such things? Shooting a ball with a defenders hand in my face is hard..."


You can have your risk of ruin work out, and on paper have positive expectancy, but at the end of the day it still comes down the skill of being to execute this. Essentially being able to enter at the correct time.

I guess that is where experience and knowledge comes in.


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## professor_frink (15 June 2010)

Twiddle said:


> Hi tech/a
> 
> What you wrote above is very sound advice and makes perfect sense.
> 
> ...




Not tech/a, but thought I'd chime in anyway. 

Have a look at this thread:

becoming an expert at anything

This blog:

traderfeed

Then go and buy this book:

enhancing trader performance

and you'll have your answer


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## tech/a (15 June 2010)

*Twiddle*

If you don't have trading software and or you don't have the ability or your method cannot be coded then the only way you will know is to record every trade and forward test your trading method using the statistics gained from your trading to define your numbers.(expectancy,winning trades/losing trades,largest string of losses/winners,etc)

Unfortunately you wont have a great deal of trades to give you any results that are statistically meaningful----as the years go by you'll likely have gone broke or realise you dont have an edge.

*The hard fact is* that the vast majority of traders never know their "numbers" and the vast majority of traders stay in a large group who Fail or at best struggle to survive.

Best to 
(1) Find/develop a method you can test
(2) If you cant code it then find someone who can.
(3) Trade your proven method keeping an eye on YOUR numbers.
(4) If your trading results fall outside your tested numbers then stop trading.
(5) Re check your method on up dated data each year to maintain your numbers.

Its worth the effort---*the effort very few take.*


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## Trembling Hand (16 June 2010)

Sorry Tech I cannot agree . The vast majority of system traders that I have seen couldn't touch the good discretionary traders I know in a raging bull market with twice the capital.

Implicit knowledge shouldn't be discredited just because it cannot be tested in Amnibroker. True that most traders never know what they are trying to achieve. Or whether they have evidence worthy of putting money on the line but you cannot make a blanket statement that a method must be a system based one.

The best business man I personally know has never done a business plan but that doesn't mean his abilities are below others who can put together 10 pages of theoretical gumph of hopeful outcomes.


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## tech/a (16 June 2010)

Trembling Hand said:


> Sorry Tech I cannot agree . The vast majority of system traders that I have seen couldn't touch the good discretionary traders I know in a raging bull market with twice the capital.
> 
> Implicit knowledge shouldn't be discredited just because it cannot be tested in Amibroker. True that most traders never know what they are trying to achieve. Or whether they have evidence worthy of putting money on the line but you cannot make a blanket statement that a method must be a system based one.
> 
> The best business man I personally know has never done a business plan but that doesn't mean his abilities are below others who can put together 10 pages of theoretical gumph of hopeful outcomes.




I'd be disappointed if you didn't (disagree).

You have 'knowledge' of your numbers.
You know how to skew your numbers.
You probably have enough past history to be able to have a full set of numbers.

I doubt you ever determine your numbers or refer to them.

But you do make it clear on your posts that traders should Sim themselves till blue in the face.

I don't disagree with the principals you use nor espouse.
but your not Joe Trader.

Joe Trader doesn't know what you know.
He doesn't even know what he has to know (no offense twiddle but perfect example).

The quickest way I know for traders to understand *WHAT MAKES *a method/Idea/Hypothesis Profitable is to test it.
Even rudimentary and not statistically reliable forward live or Sim trading will teach traders massive amounts.

While software and the ability to use it will be of great benefit (and very high frequency short term trading is done with software) hand recording will at least give people to ability to see whats happening with the addition of a condition or stop or position size change.----Importantly they *WILL* be able to know if they are on the road to reward or ruin.

However Those with basic understanding will be able to trade albeit not at their full potential. The larger majority do for a time---either becoming disillusioned or broke!

Many wing it.

I did in Trading and business.
Both altered dramatically (For me) when I understood exactly what I needed to achieve/why and how I could benchmark progress.
The result was even more dramatic when my employees understood the concept of business and what (From a numbers perspective) we needed to achieve and indeed exceed.

The choice is the traders.

All I'm doing is advocating the addition of a new (And to me the most important) dynamic in the search for consistent profit.(Business/trading/ property/antiques/art/collectibles----whatever).


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## Trembling Hand (16 June 2010)

tech/a said:


> I'd be disappointed if you didn't (disagree).
> 
> You have 'knowledge' of your numbers.
> You know how to skew your numbers.
> ...



Ok Tech I will have to disappoint you and now agree with you. 

Yes most wing it. Most never know if they had something that has previously worked let alone if its now broken.

Back to the original list of 38 miss-steps the problem I have with it is that its a disastrous list of how *not *to develop expertise. Its simply stumbling from one mistake to the next without any *planing *or aim to implement what you* know works*(and you only need to know 1 or 2 things to get started). How do you do that. Yes back-test and forward test on sim until the method is proven & you know under what *conditions it works or doesn't*.

Oh on the 'determine your numbers or refer to them' my bet would be that I do more than anyone else around here. Besides the hundreds of test & stats I play with and trading results, how many have collected diaries & trade examples & plans for trade approaches and how it panned out that would be more than this collection below??

(this is for this fin year to date  Pretty anal but far better than the 38 step to failure IMNSHO)


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## tech/a (16 June 2010)

> Ok Tech I will have to disappoint you and now agree with you.




How disappointing.
We will just have to agree to agree then! 

Id be interested in your numbers.
Just on a curiosity thing though if you feel inclined you can private mail me if thats better.


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## Twiddle (16 June 2010)

tech/a said:


> *Twiddle*
> 
> If you don't have trading software and or you don't have the ability or your method cannot be coded then the only way you will know is to record every trade and forward test your trading method using the statistics gained from your trading to define your numbers.(expectancy,winning trades/losing trades,largest string of losses/winners,etc)
> 
> ...





OK, that makes sense.

I guess it comes down to testing so thoroughly that your risk of ruin etc, is actually validated as being more than just calculations. They become verified as representative or reality.

Presently I am struggling with how I would build a system that mimics the way I want to enter trades.

Currently all of my trading (sim, CL futures and index futures using ninjatrader and mirus/Zen fire) is done on a discretionary basis. I know what I want to do when I am looking at a chart, but I struggle with how I translate that to a mechanical system.

BTW; the book you recommended "The universal principles of successful trading", seems good so far.


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## tech/a (16 June 2010)

Twiddle said:


> OK, that makes sense.
> 
> I guess it comes down to testing so thoroughly that your risk of ruin etc, is actually validated as being more than just calculations. They become verified as representative or reality.
> 
> ...




If you have a record of all trades then you have a very rudimentary testing of the way you trade.
You will have from these trades numbers.

If you wish to invest a few $s and the time to record every trade STATOR portfolio organiser is an excellent tool to run dozens of portfolios which you can enter and exit as you wish---it will automatically update each day and spit out ALL the numbers you ever need to determine how your systems/or method of trading is performing.

http://www.stator-afm.com/


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## Trembling Hand (16 June 2010)

Twiddle if you are using NT for your trading you already have all the stats you need to work out where you stand. If you have done a couple of 100 trades you would have a very good idea of how your approach is working and what can be improved.


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## Trembling Hand (16 June 2010)

tech/a said:


> Id be interested in your numbers.
> Just on a curiosity thing though if you feel inclined you can private mail me if thats better.




Tech maybe I should do another thread?? with a month or so of trading to show my 'numbers'. Off for a months hols in a few weeks so maybe when I'm back and into the swing again.


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## tech/a (16 June 2010)

Trembling Hand said:


> Tech maybe I should do another thread?? with a month or so of trading to show my 'numbers'. Off for a months hols in a few weeks so maybe when I'm back and into the swing again.




OK would be great.


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## Twiddle (16 June 2010)

tech/a said:


> If you have a record of all trades then you have a very rudimentary testing of the way you trade.
> You will have from these trades numbers.




I have a record of every trade in Ninja trader.

The problem with my current trading and testing is that from a system point of view, it is all discretionary and changes rapidly as I adjust it to what I think the market is doing within a 1 to 10 minute time frame. For example, last night I traded for about 3 hours, made about 45 trades, with about 40 winning, and 5 losing. But these were all different, using different trade management strategies for different times when the market was behaving differently.

What I am yet to work out is, should I continue to try and hone trading in such a way, or move toward a more mechanical system where I am not adjusting things on the fly.

I am happy enough with the results I am getting, on those 45 or so trades I made $3,290 before commissions... which by my reasoning is good for 3 hours, but, I really don't know if I could replicate such trading live... and I know I have to work things out in a much more solid way, sticking to a plan.




tech/a said:


> If you wish to invest a few $s and the time to record every trade STATOR portfolio organiser is an excellent tool to run dozens of portfolios which you can enter and exit as you wish---it will automatically update each day and spit out ALL the numbers you ever need to determine how your systems/or method of trading is performing.
> 
> http://www.stator-afm.com/




Thanks I will look into that.


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## Twiddle (16 June 2010)

Trembling Hand said:


> Twiddle if you are using NT for your trading you already have all the stats you need to work out where you stand. If you have done a couple of 100 trades you would have a very good idea of how your approach is working and what can be improved.




Cheers T/H

I have been through GFC markets CFDs account, my first attempt where I figured out I do not like CFDs for short time frame trading, due to the spread. Then an IG account, which I didn't like because the trading platform was not comprehensive enough, and again was CFDs. Finally ended up with Ninja/Zen fire. Have a good few days (sim) trading now and a few hundred trades. 

I have been trying to review each nights trading and improve upon the methodology. The thing is that at the moment I don't really have a methodology as I try and suss out what works and what doesn't. It is evolving over time though.


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## Trembling Hand (16 June 2010)

Twiddle you need to sort out a common method, approach or theme to your trades otherwise you sound like you're on the 38 step program. 

If you haven't an outline of what a good approach to the day is or a basic set up then as you have stated you have no metrics to measure and therefor nothing to improve.

Can you describe the trades you take? Or how you generate ideas to act on?


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## Twiddle (16 June 2010)

Trembling Hand said:


> Twiddle you need to sort out a common method, approach or theme to your trades otherwise you sound like your on the 38 step program.




Agreed, that is why I am here at the mo. 

I do feel like I am sorting out a common method, it is growing out of trial and error while I get my head around things and learn.



Trembling Hand said:


> If you haven't an outline of what a good approach to the day is or a basic set up then as you have stated you have no metrics to measure and therefor nothing to improve.
> 
> Can you describe the trades you take? Or how you generate ideas to act on?




K, a basic run down.

I trade 1 to 4 contracts of either CL or DAX 30.

I only trade with trend, but I define trend in quite a low timeframe, as I am trading off a minute chart. 

My chart is nearly naked, I have volume, a moving average, and bollinger bands (which I am not sure are useful or not at this point in time)

I only use buy stop, or sell stop orders, and place them on the chart at points where I am confident that if they fill and enter me into the position it is a continuation of a trend. 

Initially I was using a fixed stop value in ticks, however lately I have been placing stop at where I feel the trend would be broken if the price reached it, or around support/resistance.
(I am still trying to work out if this is a good idea or not)

If I feel the market is going to trend for a while, I will widen my profit targets, and after 2 targets get hit, I move the stop to breakeven + 1, and just leave it with no worries if it gets stopped out.

If I feel there is quite a bit of quick momentum, I will enter in the direction of trend for a quick scalp with tight targets and stop, additional to any longer term trades I have open.

Trades last around 1 min to 10 mins.


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## Trembling Hand (16 June 2010)

I would say the first thing to work on is finding the common pattern/chart setup of your trades. And testing the range predictability and various changes to that pattern.

If what you are trading has a repeated pattern then you should also learn what type of ranges are available as targets. You may find that if there is a pattern there you shouldn't wait for the entry but step in and get a better R:R. Personally I have never been able to make an approach work that waits for a move before an entry. (not that that means you will not)


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## Twiddle (16 June 2010)

Trembling Hand said:


> I would say the first thing to work on is finding the common pattern/chart setup of your trades. And testing the range predictability and various changes to that pattern.
> 
> If what you are trading has a repeated pattern then you should also learn what type of ranges are available as targets. You may find that if there is a pattern there you shouldn't wait for the entry but step in and get a better R:R. Personally I have never been able to make an approach work that waits for a move before an entry. (not that that means you will not)




Cheers T/H

I will take that under advisement.


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## brty (16 June 2010)

TH,



> 'determine your numbers or refer to them' my bet would be that I do more than anyone else around here. Besides the hundreds of test & stats I play with and trading results, how many have collected diaries & trade examples & plans for trade approaches and how it panned out that would be more than this collection below??




Over the nearly 30 years I have been trading, I was willing to take that bet.

Then you had to add this bit...



> this is for this fin year to date




I've probably done that this year but in a different format, going through thousands of setups of my simple system, honing, practicing, always trying to improve. To me it is the only way to success, those that  believe they can trade successfully by following a couple of signals at night in their spare time, really are kidding themselves.

Twiddle, as TH has already stated, you need to find one thing that seems to work, look over those 45 trades in detail, find something common. Then test it, test it and test it. Refine it test it again. Eventually, before you go crazy, try it in the market with small sums. Go over your results, see if they match the testing, evaluate how you emotionally handled real money on the line.

brty


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## Trembling Hand (16 June 2010)

brty said:


> Over the nearly 30 years I have been trading, I was willing to take that bet.
> 
> Then you had to add this bit...




hahaha...

Don't feel bad. I'm pretty sure I produce a bit more 'data' trading intraday. 

But really its a huge part of trading that you have to love, the investigation part. If you're not intrigued by how the market moves around your ideas and how you trade & cope with it then ya not gonna last. IMO.


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## Twiddle (16 June 2010)

brty said:


> TH,
> 
> 
> 
> ...




Thanks brty, I appreciate the advice.


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## brty (16 June 2010)

TH,



> But really its a huge part of trading that you have to love, the investigation part.




I couldn't agree more, we're all very agreeable today. 

Just on the original 38 steps of being a trader. I would think that they are pretty close to what 'the average trader' goes through. Of course the average trader is a losing trader.

 What this thread has developed into is trying to get those on the 38 step treadmill, off it.

brty


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## nomore4s (17 June 2010)

Twiddle said:


> The problem with my current trading and testing is that from a system point of view, it is all discretionary and changes rapidly as I adjust it to what I think the market is doing within a 1 to 10 minute time frame.




Twiddle,

Trading things like Crude on a 1 min time-frame makes it hard to have a system that is mechanical. IMO you will get better results from trading in a discretionary way.
It will also be very hard to back test a mechanical system properly due to getting enough data to test it on as the contract expires each month.

A mechanical approach is fine on things like stocks (even though I'm yet to be truly convinced it is any better then discretionary trading) but on things like futures on 1 min charts it is probably beyond the resources & skill of most retail traders imo.



> What I am yet to work out is, should I continue to try and hone trading in such a way, or move toward a more mechanical system where I am not adjusting things on the fly.




Like TH said you probably need to frame your trading a bit more and give each days trading a bit of direction.

The advantage you will have trading futures off 1 min charts though is that you will produce a lot more data in a shorter time-frame which will give you plenty of info to work with, the trick will be learning to use that info effectively to improve your trading.


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## Twiddle (17 June 2010)

nomore4s said:


> Twiddle,
> 
> Trading things like Crude on a 1 min time-frame makes it hard to have a system that is mechanical. IMO you will get better results from trading in a discretionary way.
> It will also be very hard to back test a mechanical system properly due to getting enough data to test it on as the contract expires each month.
> ...




Cheers nomore4s.

When you say "give each days trading a bit of direction", can you elaborate on that a bit more? 

For example do do you mean things like, particular times of the day when things are likely to happen? 

For example I have noted the DAX index does something every day at the same time, which is predictable and is good for about 8 - 15 ticks without fail.

Or analysis of the underlying trend with relation to factors that would influence it, and applying that to a strict set of rules that fit within that analysis?


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## nomore4s (17 June 2010)

Twiddle said:


> Cheers nomore4s.
> 
> When you say "give each days trading a bit of direction", can you elaborate on that a bit more?
> 
> ...




Both really but you need to understand how markets move so you have an idea of what to expect from the market you are trading during that session so you can position yourself to make the most of that sessions trading.


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## chern (26 July 2010)

Trembling Hand said:


> Twiddle you need to sort out a common method, approach or theme to your trades otherwise you sound like you're on the 38 step program.
> 
> If you haven't an outline of what a good approach to the day is or a basic set up then as you have stated you have no metrics to measure and therefor nothing to improve.
> 
> Can you describe the trades you take? Or how you generate ideas to act on?






baby_swallow said:


> 30. We begin to see that our lack of success is within us and we begin to work on knowing ourselves better.
> 
> 31. We continue to trade and the market teaches us more and more
> about ourselves.
> ...






Trembling Hand said:


> What a woeful list. If thats the path hopeful traders set themselves on I'm glad this game is zero sum.
> 
> If you're still on that list after about step 4 my guess is you will be one of the 95% and never get to step 38..................... EVER.




Hey TH,

 those are the few steps that I think I am on right now, does that mean I'm still on the list after step 4 ? Damn... I'd like to get to step 38.. haha.. 

I do record all of my trades and try to work out what could be better or how I can trade it again in the future..  I am trying to reduce the number of mistakes that I make. Sometimes, it still sucks when my tolerance wears out, and I end up hitting out at the high.

I don't know if this is off topic, but I felt like a changed trader when I started accepting that losing is part of the game and I could not let the fear of losing prevent me from trading well. (sorta like step 31)

Is there something important in the learning process that you would stress on TH? Did you have an A-HA moment in your trading career?


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