The Phoenix Scenario

[waza1960]

Well fellow ASFers I have decided to decribe the scenario in which I find myself .I have done this for two reasons firstly so that some of the wiser and more experienced can offer constructive advise/ comments and also to show some of the newbies some of the possible steps that can be taken on the long road to trading success.
Firstly some history I have being trading part time for two years but have owned shares since 2001.I have traded CFDS and blown two accounts 10K each time.
Education:I have most of the popular trading books of which I have read I have subscribed to a Australian Stock Report I am nearly finished a diploma course in share trading,I am a member of the ATAA and went to this years conference.I have done a few other small workshops.I have Amibroker and Howard Bandys books and some other trading software.
Present Situation:After owning my own business for 20years I had to close it down due to financial and health reasons.
I am from the 01/01/2010 devoting myself to the study and mastery of the market.
I have 12k to trade with but no more if I lose that money I will find it very difficult if not impossible to get more due to my disability.
I don't need an income for at least the next two years
I feel that I would like to start swing trading at first,hourly or daily chart probably in a couple of months after more study . I like some Gann but not too keen on indicators my study so far has steered me towards a more classical T/A approach.I am really interested in amibroker and Howard Bandy's books.

 

[waza1960]

One of my recent dilemas is do I stay with a CFD provider ( IG) or would I be better off opening an account with IB so I could use their paper trading account. Also will I be able to come up with a low risk system showing positive expectancy until I become familiar with Amibroker or should I study for another few months and use amibroker from the start.

 

[nomore4s]

One of my recent dilemas is do I stay with a CFD provider ( IG) or would I be better off opening an account with IB so I could use their paper trading account. Also will I be able to come up with a low risk system showing positive expectancy until I become familiar with Amibroker or should I study for another few months and use amibroker from the start.

Waza,

With only 12k to trade and having already blown up 2 10k CFD accounts I would move the IB and use the demo account to come up with some strategies and systems that actually work.

I would also probably recommend trading at least the daily charts to start with. Intraday trading opens you up to losing a lot of money very quickly, which it sounds like you have already found out.

If you don't need any income for 2 years I would take your time to learn how to use amibroker and develop a trading plan and strategies that will allow you to be successful over the long term.

The other problem you are going to have is you are seriously underfunded to make any serious money unless you have some serious skill. With 12k you would be lucky to pull 5k a year from the markets at this stage imo.
I would spend the next 12 months saving as much as you can and in the mean time try to develop a system that is robust and works by trading on IB's demo platform, and then you can either trade it through IB a bit more conservatively or take it back to the CFD account and leverage it up to try and increase your profits. Obviously both would have positives & negatives.

Take your time and develop the skills and understanding needed to succeed. This will not be easy and will require a lot of hard work, focusing on the right things. Because if you don't do this, the odds are probably that you will blow up a 3rd account.

Good luck

 

[Mr J]

Warning, take this post with a grain of salt. It's not really advice, just something to consider (I like to hear many opinions myself).

I have 12k to trade with but no more if I lose that money I will find it very difficult if not impossible to get more due to my disability

Then obviously you don't want to lose it. Like Nomore4s suggested, join IB and use their paper trading account, and trade it until the results and your own confidence are strong. I wouldn't focus on making systems, but just try to develop a trading philosophy and then build something around that. I think a good idea is to visit the popular forums and read through trading system threads. There are some real gems out there, and you should get some ideas.

The other problem you are going to have is you are seriously underfunded to make any serious money unless you have some serious skill.

Needing no income for 2 years helps, but it seems that means you want to be living off trading within 2 years, starting with 12k. Not a high probability situation for most people. I think this forces you into shorterm trading - the growth will be greater and more consistent over a period of time. Unfortuntately, it is also harder because commissions and spread will be more significant.

Intraday trading opens you up to losing a lot of money very quickly, which it sounds like you have already found out.

With just 12k I think he'd need to trade intraday to have any kind of reasonable chance. Yes, he could lose money faster, but he shouldn't be trading real money until there's a high confidence that he's profitable.

Also will I be able to come up with a low risk system showing positive expectancy until I become familiar with Amibroker

Just concentrate on that "low risk +ev system". That alone would be all you need, provided there are a good number of opportunities. Well, for decent results, but decent may not be enough.

 

[waza1960]

The other problem you are going to have is you are seriously underfunded to make any serious money unless you have some serious skill. With 12k you would be lucky to pull 5k a year from the markets at this stage imo.
I would spend the next 12 months saving as much as you can and in the mean time try to develop a system that is robust and works by trading on IB's demo platform, and then you can either trade it through IB a bit more conservatively or take it back to the CFD account and leverage it up to try and increase your profits. Obviously both would have positives & negatives.

thanks for your thoughts. I am unable to save any money in the coming two year period.
I do feel a lot more confident this time as the first time I had no money management and the second time I was following fundamentals this time I intend to only trade after I have a properly back tested system.

 

[skc]

If I can take a step back from the trading and ask your expectation of trading?

As pointed out earlier, you cannot make serious money out of $12K unless you take some serious risk and get lucky. What is your plan after 2 years (during which you are not worrying about income but unable to save). Do you then have to generate an income on whatever captial you have left / accumulated?

If your longer term plan is to live off that trading capital, then I will say think again... No matter how smart a system you come up with, your return will depend on market conditions. And because of that, the rule of thumb for trading for a living is that you need minimum 3x your desired income as capital.

Say you need $20K p.a. to live, you need $60K captial. To turn your $12K into $60K in 2 years, it is not impossible but highly improbable.

If that is your expectation down the track, it will have an effect on the way you trade today and tomorrow. Wrong expectation can lead to wrong trading behaviour... just keep that in mind.

As to CFD vs IB... if you do short term and will be short selling, CFD is probably the way to go. If you are long only with lower brokerage and interests, IB probably has more advantages.

BTW...What is the Phoenix Scenario? Is it in reference to rising out of the ashes?

 

[Trembling Hand]

Hmmm lets see. A back of the envelope break-even analysis,

Monthly cost at bare min,

Data 80 bucks (if you are lucky)
Internet 40 bucks.
Accountant 25 (if you are lucky)

Swing trading 20-40 trades per month @ $12 per RT = 240 - 480

Monthly cost = $385 - $625.

Yearly cost = $4620 - $7500

You are going to need 38 - 62% return in the first year just to stay level. Not including what you should actually purchasing, like real data, real software, backup internet, replace software and computer stuff, all the endless books to purchase looking for "the" edge etc.

 

[waza1960]

BTW...What is the Phoenix Scenario? Is it in reference to rising out of the ashes?

Exactly but in hindsight a little melodramatic

As pointed out earlier, you cannot make serious money out of $12K unless you take some serious risk and get lucky. What is your plan after 2 years (during which you are not worrying about income but unable to save). Do you then have to generate an income on whatever captial you have left / accumulated?

I'm not interested in luck or high risk, I'm not looking past two years otherwise I would compromise my trading I can survive on a very low income for as long as it takes except that atm my wife is fully supportive and working and that may not continue indefinately.I don't have any goals as to the amount of money I take from the market except for the first step of making some small amount of money consistantly over a period of at least 3 months then I believe that I will be able to build on that. I have no expectations other than eventually I will be successfull.

As to CFD vs IB... if you do short term and will be short selling, CFD is probably the way to go. If you are long only with lower brokerage and interests, IB probably has more advantages.

A little more detail would be appreciated for example can you not go short with IB, also how much leverage do you actually get with IB

Hmmm lets see. A back of the envelope break-even analysis,

Monthly cost at bare min,

Data 80 bucks (if you are lucky)
Internet 40 bucks.
Accountant 25 (if you are lucky)

Swing trading 20-40 trades per month @ $12 per RT = 240 - 480

Monthly cost = $385 - $625.

Yearly cost = $4620 - $7500

You are going to need 38 - 62% return in the first year just to stay level. Not including what you should actually purchasing, like real data, real software, backup internet, replace software and computer stuff, all the endless books to purchase looking for "the" edge etc

Internet and accountant and 6 months of data I have budgeted for outside of my trading account.
I don't own a lot of trading books looking for an edge but I love learning everything I can about the market .I believe that I have found the path to find my edge and I am going down that path. BTW TH good to have you back

 

[Trembling Hand]

Internet and accountant and 6 months of data I have budgeted for outside of my trading account.
I don't own a lot of trading books looking for an edge but I love learning everything I can about the market .I believe that I have found the path to find my edge and I am going down that path. BTW TH good to have you back

Yes but you are completely ignoring the drag of what will be your biggest cost and how that is going to be a huge hurdle to get over, Brokerage.

I can see in your mind the scenario of "if I just get over the first 3 months and get it to $20,000 I can relax" kind of thing but what will happen is in your haste to kick the account along you will be exposing it to greater cost/brokerage/risk and more than likely knock it down to $8000 before you know what hit you.

I would first spend a couple of hours away from trading data and spend the time in excel working on break even scenarios. Just to get it in your head about required return on small accounts.

 

[waza1960]

Yes but you are completely ignoring the drag of what will be your biggest cost and how that is going to be a huge hurdle to get over, Brokerage.

I can see in your mind the scenario of "if I just get over the first 3 months and get it to $20,000 I can relax" kind of thing but what will happen is in your haste to kick the account along you will be exposing it to greater cost/brokerage/risk and more than likely knock it down to $8000 before you know what hit you.

I would first spend a couple of hours away from trading data and spend the time in excel working on break even scenarios. Just to get it in your head about required return on small accounts.

Thanks for that TH I will look at doing some scenarios on excel. I must admit that is one area that I must spend a lot more time on before I start trading.I have no target in mind except to make some sort of small consistant profit in the next twelve months even if its only $100/month.If I had a scenario in mind such as you suggested I believe it would be a sure way to fail as I would be compromised in my trading.
I'm interested in having a look at eminis and FX to lower brokerage costs.

 

[sammy84]

Thanks for that TH I will look at doing some scenarios on excel. I must admit that is one area that I must spend a lot more time on before I start trading.I have no target in mind except to make some sort of small consistant profit in the next twelve months even if its only $100/month.If I had a scenario in mind such as you suggested I believe it would be a sure way to fail as I would be compromised in my trading.
I'm interested in having a look at eminis and FX to lower brokerage costs.

$100 per month on your starting capital would be a 10% pa return. That's certainly not a given. For the first year I would say be happy with a breakeven result, ignoring the associated costs.

 

[Wysiwyg]

Well fellow ASFers I have decided to decribe the scenario in which I find myself .I have done this for two reasons firstly so that some of the wiser and more experienced can offer constructive advise/ comments and also to show some of the newbies some of the possible steps that can be taken on the long road to trading success.

Wondering if there are any possible steps for newbies to be shown?

 

[waza1960]

Wondering if there are any possible steps for newbies to be shown?

The first step I can think of would be to position yourself so that you don't have any or little pressure to create a profit/income immediately. Also that a small Trading account size can be a disadvantage.Also its madness to trade until you are educated about the market and put in the necessary chart/practise time.

 

[SmellyTerror]

Minor contribution:

1. IGMarkets has paper trading. Just open a demo account.

2. You'd be cutting it pretty close for IB's minimum to open an account ($US10,000), so don't buy too many more books if you want to go that way.

3. No-one needs TWO kidneys...

 

[Ron88]

Well fellow ASFers I have decided to decribe the scenario in which I find myself .I have done this for two reasons firstly so that some of the wiser and more experienced can offer constructive advise/ comments and also to show some of the newbies some of the possible steps that can be taken on the long road to trading success.
Firstly some history I have being trading part time for two years but have owned shares since 2001.I have traded CFDS and blown two accounts 10K each time.
Education:I have most of the popular trading books of which I have read I have subscribed to a Australian Stock Report I am nearly finished a diploma course in share trading,I am a member of the ATAA and went to this years conference.I have done a few other small workshops.I have Amibroker and Howard Bandys books and some other trading software.
Present Situation:After owning my own business for 20years I had to close it down due to financial and health reasons.
I am from the 01/01/2010 devoting myself to the study and mastery of the market.
I have 12k to trade with but no more if I lose that money I will find it very difficult if not impossible to get more due to my disability.
I don't need an income for at least the next two years
I feel that I would like to start swing trading at first,hourly or daily chart probably in a couple of months after more study . I like some Gann but not too keen on indicators my study so far has steered me towards a more classical T/A approach.I am really interested in amibroker and Howard Bandy's books.

D.R. Barton Jr. wrote:"Allow yourself and your strategy the luxury of time. And don’t be surprised if lower stress and greater profitability follow close behind." Maybe you should look into your mindset (the psychological aspect of yourself) before you proceed. Evaluate yourself. Evaluate your trading plans. You may need to change a few techniques. And this may save you from sabotaging yourself again. Justine Pollard wrote, "You can’t control the market the only thing you can control is how you manage your risk in the market." Take your time.

 

[Trembling Hand]

Justine Pollard wrote, "You can’t control the market the only thing you can control is how you manage your risk in the market." Take your time.

She mustn't be a very good trader then. :

 

[skc]

She mustn't be a very good trader then. :

Or she hasn't a very large account.

 

[Ron88]

She mustn't be a very good trader then. :

Then she shouldn't have been featured in different books to mention just a few "Real Traders, Real Lives, Real Money" By Eva Diaz; "20 Most Common Trading Mistakes" By Kel Butcher and soon to be published "Ms Millionaire" By Fiona Jones and Rebecca Griffin. Or her own book Smart Trading Plans won't be hailed as one of the Top 10 Best Selling Finance Books in Money Magazine along with Warren Buffett.

We are not here to compete who's who in the market. We are supposed to be here to create and help each other get rich like those people who have already made it.

I do not know with you but that is how I see things.:

 

[Trembling Hand]

We are not here to compete who's who in the market. We are supposed to be here to create and help each other get rich like those people who have already made it.

I do not know with you but that is how I see things.:

LOL. Travel your own path dude, then come back when you have survived and prospered.

good luck.

 

[>Apocalypto<]

Then she shouldn't have been featured in different books to mention just a few "Real Traders, Real Lives, Real Money" By Eva Diaz; "

Eva Diaz is marketing tool of CMC LOL it's so bad, she has strings in her back leading to their head office! She wrote a book on CFD's, just about every second and thrid word was CMC or Market maker.... LOL Eva Diaz!

Some of this crap is a good as I am seeing at ForexFactory ATM!