Trading is HARD!

[sommi]

Hard. Hard. Hard. Hard.

Who'd have thought that buying low and selling high could cause a heart attack?

I made two profitable trades and and two bad trades which has put my net profit back to 0. My capital is back to around $4,000 and I am trading some speculative and volatile mining shares. I would love to trade ASX200 top-dogs but I feel I need $50,000 capital to make some okay profits.. and I am using this money now to learn all the lessons that I cannot learn on paper!

I just want to ask a few experienced people about the importance of a few things.
1. Firstly, how important is it to know the stock you're trading? By this I mean, watching it for a few weeks/months to see how the buy/sell pattern pan out and the unexpected events happen. I do more technical work than fundamental work and focus on volume and chart-work.

2. Secondly, my plan is to swing-trade in periods of 3-4 days (on average) but I got carried away (greedy) and tried intra-day trading and it wiped my profits.
How often should I expect my 'time barrier' to change? Should I focus on keeping it strict or should I focus more on locking away certain profits after Buying and not letting the intra-day activity give me stress attacks..

Thanks.

 

[Pairs Trader]

Anything worthwhile doing is hard, there is no easy route, but it is possible.

To answer your questions;

1) Yes its important to know the stocks you are trading, read the AFR or other financial news everyday and know what stocks are in play and how they might affect related stocks, check www.asx.com for any price sensitive announcements, dividends, etc....use http://www.investorsnetwork.com.au/research_channel/calendar_book/index.php to check for upcoming earnings announcement dates and avoid holding stock during the announcements. The better you know your stocks the more of a ''gut feel'' you will develop for them which can add to your profits.

2) You say your plan is to swing 3-4 days at a time, what is this based on? You need to have a clear and concise trading system that has been proven either through back tests or evidence of other traders achieving success with it, and no, just buying the latest ''hot'' stock in the newspaper and waiting a couple of days is not a viable trading strategy, you need a little more sophistication than that. You need a trading edge, if you don't know what this means, then you don't have one.

Also don't try to day trade ASX cfd's, the spread and commission will eat you alive.

Then you need sufficient capital and at least an hour per day to focus on trading, then like succeeding in anything else, you need to practice - practice - practice and you will get better. You will only get out what you put in.

You need to separate your emotions from swings in your account balance, otherwise your mood levels will start resembling the charts you trade, up and down.

Start with finding a profitable trading system that suits your personality and resources, then develop a trading plan that you will stick to day in and day out.

Best of luck!

 

[Sir Osisofliver]

Sommi here's my version

Hard. Hard. Hard. Hard.

Trading is.....

Boring boring boring boring

Who'd have thought that buying low and selling high could cause a heart attack?

Who'd have thought that watching trades where lot's of money is changing hands and big events are happening all the time could be mind-numbingly boring? I mean you spend years Farking around and finetuning systems and processes so often and research how to do things and it sucks all the excitement out of things. You end up on forums just for some human contact so you don't end up in the looney bin from boredom

I made two profitable trades and and two bad trades which has put my net profit back to 0. My capital is back to around $4,000 and I am trading some speculative and volatile mining shares. I would love to trade ASX200 top-dogs but I feel I need $50,000 capital to make some okay profits.. and I am using this money now to learn all the lessons that I cannot learn on paper!

I mean my system told me to make 700 trades in the last two years, 400 of which were profitable, and 300 of which lost money but were stopped out before they could do me any damage. I didn't even get the excitement of loosing a big wad of cash and have to play poker with my mates in my spare time to get that thrill of losing money in a risky situation.

I just want to ask a few experienced people about the importance of a few things.
1. Firstly, how important is it to know the stock you're trading? By this I mean, watching it for a few weeks/months to see how the buy/sell pattern pan out and the unexpected events happen. I do more technical work than fundamental work and focus on volume and chart-work.

It is as important as you make it be. I know that sounds like a wishy washy answer Sommi, but the way that you will trade needs to be the result of experience using the tools that you understand and are comfortable when using. If you are comfortable in using nothing but TA - great!, comfortable only using complicated FA models - great! If you are starting out examine a range of different techniques for the one's that will most suit you. (or build your own).

2. Secondly, my plan is to swing-trade in periods of 3-4 days (on average) but I got carried away (greedy) and tried intra-day trading and it wiped my profits.
How often should I expect my 'time barrier' to change? Should I focus on keeping it strict or should I focus more on locking away certain profits after Buying and not letting the intra-day activity give me stress attacks..

Thanks.

Sound like you need one of the greatest tools that a trader has...self discipline. This is why trading is boring....lots of research into how to create a system with positive expectancy, lots of testing of that system and then....sticking to your rules.

Cheers

Sir O

 

[tech/a]

Id only add.
Learn about
Risk Management
Trade Management and
Position sizing.

Id also point this out

finding a profitable trading method

A plan without knowledge of profitability is nothing more than an idea.

Once you have a few of these your charts become reference points only.
You dont need to decipher what they are telling you.(Your system/method takes care of that).

Once it becomes boring as Sir O says
Youll know you've succeeded.

Oh and you'll probably need that $4 k to gain the tools required to test and design a good system.
Data
Software
Education.

 

[sommi]

Thanks for the replies guys.

I'm into my fourth year at university, current doing finance and economics...

And most of what I learn is that you can't actually trade profitably I am pursuing this because I want to find a system that can make money off the irrationality of other traders in the same market. I have quickly learnt not to become one of those irrational traders myself so I am actually happy that I have learnt some tough lessons.

But for the past 12 months I have been doing extra-research into T/A because I like watching the randomness of the market. I still haven't got a system yet because my capital is so low and I'm unable to buy live software and charting tool programs. Is this shooting myself in the foot?

The reason why I chose 3-4 day swing-trading is because I feel I can make better decisions watching the close-prices of stocks rather than get caught up in the middle of the day. This is just me. And I also believe that I will over-trade on an intra-day basis. This 3-4 days might even become 5-10 days but I would still feel confident doing so.

 

[Sir Osisofliver]

Hi Sommi,

Well your degree certainly won't hurt...but I came to realize fairly quickly after my degree that what academics do versus the harsh realities of the market are poles apart.

Your statement that most of what you have learnt so far says you can't trade profitably sounds like you've been listening to the old EMH (Efficient Market Hypothesis) and Modern Portfolio Theory.

If this is the case there are some significant criticisms of the above couple of theories, only strengthened by the recent financial crisis.

But for the past 12 months I have been doing extra-research into T/A because I like watching the randomness of the market.

Is the market random? I'd have to disagree with you there. To me the market is chaotic - which is very different to random, and exploitable to those who can figure out how to do so.

Cheers

Sir O

 

[sinner]

Hi Sommi,

Well your degree certainly won't hurt...but I came to realize fairly quickly after my degree that what academics do versus the harsh realities of the market are poles apart.

Your statement that most of what you have learnt so far says you can't trade profitably sounds like you've been listening to the old EMH (Efficient Market Hypothesis) and Modern Portfolio Theory.

If this is the case there are some significant criticisms of the above couple of theories, only strengthened by the recent financial crisis.



Is the market random? I'd have to disagree with you there. To me the market is chaotic - which is very different to random, and exploitable to those who can figure out how to do so.

Cheers

Sir O

Sir O said it all.

Market looks like a random walk, but it isn't, otherwise there would be no such thing as a trend.

Market is a chaotic system which becomes quantised in fractal dimensions as information enters and exits the system in those dimensions. Information in this case being the forces of supply and demand.

t for the past 12 months I have been doing extra-research into T/A because I like watching the randomness of the market. I still haven't got a system yet because my capital is so low and I'm unable to buy live software and charting tool programs. Is this shooting myself in the foot?

600 hours is the timeframe the average person can be expect to expend before becoming proficient at anything. A day is a perfectly good amount of time for supply and demand to agree on the closing price of a contract, therefore EOD data is eminently suitable for testing. Plenty of free data around:

http://www.tradingblox.com/tradingblox/free-historical-data.htm
http://www.eoddata.com

spring to mind immediately. If you are 4th year uni you should know at least a little MATLAB or SPSS or something, run your data in that. It's just a time series, you can run the data any style you like, doesn't have to be T/A style. Quantify a few things, is what tech/a and sirO are trying to say. What can you expect from a breakout on low volume on a Wednesday? How many days does the average gap take to fill? If your idea works, how well? If it fails, how badly? A million questions to ask, so figure out the right questions, and work out the answers. None of that will teach you how to trade (only screen time, effort and research will do that - 600 hours of 1 hour a day EOD trading will take you 600 trading days, 250 trading days a year roughly) just how to make trading boring.

Income, Savings, Investment. In that order. Income must be stable, productive, and preferably have nothing to do with the markets. Savings must be liquid, safe, easily accessible, and have nothing to do with the markets. A wise man once said, you are only as wealthy as how many months burn rate you have saved. Once you are wealthy, you can invest only money you can afford to lose, and nothing to do with your savings or income! I like to split the investment 30:70 high risk low risk, in good years high risk will outperform low risk, and in bad years low risk will keep your equity curve smooth. Others I know like to be more risky, and still others, less risky. Up to you, it's all money you can afford to lose, right?

Trading is a profession. There are prerequisites. Without these, trading is HARD. I assume fourth year macro-economics is "HARD" if you haven't done first year econ 101? Same concept applies.

 

[Gringotts Bank]

I fall into the boring mechanical category with what I currently do, but I'm working on other methods.

A fun, fast paced 100% discretionary system, similar to what iPod from HC used, but applying some psychological rules in place of profit targets and stop losses would be the ultimate. iPod (and to a lesser degree Trembling Hand from this site) was the only highly profitable day trader on that ****ty website and they banned him. He was brilliant. Just going through his old posts makes me think 'wow'. Gut feel day trading would have to be the most profitable 'system' I have seen work, by a long shot.... but possibly also the hardest to master, depending on your starting point.

 

[tech/a]

Gut feel day trading would have to be the most profitable 'system' I have seen, by a long shot.

(A) What is it you have REALLY "seen".
(B) How many account blowups have you see with this amazing 'system'
(C) From Hot Cr8pper---explains it all.

 

[Gringotts Bank]

Since you don't really want an answer, I won't bother giving you one.

 

[nunthewiser]

lol ....... what a copout

no offense intended

 

[tech/a]

Since you don't really want an answer, I won't bother giving you one.

lol ....... what a copout

no offense intended

There is a lot posted on forums which are
"as expected"
This is a perfect example.

 

[ducati916]

Market looks like a random walk, but it isn't, otherwise there would be no such thing as a trend.

You can have a trend in a random walk. The usual example being coin tosses: [assuming all the fair coin provisions] flip enough coins and you will get random runs of heads/tails. Look at charts generated by coin tosses, very similar to price charts.

Market is a chaotic system which becomes quantised in fractal dimensions as information enters and exits the system in those dimensions. Information in this case being the forces of supply and demand.

Numerous ideas here.

First off, you say information is causative of the forces of supply/demand: this rather begs the question, what information, and how is it interpreted, so as to be transformed into forces that drive supply/demand.

Lots and lots of information out there.

jog on
duc

 

[nomore4s]

I fall into the boring mechanical category with what I currently do, but I'm working on other methods.

A fun, fast paced 100% discretionary system, similar to what iPod from HC used, but applying some psychological rules in place of profit targets and stop losses would be the ultimate. iPod (and to a lesser degree Trembling Hand from this site) was the only highly profitable day trader on that ****ty website and they banned him. He was brilliant. Just going through his old posts makes me think 'wow'. Gut feel day trading would have to be the most profitable 'system' I have seen work, by a long shot.... but possibly also the hardest to master, depending on your starting point.

TH doesn't trade off "gut feel" and I have no idea who iPod is but I'm guessing he also doesn't trade off "gut feel" alone.

 

[tech/a]

I have no idea who iPod is

Here you go

 

[Gringotts Bank]

Why would I answer some rude smart-**** who knows it all already?

 

[tech/a]

Why would I answer some rude smart-**** who knows it all already?

I didn't know we'd met!!

 

[mazzatelli]

You can have a trend in a random walk. The usual example being coin tosses: [assuming all the fair coin provisions] flip enough coins and you will get random runs of heads/tails. Look at charts generated by coin tosses, very similar to price charts.

For pedant reasons: random walk = stochastic process
Stochastic trends differ to deterministic - the latter is what most try separate from the noise to exploit.

 

[ducati916]

For pedant reasons: random walk = stochastic process
Stochastic trends differ to deterministic - the latter is what most try separate from the noise to exploit.

So you are arguing that a random walk = a process involving a randomly determined sequence of observations each of which is considered as a sample of one element from a probability distribution.

This is a statistical viewpoint, and is very common in the financial markets. It is also only one view of a random walk. A second view of a random walk, and one that speaks to the original observation of the information discounting function of markets, are future events that become actual reality, which were totally unexpected.

The result being, a statistical move of say 20 standard deviations, which should never happen in our lifetimes, statistically speaking, which blows out our deterministic position, and can be considered random.

One recent example being the Flash Crash of a couple of months ago.

jog on
duc

 

[mazzatelli]

So you are arguing that a random walk = a process involving a randomly determined sequence of observations each of which is considered as a sample of one element from a probability distribution.

No, my original point is regarding differences in decomposition of a stochastic trend [coin tosses] vs. deterministic trend [e.g. seasonal. momentum etc] from a stat/math perspective.

Yes, there are several definitions of random walk. There is no point using returns of independent and identical distributions, if testing predictability of returns with autocorrelations.

Apologies to the OP for dragging this OT