The Investors Bible

[tech/a]

(9) Simply means if its worth buying or selling sell at market dont place limit orders just buy at market.Many a trade I would have missed and much profit would I have sacrificed had I not adopted this rule!

Lack of Knowledge.
Of what knowledge do you speak?

 

[Battman64]

Study some of the great masters:

W D Gann
R N Elliot
L B Angas
R Schabacker
J Wells Wilder Jr
Charles Dow
John Bollinger

As well as:
Frank Tubbs
Allan Andrews
Dawn Bolton Smith
Nicholas Darvas
William Dunnigan
Richard Donchian
Robert Edwards
Joseph Granville
John Magee
Robert Rhea
George Taylor
Richard Wyckoff
H M Gartley
J M Hurst

And of course:
Guppy,Tate and the one and only Larry williams

That should do for starters....
There are many others.

 

[Battman64]

How could I forget:
Jesse Livermore

 

[tech/a]

Hmm there would be many successful Fundamental traders who have never heard of any of these technical "experts".I'm sure they would agree that knowledge of these writers teachings is NOT required.

While I trade technically I dont believe that this sort of knowledge is "The " secret to profit---the way you trade,(Technical,Fundamental,Dartboard) has little to do with return.

Knowing "What" guarentees profit is the edge 95% never find.

 

[Mofra]

(9) Simply means if its worth buying or selling sell at market dont place limit orders just buy at market.Many a trade I would have missed and much profit would I have sacrificed had I not adopted this rule!

Each to their own tech/a, hearing horror stories about people dumping options positions at market and getting less than intrinsic value are enough for me to keep at limit orders in my trading toolbox - especially with the 3-4 tick spreads MMs keep on lower liquidity ETOs.

 

[excalibur]

Hmm there would be many successful Fundamental traders who have never heard of any of these technical "experts".I'm sure they would agree that knowledge of these writers teachings is NOT required.

While I trade technically I dont believe that this sort of knowledge is "The " secret to profit---the way you trade,(Technical,Fundamental,Dartboard) has little to do with return.

Knowing "What" guarentees profit is the edge 95% never find.

Permit me to say tech/a : I don`t think that you trade technically , moreso that your thecnique is one of your fundamentals.
The word fundamental comes from the word foundation.
Most important for each and every trader, is the foundation in what one believes to be true. Knowledge that is believed to be proven through calculations or past experiences ( be it ones own or others).
I am very familiar with technical analysis and take them in consideration for my investments.
Although my ideals and what I feel to believe is right, have always had the last word.

 

[tech/a]

EX.

Specifically your correct.
The components of any trade are for me technical.
The method in which I mostly trade is mechanical.
The profit comes from the implementation of Money/Management and Risk parameters over a number of trades.

To say I have developed a fundamental approach to my trading is correct.

Fundamentally correct for me.

 

[excalibur]

A teacher was in his classroom and raised a 50 dollar bill asking the class: who wanted to have it?
Everyone raised their arms.

He then crushed the bill and asked once again if anyone still wanted it.
The armes were still there.

Afterwards he took the bill and cleaned his shoes with it, then stamped his feet on it. He asked once again if anyone still wanted to have the 50 dollar bill and wasn`t surprised to see that everyone in the room had his arm up.
He said:" I see that destructing the optical or superficial side of this bill has not destroyed its worth...and so is it with our lives:

We as people as well as investors go through difficult phases in our life...
Getting stamped on or being put down, making failures does not justify a depression. Our worth cannot be destroyed.

Always be aware of your successes. Because it is the journey to each success ( the work, the knowledge, the effort) that counts and not the failures. :grinsking

 

[ice]

if you can't write your trading plan on the back of an envelope it's too complicated.

Well......it works for me.

 

[excalibur]

If you want to be successful in trading, you must keep an eye on Wallstreet.

 

[Knobby22]

Daytraders lose their capital.

 

[Knobby22]

Options (not used on actual commodities) are bets with other parties with the organiser taking a commission. If you make this bet you must think you know more than the other guy (who is often a professional and may have inside knowledge).

I reckon for most people, roulette would give better odds.

 

[Knobby22]

We are in a bull market, If you made less than 15% this last financial year then you are doing badly.

 

[excalibur]

We are in a bull market, If you made less than 15% this last financial year then you are doing badly.

Sorry Knobby but I have to argue with you about that.
I know a few guys who would say maybe if your floating around, 25%, 39% or +-3 you would be doing badly. In making such a quote, we would be demoralizing a lot of beginners on this chat forum.
Check your investments every quarter if your long.
Learn to keep a log of your trades.
Write down why you made a certain investment and remember your goal for each.
Happy trading everybody

 

[wayneL]

Daytraders lose their capital.

What if we apply the Socratic test to this statement?

Is it possible that there are daytraders who do not lose their capital?

Is it even possible that some daytraders make a profit; a living even?

Can we recognise that some traders who lose their capital are not daytraders?

Is it possible that the statement "Daytraders lose their capital." might not be accurate? At least not without some modification?

Maybe "SOME daytraders lose their capital" might be more accurate. Another statement may even be better.

I'll leave that to you

Cheers

PS Here is an article I wrote with some discussion about daytrading:

100% profit per year??

Often traders talk about making 50%, 60%, 100% profit per year. When these figures are quoted we often get the compounding arguments thrown at us by investors more used to 10-20% per year on average. People say things like; “yeah sure, if you started with $10,000 you’d be a billionaire in x number of years!” with mocking disbelief.

They do have a point. But 100% per year is possible, so why aren’t there hundreds of Warren Buffets running around?

Two reasons:

1/ Traders who achieve this are invariably full time traders. This means it’s their job! This also means that they are subtracting living expenses from their profits, severely reducing the amount of profit available for compounding purposes.

2/ Such performance is only possible with a relatively small account as with very large sums, one would soon run into liquidity and slippage problems, reducing returns. Indeed the type of trading required would be impossible with a huge account.

So if you have a billion-dollar account, I’m sorry, but you will have to settle for a hundred million dollars or two a year of profit. J

So lets have a look at how we can do what so many think is impossible, using a day trading strategy.

Firstly we need an instrument to trade. Then, we need a trading plan with a positive expectancy, obviously. Lastly, we need money management rules.

The instrument we use can be anything, but for this example, I am going to have a look at the Euro futures contract, which trends nicely intraday and has lots of liquidity and leverage. I won’t go into the trading plan, but for the purposes of the mathematics of the expectancy calculations, we will use a 20 tick stop loss.

Also for the calcs we are only going to trade 230 days a year to allow for holiday,etc.

For money management, we will use the standard 2% fixed fractional method. (i.e. we never risk more than 2% capital loss in any one trade.)

OK! Euro futures have a tick value of USD$12.50, which mean that for each tick movement there is you can add or subtract USD$12.50 per contract to/from your account. That’s about AUD$16.00. We have already said our stop loss is 20 ticks, so using our money management rules, we can work out how much capital, in Aussie dollars, we need to trade each Euro contract. In this case we need AUD$16,000 capital per contract. {(AUD$16.00 tick value X 20 tick stop loss)/ 2% maximum risk}

So, $16,000 per year is what we need to make, daytrading each Euro contract to return 100%. That is 1000 points profit per year. So if we are trading 230 days (presuming we take one trade per day) that boils down to an average of 4.35 ticks profit per day on average, after expenses. Lets round that up to 6 points net to account for brokerage.

The Euro has an average daily range of greater than 100 ticks; so do you think with a positive expectancy trading method, that you could capture just 6 of those ticks on average per day, over the course of a year?

Using the old expectancy calculations, lets have a look at how that might pan out. {Expectancy=((1 + reward/risk ratio) * win/loss ratio)-1}.

We can work out that with a stop loss of 20 ticks, that we need a positive expectancy of the magnitude of 0.3 for a 100% profit/year to become a reality. From there we can work out what our winning trades may have to be.

If our win/loss ratio is 60%, in other words we win only 6 trades out of ten and lose 20 ticks the other four, we need to make an average of only 24 ticks profit on those winning trades…from an average daily range on the Euro contract of > 100 ticks!

If our win/loss ratio is 50%, we need to make an average of 32 ticks profit on the winning trades.

If our win/loss ratio is miserable 40%, we need to make an average of 45 ticks profit on the winning trades…

…from an average daily range of greater than 100 ticks!

Still think it’s impossible?

 

[tech/a]

No----but.

Wayne how many Forex traders actually turn a decient profit?
Over 50% more than 10%?

More than any other traders?

 

[wayneL]

No----but.

Wayne how many Forex traders actually turn a decient profit?
Over 50% more than 10%?

More than any other traders?

I think probably MORE daytraders fail (whether forex, stocks, shares whatever) tham normal.

But this is not because daytrading is intrinsically more risky. It's not.

It is because it attracts more people with casino mentality...gamblers.

Daytrading, done with proper method, money management, etc can be extremely profitable and generally has much higher risk adjusted returns than trend trading.

It is however, more of an income method, being time intensive, rather than wealth building. To balance that, you need much less capital.

Cheers

 

[tech/a]

The capital issue.

I notice Radge (Nick) is returning to fulltime trading.His choice of instrument being CFD stock trading.
I find that a strange choice for a fulltime trader---although not wanting to be up when everyone else is asleep could be a motivation. He has traded futures extensively---but choose CFD's.
I agree that leverage is a very important key and perhaps 10xCFD leverage wasnt available when he last traded futures.---I'll ask.

Anyway as a fulltime trader what initial capital is required in your opinion?

 

[Knobby22]

Backing up my statements -

If you had invested over all stocks last year you should have made 20%. That is why I picked the figure of at least 15% for last year.
I am not trying to demoralise learners, I am warning them not to be happy because they made 10%. If you are good you should beat the market, not go worse than it. We are in stock heaven at present, when it goes bad the losses may be awful for the unweary.

Secondly, my definition of a daytrader is someone who buys and sell regularly the same stock over the same day. Very short term. If day trading worked there would be some rich daytraders around, I have never met any. I know traders who have more long term views that do well, say averaging a week per trade but not day traders. The great traders e.g. Soros were not day traders. Can anyone name me a rich day trader? I bet many of you could name a lot of failed very short term traders. To be a day trader you need to be on your computer all day in any case, a not very good way to live your life and as you said Wayne, meaning you can't earn your living another way forcing you to eat your capital. You also have to pay more taxes and brokerage. I think there are daytraders that get by but I bet it is a very few who manage to increase their capital after expenses who would not have been better off going to work and investing with a more long term view.

I would think Wayne, you would need at least $50,000 as you have to make sure the effect on brokerage is minimal and to be able to have the effect of moving the market in certain circumstances.

Daytrading starts to approach the option problem again. For every winner there must be a loser. Owning shares and collecting dividends as they rise makes every shareholder a winner.

 

[wayneL]

The capital issue.

I notice Radge (Nick) is returning to fulltime trading.His choice of instrument being CFD stock trading.
I find that a strange choice for a fulltime trader---although not wanting to be up when everyone else is asleep could be a motivation. He has traded futures extensively---but choose CFD's.
I agree that leverage is a very important key and perhaps 10xCFD leverage wasnt available when he last traded futures.---I'll ask.

Anyway as a fulltime trader what initial capital is required in your opinion?

I don't really know the answer to this question as I never started as a day trader, daytrades are only a part of what I do, and I have never had capital constraints.

But I would say, as Knobby suggested, $50,000 as a minimum, including cash reserves. But, more is better.

If day trading worked there would be some rich daytraders around, I have never met any.

There are! I have never met an Astronaut either, yet there existence seems undeniable

The great traders e.g. Soros were not day traders. Can anyone name me a rich day trader? I bet many of you could name a lot of failed very short term traders. To be a day trader you need to be on your computer all day in any case, a not very good way to live your life and as you said Wayne, meaning you can't earn your living another way forcing you to eat your capital. You also have to pay more taxes and brokerage. I think there are daytraders that get by but I bet it is a very few who manage to increase their capital after expenses who would not have been better off going to work and investing with a more long term view.

It's true that the big money is in longer term trades and you will find that any succesful daytrader also has longer term trades as well.

As I said, Daytrading is more of an income generating method.

As far as better off going to work? Well that depends on your perspective.

My last business before trading was as a self employed farrier (horseshoer). Income was about 2k a week, but spent at least 10 hours per day with my bum higher than my head, in 40 degree heat, flies everywhere, underneath untrained or mean tempered horses who who would try to put me through the stable wall. (Many times with success I might add ) I always smelt off burned horse hoof and spented at least half my life nursing one injury or another.

Compare that with what I do now. Sitting in front of a screen about 4 -6 hours a day and doing what the hell I feel like the rest of the time, is like seventh heaven.

As you can see I am used to decent money. I have been trading full time for 5 years so I'll let you work out whether I'm happy with my income.

But yes daytrading is a business, with advantages, disavantages, risks and rewards.

As I said elsewhere on this forum, a persons reality often reflects their beliefs. If you believe daytrading is no good, then for you it is certainly true.

The reality for others, is entirely different.

Cheers