How do you decide what to trade?

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Cannea

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Hi Ladies and Gents

I am totally new to this forum and totally new to trading. I just recently started to learn about the finance markets, mostly out of curiosity. And then I discovered that you could make a living by trading either for yourself or for an institution, a lightbulb went off in my head and I thought to myslef "what a totally interesting way of earning a living".
I am bent on learning more about this.

Since I am a totall rookie with a capitar R, I have many questions...

The first, How do you decided what to trade?

Stocks
Futures
Forex
Derivatives

Why would you pick investing in one over another?

What books would you recommend to learn about any of these fields?

I would really appreciate if anyone could take a minute or two and explain some of this to me, to tell you the truth I am a bit lost in a sea of information and I don't have much of a clue of where to start.

Thanks,
 
Read all about discipline and money management. It will save you burning your fingers big time.

As for what to trade, I've traded gold and silver, then FTSE then DJIA, then finally settled on currency; only you can decide what is best by playing around with things. Open up a demo account and avoid losing money until you get a feel for what the hell is going on. And then you can lose money. :D

Go small, don't be greedy; the market will always be there. Take your time to learn.
 
shadowninja said:
Read all about discipline and money management. It will save you burning your fingers big time.

As for what to trade, I've traded gold and silver, then FTSE then DJIA, then finally settled on currency; only you can decide what is best by playing around with things. Open up a demo account and avoid losing money until you get a feel for what the hell is going on. And then you can lose money. :D

Go small, don't be greedy; the market will always be there. Take your time to learn.
Click to expand...

Thank you that was very helpfull, taking your advise I just opened up a practice account with Forex.com and I am watching allot of confusing numbers going up and down :cheesy:

Next thing I am going to do is look for a book on discipline and a book on Currency Trading, maybe Currency Trading for Dummies. :D

Thanks again.
 
Cannea said:
"what a totally interesting way of earning a living"
Click to expand...

interesting yes. but never let it get exciting or depressing. once emotion kicks in you're ruined.
trading for a living should be as boring, as routine as clocking in at a factory ........

once you master the art of taking losses with as little emotion as you feel making windfall gains or as you feel being neutral and out of the market, then you'll be on your way....

good luck
 
Cannea said:
The first, How do you decided what to trade?

Stocks
Futures
Forex
Derivatives

Why would you pick investing in one over another?
Click to expand...

There are a lot of considerations which go into what you opt to trade. It's a very personal decision, so don't let what others trade make the decision for you. It comes down to things like the timeframe in which you will trade, the amount of money you will be trading with, your own personal affinities, and other things.

My advice would be to first learn basic trading mechanics, which the demo process will help you do. Then learn the ins and outs of the various markets so you can make an educated decision as to which fits you best.
 
Cannea said:
The first, How do you decided what to trade?

Stocks
Futures
Forex
Derivatives

Why would you pick investing in one over another?
Click to expand...

My worthless two pence.

I chose stocks - literally thousands to choose from. If the markets are efficient you're ****ed. There's a bigger chance of inefficiency with smaller companies than a few currency pairs or commodity futures - traded by huge investment banks and small retail traders.

UTB
 
Re books you can waste a lot of time and money ,but you need to start somewhere. LOL technical analysis books can be dry so I'll give you one which is top of the stack and written in a fun manner....Marber on Markets ...I think after 51 years in the business he's qualified to give you the basics on TA. You could also read Magee and Edwards and get much the same stuff,but with less entertainment value.
 
Mr. Rathcoole_Exile, at first I was a bit puzzled by your advice, but after some thought I understand. We Traders are like proffessional gamblers, while others go and play for the excitment, we play for the money.

Mr. Blades. Thank you for your worthless two pence :D, it seems like I have a period of self discovery that I will have to go thru. First,(since I already have a trial account), I am going to start learning about Forex then I will move onto the Stock Market and afterwards Futures. Aftewards I am going to decided what I want to specialize in.

Thank you Mr. Chump (That is a great name) (y) I shall follow your advice, I have ordered Marber on Markets, and I will read it as soon as it gets here.

Can anyone recommend other books I should take a look at?
 
Hi Cannea,

Read "A Random Walk Down Wall Street" as a cautionary tale about trading in general. It should make you stop and think because trading is not easy and surviving is largely a matter of luck, not skill.
 
subarashi said:
Hi Cannea,

Read "A Random Walk Down Wall Street" as a cautionary tale about trading in general. It should make you stop and think because trading is not easy and surviving is largely a matter of luck, not skill.
Click to expand...


Each to there own ,but I don't think luck has much to do with it.
 
Yes.

Such is the natural statement of one who hasn't acquired the skills. Back when I didn't have them I read the book too and enjoyed it - even corresponded with the author for a while. He's wrong though because there are perturbations in the randomness that are very useful to those who take the time to develop the skills and the discipline to apply them.
 
Deciding what to trade is a matter of personal preferance, it is perverse however for an individual not to trade. Freud thought something similar about folk choosing what to shag I believe... which modern psychiatry calls "if it moves funk it" principal. So applying logical reasoning of the brain in the top head we have thus.

"If it moves trade it" Its normal yah.
 
nine said:
Yes.

...........I read the book too and enjoyed it - even corresponded with the author for a while. He's wrong though because there are perturbations in the randomness that are very useful to those who take the time to develop the skills and the discipline to apply them.
Click to expand...

Agree. "Random Walk" is an interesting book and it's sometime since i read it. I seem to recall i thought the author takes a typically academic approach - all the theory is correct but it doesn't stack up in practice. Bit like Socialism really.

If the book was right i don't think there would be many succesful traders.
 
Luck is an interesting concept.

Dont forget though that luck is a residue of design.

Winning the jackpot on the U.K lottery is around 14 million to one.
If I buy one lottery ticket and win the jackpot you could class me as being lucky, even though I picked the numbers or went into that particular shop at that time to pick lucky dip.
Would I still be classed as lucky if I bought 5 or 10 maybe, what if I were to buy 100 tickets or maybe 1000, what about a million tickets?

As is with trading the more you know the better you do, if luck is just luck then how is it that a pack of cards randomly shuffled and dealt on a poker table will churn out the same top class names every year for several years and/or decades. Is this random luck? Game after game after game they seem to be lucky...or are they?

subarashi said:
Hi Cannea,

Read "A Random Walk Down Wall Street" as a cautionary tale about trading in general. It should make you stop and think because trading is not easy and surviving is largely a matter of luck, not skill.
Click to expand...
 
0007 said:
Agree. "Random Walk" is an interesting book and it's sometime since i read it. I seem to recall i thought the author takes a typically academic approach - all the theory is correct but it doesn't stack up in practice. Bit like Socialism really.

If the book was right i don't think there would be many succesful traders.
Click to expand...


LOL. There are not many successful traders :devilish:
 
Lee Shepherd said:
Winning the jackpot on the U.K lottery is around 14 million to one.
If I buy one lottery ticket and win the jackpot you could class me as being lucky, even though I picked the numbers or went into that particular shop at that time to pick lucky dip.
Would I still be classed as lucky if I bought 5 or 10 maybe, what if I were to buy 100 tickets or maybe 1000, what about a million tickets?
Click to expand...

Actually, yes. I would call that luck for the simple reason that so long as your expectency is negative winning is simply a matter of luck. If you could somehow improve your expectency, that might be a different story.
 
Skill or Luck?

chump said:
Each to there own ,but I don't think luck has much to do with it.
Click to expand...

Sorry Chump, but I think that luck has almost everything to do with it. You cannot argue that prices are random and then take the stance that skill will help you.

Here is a thought experiment for you.

Imagine you have a black monitor which is the state space. Every so often a pixel lights up in the state space, but you do not know when or how often a pixel will show. Furthermore you do not know where in the state space a pixel will light.

Over time you develop a belief that pixels tend to light in proximity to each other, and that they seem to drift towards the top right of the state space and then drift down towards the bottom right, before wrapping round the other side. You decide this because you have kept detailed records of each and every pixel that has flared.

Can your belief about the behaviour of the pixels predict the next probable location of a flaring pixel? Does your belief alter the behaviour of the pixels so they begin to conform to it, or are the pixels just flaring randomly and have happened to throw up a run of flares in close proximity to each other?
 
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