My rough methodology to begin Trading - critique wanted

Edit - this is SPREAD Trading/Betting.

Hi all, before I launch into this, by way of background, I have no experience of trading, outside seminars I've attended, some although I find TA fairly straightforward, ie Head+Shoulders movement.


Step 1 -Open a Demo Account

This I've done, gone with ETX - though I've gotten another recommendation which I'll investigate.


Step 2 - Pick an Instrument

I've chosen the Dow, it seems to be the best for newbies to cut our teeth.


Step 3 - Determine Trading Discipline/Prepare Life

I understand that trading from greed and fear are the two biggest (if not the only) factors that lead to the 80% failure rate for traders. I am absolutely determined to trade coolly and logically, taking both gains and losses dispassionately. I have waited a few years in order to reach a point now where I have no pressing financial needs, and to avoid stress, I recently changed job to a much simpler one, with very little commute, to allow full concentration on trading. (see 4a)


Step 4 - Craft a Strategy

This is where I'm at now - and it's the area I have the most difficulty with just defining. I'm not sure if "strategy" means

• A, how many points I want to make, across how many trades, across what period of time, or
  
• B, the TA I have backtested that determines when I enter/exit a trade.

If A, then I hope to paper trade for 3 months for between 2-4 hours per day, with a daily target of 20pts in Month 1, rising to 40 in Month 2, and 60 in Month 3, walking away from the monitor for that day when I have either been stopped out or achieved target, before moving to monied trading in Month 4.

If it's B, then I assume I create one by web searching, or doing my own TA of historical movement over an x-month period.


Step 5 - Begin Paper Trading

All professional guidance/thoughts warmly welcomed, most of all about strategy creation and viability of targets.

Why paper trade/demo for so long? 2 months should be enough if you put the screen hours/research/mental graft in. Alternatively open an IG account, get strapped up to their trade sense acount (allowing ten pence bets) and build that trading up over a 6 week period combinded with as much research as one brain can hanlde.
BTW, do you mean 20 pips a day or did you miss a zero off...?

2 months? LOL. 4 months?

Listen, get an idea of 12-18 months in your head. If you do better han than that, great.

Black Swan said:

Why paper trade/demo for so long? 2 months should be enough if you put the screen hours/research/mental graft in.

Click to expand...

Basically it's to build discipline. My brother just jumped into trading a few years back after the grand total of a week's training course, and has regretted it bitterly ever since - no paper trading whatsoever. Down 10k at one point, wife and kids to clothe and feed, before clawing his way back to black about a year later. That's a hole I don't want to ever find myself in.

Alternatively open an IG account, get strapped up to their trade sense acount (allowing ten pence bets) and build that trading up over a 6 week period combinded with as much research as one brain can hanlde.

Click to expand...

Dumb question, but research into what?

BTW, do you mean 20 pips a day or did you miss a zero off...?

Click to expand...

I always thought pips = points, but for example, if the DJ opens at 10,000, I short it for 9976, minus a 4pt brokers fee/spread (whatever), it goes to 9970, I'm in 20pts at £x per pt/pip.

Wouldn't have a target. Let the market tell you what the rough target should be for the strategy you settle with.

I think you need to understand better what Step 4 involves. In order to stay disciplined and have an edge you need a well-defined trading strategy.

before you can do anything you need to get real market experience. once you have that then you can formulate your trading plan.

basically you need to investigate how you are going to exploit high probability 'setups'.

if only you could find something in this trading jungle that works more often than not and can potentialy make you more money than you risk, you will be able to survive and prosper.

a hint : you will find it when you have learnt how to listen to the market, it's the illusive obvious, it is everywhere, but seems to be nowhere.

Jake Shelton said:

My brother just jumped into trading a few years back after the grand total of a week's training course, and has regretted it bitterly ever since - no paper trading whatsoever. Down 10k at one point, wife and kids to clothe and feed, before clawing his way back to black about a year later. That's a hole I don't want to ever find myself in.

Click to expand...

jeez, he eventually did very well in a short space of time. thats far and few between, he must be doing extreamly well out of it now.

if I was you I would seek out his advice and guidance, that should speed things right up.

Hi Jake

My suggestions.

Make sure you understand support and resistance, trends and breakouts. Above all learn from your sibbling's mistake and learn about money management.

If you can master these as a cornerstone of your plan, then I personally belive you will go far.

Best of luck.

Graeme

Jake Shelton said:

I hope to paper trade for 3 months for between 2-4 hours per day, with a daily target of 20pts in Month 1, rising to 40 in Month 2, and 60 in Month 3, walking away from the monitor for that day when I have either been stopped out or achieved target, before moving to monied trading in Month 4.

Click to expand...

Don't decide when to walk away from the monitor based on your short term results. It's much better to walk away after you've put in a predetermined amount of time, or when the markets go flat and don't give you any info to trade on. This is especially true when you are in the practice/learning phase

You asked what is there to research........

1) Read sticky threads in here, especially ones aimed at newbies
2) Learn about money management and why it is so important. Then learn it again.
3) Learn basic stuff like risk/reward, expectancy and how this fits in with the concepts of high probablility set-ups and how to trade profitably.
4) Read lots about trading psychology and the pitfalls you're likely to come across due to your own fallibility.
5) Learn about Technical Analysis, especially price action.
6) Whilst you're doing all this, demo trade or trade small amounts to figure out what kind of trading suits you (timeframes, styles, etc). Practise what you learn. Learn to accept failure and learn from it. At some point you'll start to understand.

Eventually you will make it but you need to stay in the game without blowing your money so missing out any of 1-5 will set you back significantly.

Never stop learning and enjoy the experience.

Also appreciate that if you're serious, the research will never stop.