Hello people :)

[zaysev36]

Wow, this thread escalated quickly Personally I like Db's approach. Make no mistake, I'm a complete newbie at trading, but taking a slower path with a well-thought out plan seems harmless to me as opposed to "learn-by-mistakes" plan. Basically, when a newcomer makes a mistake, the only one who wins is another trader who got his money. So for as long as you are able to minimize losses you should do well. IMHO

 

[Forexmospherian]

I am sorry that I used the word trick in my explanation, because I think it gave the wrong message.

What I was trying to explain is that considering the basis of macro economics, your research before opening a live position in financial markets may take a couple of months to work if not at all, but to be fundamentally correct, you need to give yourself a lot of room like a couple of months, your chances of predicting what is going to happen in a couple of months to an economy or a company are actually quite good.
Your chances of predicting whats gonna happen the next day is almost nothing, do you see where I am getting at, you have more chances of being correct if you give more time to your trades to work.

Taking that approach, having a lot of leverage makes this operation impossible, because the volatililty of your account is too high to keep a position for a couple of months, and I am sure you would agree on that.

It was only after taking classes about finance that I realised that Hedge fund use very little leverage after all and you don't need to use it as well, that is what I blame brokers for, for not educating their clients about leveraging mechanics properly.
I have written a blog post about it at this url, It explains a bit more about my point of view on the mattter :
http://bullinstu.com/2016/02/07/how-to-trade-like-a-real-trader/

Hi bullinstu

What you have said is fine if you plan to trade like an hedge fund - ie using multi million pound capital account - no real leverage needed and be happy with average annual rate of return between say 20 and 40% of your very large capital account.

But whats missing here and this this is important - commercial / bank type trading is chalk and cheese to retail trading- ie traders who use their owns funds - majority are not full time and most accounts are well under $100k - in fact this whole last debate is about how much capital do you start with.

Now if I was trading with a $10 or $15 million capital account - I would be delighted with a average ROR of say 25% - ie say over $3 million a year .

But as a retail trader even on a $50 k account I would not be delighted on a 25% ROR - its so low a return in retail returns

Although I do not have over 40+ years of trading experience like Db - and that must be acknowledged - I do have near 14 years of which approx 8 now is full time - ie intraday trading successfully and consistently to make return of anything from 20% to 50% - PER MONTH

I don't compound my account ( thats another emotional headache ) but withdraw my funds regularly to pay my overheads and also to invest elsewhere in other areas.


I would be interested to hear what type of Capital to you plan to use - or are using - and by the sound of it you are probably looking more at investing - ie taking say 2 to 6 months on trades rather than just intraday or daily.

My experience is purely geared around FX trading I have focused from the start just on that product or instruments and nothing else - no ftse / oil/ stocks/ shares etc and so again I dont have a clue on other areas and so would stand down on all other areas to someone like DB - but with regards to FX retail trading I certainly know from my own experiences what I am on about

I wish you well and hope things go to your plan etc

Regards

F

 

[Forexmospherian]

Nor do you. My point was and is that a beginner who is not adequately capitalized AND has no trading plan should not be trading. He should rather be studying while he becomes adequately capitalized and working on a trading plan while doing so, at which point the issue of leverage is worth examining. Until then, it's just sucking newbies into situations with which they are ill-prepared.

Db

This is getting interesting now Db and so maybe its time to recap on maybe what we disagree on.

1 -My point was and is that a beginner who is not adequately capitalized AND has no trading plan should not be trading


Agree to a point - adequately capitalzed though - what are you saying in terms of suggested capital for a newbie using no leverage - $5k - $10k - $25 k +

You then suggest the issue of leverage is then worth examing

So do you or do you not rule it out and then if you say yes small leverage is OK - is that 5:1 or 10:1 or even 50:1 ?

Now this is the real point I find interesting - or confusing

Until then, it's just sucking newbies into situations with which they are ill-prepared.


Now if I am correct DB - you are the experienced trader who believes properly taught traders with a good trading plan - like the Wyckoff method can become consistently profitable trader within 12 month ?

Personally - I believe that is exceptional and favour instead 2 to 4 year for the dedicated part time trader to become fairly consistent - but no where near the finished pro trader

But that raises the question then - when do thay start trading on a live account - not sim with adequate Capital - after 3 months - 9 months or even after a year ?

Do they go say 6 months and find out they are disciplined keep to the rules and understand the concepts of trading - but then when they go live - they find out they are a shivering emotional wreck after 4 consecutive losses - and seeing real money go down the drain

Actually - i agree with you to a point about emotions should not cloud your judgement trading with live real money. Unfortunately It does to maybe 90% of traders not just because they are simply over leveraged etc but because money is money - its valuable - some with be stressed on $5 a point / pip - and will go to jelly losing $200+ whilst other traders with larger account might say no I can handle losses of $500 + dollars OK - no problem

Buy can they when they have 6 or 8 in a row - and of course over maybe 1 to 3 years no matter what plan - it will more than likely happen

They will only know when it happens to them . Its a bit like crossing a busy road - you take precautions and 99.9% of the time you will be OK. Do it completely wrong and you could get injured or lose your life and die - that's surely worse than losing money you can afford to lose - but how many pedestrians get really stressed and emotional drained just crossing the road ? - not many I am sure

So my question then is if I don't get it please explain when newbies are ready to face this wicked leverage problem - and when will they be ready to trade live - especially if with 1 year they should be looking at being consistently profitable ??

Also - under your way - will they ever be able to go full time trading and give up their regular job and income on under say $300k+ of capital ??

Looking forward to your reply as I am always open to learn more

Regards


F

 

[dbphoenix]

You've set up so many straw men it would take me the rest of the week to deal with them all.

Those who are interested are welcome, as always, to read what I've provided regarding Developing A Plan. Those who are not interested are certainly not required to do so.

Db

 

[Forexmospherian]

Hi DB

Have read it

Points that may answer part of my questions are below


Paper-trade this plan, in a simulated environment, as a semi-final test, until you are
satisfied that it performs at least as well as it did during the previous testing
phase. This may take several months or more depending on how many trials you
perform

 Trade the plan using real money in real time, spending only what is absolutely
necessary on "tools" and trading the minimum number of shares, contracts, etc

If your plan is consistently profitable in practice, increase your size to what is a
comfortable level, maintaining a continuous loop of re-appraisal and re-evaluation

But - not enough detail really on specifics - and after all the "devil is always in the detail"

Cannot see anything about leverage - although you mention to study money management etc - but again no detail

I appreciate its fine for newbies - very comprehensive - but where do they find everything else to be able to get anywhere near a consistently profitable trader within 12 months or so ?

Regards

F

 

[dbphoenix]

The detail is in the observations they make, the records they keep, how they consolidate those records in order to provide themselves with a set of actionable tactics. If they know nothing about how to observe, how to keep records, or how to consolidate their data into something that is useful, then it will of course take longer. All of this is however in Developing A Plan.

And, no, there's nothing about leverage. Unless and until one is consistently profitable, there's no need to go into it.

Db

 

[Bullinstu]

Hi bullinstu

What you have said is fine if you plan to trade like an hedge fund - ie using multi million pound capital account - no real leverage needed and be happy with average annual rate of return between say 20 and 40% of your very large capital account.

But whats missing here and this this is important - commercial / bank type trading is chalk and cheese to retail trading- ie traders who use their owns funds - majority are not full time and most accounts are well under $100k - in fact this whole last debate is about how much capital do you start with.

Now if I was trading with a $10 or $15 million capital account - I would be delighted with a average ROR of say 25% - ie say over $3 million a year .

But as a retail trader even on a $50 k account I would not be delighted on a 25% ROR - its so low a return in retail returns

Although I do not have over 40+ years of trading experience like Db - and that must be acknowledged - I do have near 14 years of which approx 8 now is full time - ie intraday trading successfully and consistently to make return of anything from 20% to 50% - PER MONTH

I don't compound my account ( thats another emotional headache ) but withdraw my funds regularly to pay my overheads and also to invest elsewhere in other areas.


I would be interested to hear what type of Capital to you plan to use - or are using - and by the sound of it you are probably looking more at investing - ie taking say 2 to 6 months on trades rather than just intraday or daily.

My experience is purely geared around FX trading I have focused from the start just on that product or instruments and nothing else - no ftse / oil/ stocks/ shares etc and so again I dont have a clue on other areas and so would stand down on all other areas to someone like DB - but with regards to FX retail trading I certainly know from my own experiences what I am on about

I wish you well and hope things go to your plan etc

Regards

F

Thanks for the kind words,

Far from me the idea to give a lesson to anybody, I can't even remember now how the thread even started ! but it looks like you are right saying the debate is about the minimum deposit...

I have started to trade with forex instruments through brokerage accounts a couple of years and didn't know back then about the underlying conflict of interest.

Thankfully, I only lost my initial deposit and that was very little and a long time ago.

Then I started watching interviews of hedge fund managers on youtube and thought, actually, those guys do it completely different right ?

So if I would tell how I would trade today, I would not trade on forex but more on equity stocks, not that I don't like forex, but the fundamental research is more daunting as you have to overlook much more than trading on equities.

Also equity is more volatile than forex (if we go back to the principle that i do not use leverage or only 4:1) so I can catch bigger moves,

Timeframe wise, you are right on the spot, the optimus for me would be 1 to 3 months.

Economic surveys such as the PMI, consumer sentiment and building permits, give a great outlook to what is going to happen to an economy.

For example, the pmi reported contraction for the US since november, and it was only at the beginning of January that contraction was reflected in the S&P500.

If I would apply this concept to any market in any geography (it is very easy to think that only the US exist), I stand a pretty good chance.

Long/Short diversified portfolio, makes me survive another battle. Good luck with your trading mate.

 

[Bullinstu]

Wow, this thread escalated quickly Personally I like Db's approach. Make no mistake, I'm a complete newbie at trading, but taking a slower path with a well-thought out plan seems harmless to me as opposed to "learn-by-mistakes" plan. Basically, when a newcomer makes a mistake, the only one who wins is another trader who got his money. So for as long as you are able to minimize losses you should do well. IMHO

Maybe you are new, but you got the most important concept right from the start : "when a newcomer makes a mistake, the only one who wins is another trader who got his money".

let's just hope that its not the broker of that guy taking the other side of the trade.

 

[zaysev36]

Maybe you are new, but you got the most important concept right from the start.

Thanks! Well, I got this concept from my business experience. It was painful, but useful So, what trading approach do you prefer? Or are you a newcomer like me?