Advice for a beginner...

[moog]

Hi, I've been lingering on this board for a while now soaking up all this amazing info. I started to look into investment due to claims from a friend that neural nets could predict stock-market moves (I'm a software developer...) and to be frank trading looks like a far more interesting career than programming, and I've never been keen on bosses.

So I'm asking for advice on where to start really. I have a pretty good idea about trends and TA from reading FTSEBeaters thread (and others too numerous to mention) but I'm still confused by all the trading options open to me. I could theoretically start with around £20k, which would mean a max risk of £200 per trade if I stick to 1% risk. I could do with making enough to live on (say £1k per month), but I can work freelance or even take a part-time job (urgh) if I have to...

- Should I spreadbet, or trade futures, or something else?
- Should I trade EOD, Intraday, or something else?
- Should I get an IB feed or just use trading sites (setting up software/network stuff is no problem technically)? And why?
- What charting software/feeds are best? And again, why?

Thanks in advance (and I hope it isn't too presumptious to ask so much in a first post),

Moog

 

[barjon]

Moog

If you kick in £20K as a complete innocent (apart from soaking up
the valuable info on these boards) then don't expect to have
much left after a few months unless you're one of lifes lucky, lucky
guys. Better to prepare yourself well and practice small until your
trading confidence grows.

Answer your own questions - eod or intraday, stocks or indices -
by looking at them all and seeing what suits you. For practice
there's nothing to beat real trading and spreadbetting is
probably the cheapest route (I think Finspreads let you bet at
pennies a point for the first eight weeks or so) then you can
decide whether to stick with sb or move to a broker depending
on what you've decided to trade and over what timescale.

Don't forget to sort out your trading plan - you'll have read about
them on these boards - discipline yourself to follow it and test it
for real before you tweak it.

Hope this helps.

good luck and good trading

jon

 

[stevet]

put your cash in the bank under lock and key and forget u have it or some broker or spreadbetting company is going to be using it for wallpaper

start small with a spreadbetting company and stay small ( that means absolutly the lowest bet size) for a year - assume every winning trade was luck - get a really good charting package for real time trading - and watch the screen real time day in - day out whenever u can and learn that each tick on a chart has a meaning -work out why some trades win and some lose - replicate winners and then work out why they lost that time

and dont get caught up in any small minded ideas from people who trade for fun or just lose money trying to trade off some data they get for nothing from a guy who knows a site on pluto, and dont even think about long term trading strategies, they are for people who lose and just like to make the losing happen later and have just never jumped the hurdle to real trading or screwed up first time out the trap and did not just keep going

electonic trading has leveled the playing field for any and all particpants - you have the chance to take advantage of that -something that even a few years ago was not possible

traders can make thousands a day - day in, day out - and no one who is a real trader makes less than thousands a day

but it might take you years to get to that point - u miight never reach the highest levels - u might piss away a few dollars on the way - u might shoot yourself on the way out of frustration - but it is possible - so forget any other kind of so called trading - learn to trade intraday indexes - there are no second places in trading and there is no easy way or easier way and no secret - just hard work and if u treat it as a business - u will get at least good enough to make the journey worth while - good luck to you

 

[moog]

Thanks for all the advice. I know the risk, but I don't see why you think I'd lose all my money. Sure I might lose some of it, but if my strategies don't work I'm not stupid enough to continue...

I have backtested some of my strategies and both my EOD and Intraday runs have shown a profit. What would I gain from trading tiny bets for a year that a years worth of backtesting wouldn't show me?
Why do some people say futures through IB are better than SB'ing? Is it that IB takes a smaller cut for themselves?
Where can I get more intraday data for backtesting? I am using data from dukascopy at the moment but the most data I can get from there is around 2 months at 10 minute intervals.

 

[barjon]

moog

none of us is stupid but many have the starting off "wiped out"
tee shirt in their wardrobes. SB companies admit that 90% of their clients lose.

you can backtest 'til the cows come home but it never prepares
you for real trading, nor does paper trading. Only practicing
real trading does the trick - small stakes just stop you losing
your shirt too quickly whilst learning.

jon

 

[stevet]

ib

moog

i guess a good question about the money - i dont know why you would lose it all - but i know u would!

to create a back testing system to do real back testing is both an interlectual and technical nightmare and even if you could get something to work - all you would have achieved is something that proves that certain things happened in the past - which is no indicaton of the future unfortunatly

and on the subject of trading off EOD for longer term trading - if the mutual funds and pension funds all round the world who are the ones who promote "longer term and therefore safer trading" and have departments of hundreds who do research and analysis and all earn massive bucks - have managed to lose everyones hard earned money - personally, on that evidence alone, i would take a long hard look at that concept - i am not saying it cant be done - but most kid themselves and get off on the ego of their research etc being what caused their profit and when they lose its just because the index went down and took their stock with it - in reality most stock traders are index trackers and dont realise it

i repeat - i am not saying that trading off EOD cannot be done - although i have a suspision that even those very very few who have been succesful at it are now getting screwed, simply because markets are so efficient and so quick at analysing and pricing - so what used to take days or weeks or months to filter into the price - now gets done in a blink of an eye

but at any rate- it is the hardest hardest form of trading by far - taking years and years of real hands on multi million dollar trading experience - simply because ultimatly in a way it would be a real easy way to make money - just take a trade and close it out when u get back from your hols - and life just aint like that

most private investors into this concept of research and analysis are just into trading as a hobby and the ego of feeling they can beat the market - and ego costs money - they make some bucks when markets are in a narrow range and going up - and then lose all the profit when the market cycle changes and then they lose all they won and more

and the reason why people would suggest futures over spreadbetting as preferably is just that it is a lot easier to make money trading futures - but ONLY when you know what you are doing, up to that point you will lose by either method, and you will lose bucket loads more in futures just becasue of the minimum bet size

learners can and do lose thousands in a day easily - maybe that might be the best route for u - but its also liable to bankrupt you -so why not take it easy - and get a feel for how hard it is to trade and then decide to up the anti

you just need to be able to work out which trades would have worked in futures even if u lost spreadbetting, but take advantage of a loss costing you a few quid in spreadbetting as opposed to hundreds or worse in futures

take your time - trading is one place where for sure the faster you go - the longer it will take u to success

 

[moog]

Thanks, that's a great help. As for the money, it is simply not possible for me to get wiped out, as my risk would be minimal and I would go back to the drawing board if it doesn't work.

Why do you say backtesting is an intellectual and technical nightmare? Maybe I am missing something, but it took me about half an hour to write a simple script to backtest a 10/53MA crossover strategy on Intraday S&P500 data...

I agree with what you are saying about EOD, I had considered it mainly as an option if I were to keep working full-time. My intraday backtest shows far more profit than EOD, but I need to test it with much more data for it to be statistically meaningful.

I'll probably start off with SB at small amounts as recommended, to see if I can make a profit over 6 weeks of penny trades on finspreads, mainly so I can get to grips with the trading interface...

 

[stevet]

"it is simply not possible for me to get wiped out"

i promise u that the very fact that u make that statement is a real proof you would get wiped out - go slow - get rich

"but it took me about half an hour to write a simple script to backtest a 10/53MA crossover strategy on Intraday S&P500 data..."

the longer you spend on developing a back testing system - the more you will see the problems - miillons of dollars and man hours have been spent on this and no one has got anywhere -

but that is different to a seasoned and succesful trader develooing and checking his methodologies to see if they make any sense and then uses his trading experience to make it profitable

 

[Newtron Bomb]

Start slow, build up your business, forward test your strat with an SB, increasing size with profits, maybe look to go part time when you have a regular income so you can concentrate more be sure not to change your successful strat. when you do this... and then full time trading with your fall back as freelance, it maybe and idea to do both as you will not have to worry about the bills when or if you have a bad month.

This is a business so do a business plan and stick to it and adjust it as necessary.

This is just a suggestion if i had you circumstances

 

[moog]

Steve, "i promise u that the very fact that u make that statement is a real proof you would get wiped out"

Hmm, you're gonna have to explain that one. Given that I only ever risk a max of 1% and I walk away after losing say half my money, how is it that I can get 'wiped out'? Unless by wiped out, you mean the point at which I quit, rather than the point at which I've lost all my money. Personally I think you should consider what 'real proof' is...

Also, what specific problems do you see with backtesting? At the moment all I hear is nay-saying...

Newtron Bomb, thanks for the positive advice. I do intend to have a strict plan and run it like a business.

 

[moog]

A quick question regarding trading while working full-time: how?

I can't trade during UK hours because I am at work and I don't generally get any time till about 8pm in the evening... My plan is to get part-time work before even starting to trade, but if there's another way...

 

[jimmyp993]

Moog,

My understanding of how most people start trading part time is to trade US stocks, since you can do that in the evening.

If you do decide to go that way, can I suggest the Wealth Lab website, which should help you to do more backtesting of your strategy. It seems to be a usefull resource (which I learned about from someone on this site, of course!).

(P.S. You should modify your profile to receive private messages!)

 

[moog]

Wow, thanks Jimmy. That site looks excellent and perhaps will provide me with the ability to forward test while I'm working

 

[stevet]

moog

trading is gambling and in any vice - logic goes out the window - so its only when u learn to be the one who is taking the bets and not making them - that u can make the bucks - spreadbettors take the bets and make money, briokers take the bets and make a cut - and in every trade - two people are taking the opposite side of the bet - it takes time for you to learn to be the one who takes the winning side more than the losing and move from gambling to trading

on back testing - let me know how your first trades go from your backtesting tests - i think we might have a more logical conversation then

and as it happens - the shift from 8 to 9 (UK time) on the US market is one of the safest and most profitiable times to trade - good and defined trends - lots and lots of bucks!

remember that the great part of youth is to question experience - and that is important for the world to progress - but never underestimate the power of experience in evalating the risk rewards of success in any facet of life

 

[Newtron Bomb]

Moog,
Start off looking at EOD and maybe look to swing trade, get to grips with a way of trading before you quit your day job... if you can go freelance then this will give you the best of both worlds but that can only be dicided by yourself as you know your circumstances

You sound like you have the right frame of mind to succeed, only the actual doing will prove you able or not...

I hope you have great success with this, it was the best thing i ever did