Short Term traders - advice please

[jacinto]

hi jackie,

i think you have received excellent advise. i really cant add much more except:

1) dont trade real money until you are ready to trade! and that will typically mean demo trading for a good time such that you really acquire the tools to do the job......yet it doesnt stop there.

2) never forget the emotional-psychological aspects of trading with real money.

something i have learned with blood is:

trading is 10% analytical skills and 90% emotional-psychological discipline to enforce a trading plan

3) ah, which means, no trading plan, no trading future.

good luck

j

 

[nine]

Be aware that the two factors that will increase the cost of your education are :
1.Using leaverage without fully understanding it.
2.Not understanding the instrument you are going to trade and how to recognise the technical setups that create momentum/volatility.

From what you have posted so far you are not yet equipped to trade. Starting with the above is as good as anywhere to start learning.
I draw your attention to leaverage because of your comments about short term trading and the potential for you to charge ahead and SB where margin will be given.

What Chump says is very valid. Another element to watch is try to keep your decisions simple and the timeframe long (don't seek a style of trading that requires decisions in a minute or two initially or your emotions are more likely to overcome your reasoning capability).

A strategy I liked that fits your time constraints is Jacko's euro system. Google "Jacko's Forex House of Pleasure and Pain."

 

[Slorm]

Hi everyone,

I still have a very long way to go before I'd even attamept to trade. I'm looking for equities I could perhpas hold onto for a few days / weeks, even months before selling. I work full time, so I can only devote so much time to it, but i'm ok with that. I realise it's going to be a very long process and I have alot to learn. If the objectives i've outlined don't really fit in to any viable trading catergory, maybe i've got this whole thing wrong. Does anybody do this in their spare time ?
(apols if my questions sound frustratingly naive)

thanks
Jackie

Firstly, don't worry if your questions sound naive, we all had to start somewhere. It's far better to find out things now rather than get a nasty expensive shock later.

As you are pushed for time probably swing trading is your best option for now and you won't have the stress of having to make instant decisions.

You'll need to allocate time (evenings or weekends) to learning the tools of the trade and also for research. Some swing traders using purely technical analysis but personally I like to supplement this with fundamentals as well, to ensure I'm buying value.

So you will need:
Knowledge of TA
Knowledge of Fundamentals
A tested Trading Plan
(See books and links already mentioned)

Research
End of Day prices
Charting package
Access to company information and news
(You can get this for free initially at various websites but as you progress you may want to invest in a specialist charting package for data mining etc)

It may look a bit onerous but there's really no need to rush, the markets will still be there even if it takes you ten years to get started.

When you're ready, paper trade your trading plan as you must be confident it works or else you'll have a lot of sleepless nights with worry. As others have mentioned, psychology is a major factor.

Once the plan works then start small and only with money you can afford to lose, and bear in mind with equities that your trades have to generate sufficient profit to cover both buying/selling costs and the accursed stamp duty.

You can spreadbet equity swing trades but you must be careful to check out the overnight finance charge so always test with a demo account before commiting real money.

 

[chump]

It's each to theirown,but when I trade stocks (as opposed to invest) specifically in short timeframes up to an aggregate of a few weeks I am not even interested in fundamentals,indeed I don't even know what the core activities are of all the companies in the watchlist. If I am in and out in days/weeks I am trading on momentum and that is in the chart with sectors for context. You might wish to keep an eye on news releases though including dates for divs etc.That's as fundie as i get for that type of time period and as I say it's each to theirown.

 

[Jackie284]

hiya,

Slorm, when you say a charting package, is this some sort of software I would need to get separately ? and re: a Trading plan, I imagine this is different to a Trading stratergy is it ? and a stratergy I guess I would have to build myself with experience ??

Chump, so when trading stocks, do you just study the charts of a share you may be interested and decide when to buy, and thus when to sell ?

thanks
Jackie

 

[chump]

hiya,

Slorm, when you say a charting package, is this some sort of software I would need to get separately ? and re: a Trading plan, I imagine this is different to a Trading stratergy is it ? and a stratergy I guess I would have to build myself with experience ??

Chump, so when trading stocks, do you just study the charts of a share you may be interested and decide when to buy, and thus when to sell ?

thanks
Jackie

yes,but Ialso rely heavily on sector charts and in addition the leaders in that sector. It is however all charts and just a glimpse of info for upcoming earnings releases/divs etc.

 

[YouTubeTrader]

Getting Started

I agree with the absolute need to get your psychology set first before you trade real money...I finally got my psychology right by reading the book, "law of attraction" ( http://www.amazon.com/Law-Attractio...9322816?ie=UTF8&s=books&qid=1188915881&sr=1-1 ). The next thing I did which was very beneficial was to start with scalping to have low exposure time to the markets. Getting quick "in and out" hits is a great way to start as a new trader to build confidence.

 

[Jackie284]

Hi YouTubetrader,

when you say getting in, then out out quick,.how quick do you mean ? does that depend if you are happy you are happy you can make a profit from the price movement ? Also, what exactly is scalping ?

many thanks
Jackie

 

[LondonUSTrader]

Hi everyone,

I'm new here and need some advice. I have a real interest in this short term trading business although I am very very new to it and am still reading and learing, so i'll apologise if my questions are annoying. I wanted to ask, when you buy a share you have to pay arounf £10 -£12 for the transaction, and then the same when selling ? have I got that right ? 'cos I was just thinking how that would really eat into any profits.

Also, do you guys open accounts with an interactive investing site, or do you use something called a trading platform ?? Any advice and info would be greatly appreciated,

many many thanks
Jackie

My advice is as follows:

(1) You need to have an edge that gives you a positive expectancy. In order to get an edge the best way is to observe the market and see if you can spot any frequently recurring patterns. However, it is important the edge is based on market observation. And thinking as well. There should be a logical reason why your edge works. In order to be successful you have to do things that your competitors aren't doing. So, a little thinking outside of the box is required.

(2) Once you have an edge you need to formulate a trading plan and test the trading plan over as much data as possible. A minimum of 30 trades is what mathematicians consider statistically significant, although some traders I know like to at least test a 100 trades or so depending on the time frame they are trading. The aim of the backtest is to have it as closely as possible approximate actual market conditions.

(3) You need to walk forward your test on out of sample data. You can do this by paper trading for a decent amount of time.

(4) If everything is still looking good you can begin to trade your strategy. Part of your strategy should be an appropriate money management plan. Lots of people will tell you to only risk 2% of your account, but the actual percentage depends a lot on the stats of your system and your own comfort level.

(5) Do not spend any money on courses. The market is all the education you need. Also, try and start with the longest timeframe possible. In my experience, the shorter the timeframe the harder it is to find an edge because there is more noise.

(6) Successful trading takes a considerable amount of effort and years to achieve. In fact, it may take you as long as 3 years or longer to go through these steps. I know one trader who is now very successful who it took 7 years to complete this process. And you may never get there. Many don't.

Cheers.

 

[Slorm]

hiya,

Slorm, when you say a charting package, is this some sort of software I would need to get separately ? and re: a Trading plan, I imagine this is different to a Trading stratergy is it ? and a stratergy I guess I would have to build myself with experience ??

thanks
Jackie

Yes, a charting package will give you many more indicators and facilities than what you'll find on websites. I personally use Sharescope but there are others around as well, there's a forum covering the different packages and it's worthwhile to check them out to see what suits you best.

There is one caveat with charting, because you may have around 70 odd indicators to play with, doesn't mean to say you should try using them all or you'll end up with what is referred to as "analysis paralysis". Pick a few which work for your style of trading and make sure you understand how they work in different markets (ie market trending or sideways/rangebound, volatile/quiet).

Your trading stategy should be part of your trading plan which should also include, money management, risk management and other rules which you follow (eg I never trade if I'm ill, stressed, distracted etc). See the link I gave above for a trading plan template.

 

[YouTubeTrader]

Hi YouTubetrader,

when you say getting in, then out out quick,.how quick do you mean ? does that depend if you are happy you are happy you can make a profit from the price movement ? Also, what exactly is scalping ?

many thanks
Jackie

Scalping (getting in and out of positions quickly) usually is defined as very short term trades that are for small profits with low exposure time to the market (low amount of time in each trade...like 1 to 5 minutes). Scalping conducted properly can accumulate very good daily returns without having to hold positions for long periods of time (expanded risk). I scalp the ER2, ES, NQ, and DAX currently with 89 and 144 tick charts using this chart/indicator set-up............ http://www.feltontrading.com/screenshots/index.asp } .

I keep my trading very simple, so I only use two primary indicators set to faster than standard settings..this set-up catches the short term price action cycles of the market extremely well.

 

[ammo]

you can get free delayed charts at big charts.com..i didn't notice which side of the pond you were from there must be an equivalent in the uk,anyway you can use the interactive tools to draw trend lines for support and resistance you'll see its easy to be right and build your confidence and youll have a mental picture of what the mrkt is doin

 

[chump]

ProRealTime will give you free EOD charts for UK stocks. I'm sure you will find enough indicators in there to keep you happy.

 

[Jackie284]

thanks for your input guys !

it's really quite daunting isn't it ? , I'll just have to start very small and simple and try and build on that. Can I just ask what you guys find most difficult about trading,.is it sector / share selection, knowing when to buy /sell ?

thanks
Jackie

 

[chump]

In the learning process the "difficulty" is in the psychological. That is freeing yourself from bias ,not caring what direction is.Being predisposed to being neither a bull nor a bear.
Then achieving the mindset able to manage the trades in accordance with your systems ,again psychological in the sense of being able to control emotions and one's imagination about what might happen to focus only on what is happening.
You can 'know' when to 'buy and sell' without necessarily doing just that and that is the point I am making to some extent.

 

[Slorm]

thanks for your input guys !

it's really quite daunting isn't it ? , I'll just have to start very small and simple and try and build on that. Can I just ask what you guys find most difficult about trading,.is it sector / share selection, knowing when to buy /sell ?

thanks
Jackie

Hmm no, what you mention are the easier bits, entrances and exits will be in your trading plan (once tested) and finding the right market is more about doing good research.

As others have mentioned the psychology is the hardest part. If you get a nasty feeling in the pit of your stomach when thing go against you, or exhilarated when you do well, then forget trading.

You need ice in your veins to trade well, when you lose it's simply a business expense, when you win it's simply a profit, no different to any other business. Emotion is your enemy particularly if daytrading where decisions must be made quickly, it tempts you to chase losses and cut your winners. One rule I have is that if I find I'm becoming involved emotionally with my trades I stop and do something else for the day.

 

[jacinto]

One rule I have is that if I find I'm becoming involved emotionally with my trades I stop and do something else for the day.

yeah, got the same rule myself. a pain to do it, but in the end its for the best, really.

 

[Tawe Trader]

I thought emotionless trading was the way to go but I have been proved wrong. I believe we need emotions to HELP us trade.

Why ?

1. At the start of the day of the trading day, run a mental check over yourself, etc are you feeling tired or are you excited and over-confident after having a big win the previous day. Or are you feeling down after a taking a big loss the previous day.

2. If you are day-trading you need to check up on yourself throughout the day. You could have had 4 good winners by mid afternoon, you are feeling on top of the world.....you think to yourself, I have cracked this trading game etc.....what happens next........you let your standards slip and enter a trade that doesn't adhere to your trading plan.....next you have a big loss and wipe out all or your days profits.

I know this sounds new-age and wishy washy but I believe you have got to be in tune with your inner-self. Use your emotional state as an INDICATOR.

The other 'secret' is EGO - or trying to trade without one. Try and trade without having a bias concerning mkt direction, it is so bloody difficult but this is the very trait that all successful traders have mastered. EGO-LESS trading is the HOLY GRAIL.................

 

[rols]

thanks for your input guys !

Can I just ask what you guys find most difficult about trading,

Jackie

How long have you got?

Recent cognitive neuroscience research suggests that 10.000 hours of practise are necessary to become an expert at anything.

This is one of the difficulties of trading. Unlike golf or chess where one can enjoy being an amateur, being anything but an expert at trading will cost you several shirts.

Read this lot and you will have scratched the surface so to speak.

http://www.trading-naked.com/Articles_and_Reprints.htm

Bon voyage!

 

[chump]

"Try and trade without having a bias concerning mkt direction, it is so bloody difficult but this is the very trait that all successful traders have mastered. EGO-LESS trading is the HOLY GRAIL................."

don't know if I'd go that far ,but in general that is the point I was making earlier and it is hard to do....
Most people have a bias, broadly, do you see the glass half full ,or half empty,do you see an opportunity ,or a threat ,once you know the answers you'll know if you are a bull or a bear by inclination (bias)..
A trick I used for ages was to turn a chart upside down before trading it...if I had thought to be short then when upside down did I wish to be long ,or not ? ...If uncertain, leave it alone. If sure ,trade it.

For clarity ,I have never found that being emotional assisted me in any positive way when decision making was required. May sound odd I know ,but in practice arriving at the correct decision based upon the facts known is is much better served by removing 'oneself' from the issue emotionally. After the decision is made and executed I have been known to do a fair immitation of Basil Fawlty which is fine as it doesn't affect anything except to reduce my blood pressure.