Trading made simple?

[CoconutJelly]

All,

From all the information internalized to date it seems to me that successful trading comes down to this:

1. develop a positive expectancy system - i.e. - (win % x win amount) less (loss % x loss amount) > 0
2. ensure your system has enough tradable frequency - i.e. not slow e.g. only 5 opportunities a year but also not like 100 opportunities per day
3. manage the cost of business - i.e. the commissions paid and slippage
4. ensure you trade with enough starting capital so that the cost of business is low as a % of capital
5. ensure the risk of ruin is minimized so that the expectancy of the system can be achieved over the long term and compounded with geometrical growth- i.e. do not risk too much on any single trade or a number of correlated trades at the same time
6. control the emotional state and bias which prevents the attainment of 1. and 5. i.e. the fear of loss, the high of greed, the mind freeze.


Question: Which is the most signficant for success? Is anything critical for success missing? Which is the hardest part?

 

[Ambrose Ackroyd]

I find the hardest thing is staying awake mate.

Successful boredom management is crucial.

 

[Mornington Crescent]

forget all that motherhood stuff

what on earth makes you think you will make a successful trader ?
have you any previous trading experience outside of the financial markets ?

why did you not choose to become a brain surgeon ?



there are more things in heaven and earth than are dreamt of in your philosophy

 

[Splitlink]

All,

From all the information internalized to date it seems to me that successful trading comes down to this:

1. develop a positive expectancy system - i.e. - (win % x win amount) less (loss % x loss amount) > 0
2. ensure your system has enough tradable frequency - i.e. not slow e.g. only 5 opportunities a year but also not like 100 opportunities per day
3. manage the cost of business - i.e. the commissions paid and slippage
4. ensure you trade with enough starting capital so that the cost of business is low as a % of capital
5. ensure the risk of ruin is minimized so that the expectancy of the system can be achieved over the long term and compounded with geometrical growth- i.e. do not risk too much on any single trade or a number of correlated trades at the same time
6. control the emotional state and bias which prevents the attainment of 1. and 5. i.e. the fear of loss, the high of greed, the mind freeze.


Question: Which is the most signficant for success? Is anything critical for success missing? Which is the hardest part?

For a start, I think that you are being a bit patronising or is it that you are writing these thoughts for your own benefit?

It is true that you must get your mental approach to this in order. You go ahead and do that and then get down to the practical aspect of trading.

To answer your question. The hardest part is making any kind of a profit, even breaking even. If you can do that you will survive but survival is not the reason for entering the trading arena. It is about making a comfortable income, or better.

That, really, is a jungle out there and everyone wants your money, so starting off with a large sum to ensure that your risk is reasonable or acceptable is just what the market likes to hear, especially from newcomers. It is, always, looking for fresh capital.

Start with a small capital base and grow it with experience or, if you can't grow it, get out with a low cost lesson.

 

[CoconutJelly]

I find the hardest thing is staying awake mate.

Successful boredom management is crucial.

Thanks - good point.

 

[CoconutJelly]

forget all that motherhood stuff

what on earth makes you think you will make a successful trader ?
have you any previous trading experience outside of the financial markets ?

why did you not choose to become a brain surgeon ?



there are more things in heaven and earth than are dreamt of in your philosophy

what on earth makes you think you will make a successful trader ?

I believe that a philosphy of "assume nothing" is perfect of trading.

have you any previous trading experience outside of the financial markets ?

Outside of the financial markets? Yes - I've been "trading" for financial return for the past 21yrs. Trading my time, energy, thoughts i.e. my labor for a salary.

why did you not choose to become a brain surgeon ?

the cost was prohibitive plus my strength in the sciences was limited to mathematics

 

[CoconutJelly]

For a start, I think that you are being a bit patronising or is it that you are writing these thoughts for your own benefit?

Writing these thoughts because it's my belief as to what it takes to be succesful in this business. I asked the questions asked hope that members here can provide their views on which point is most significant/hardest.

All around you hear or read that either (i) money management is key or (ii) controlling your emotions is key or (iii) having enough capital is key or (iv) having a positive expectancy system is key. So the question is which is the most signifant and hardest to master.

Mathematically - no amount of emotional control or money managment or capital will turn a negative expectancy system into a positive expectancy system (unless you can master streak theory). Conversely, a positive expectancy system will fail without emotional control or money managment or enough capital.

Much thanks for your points made in you post.

 

[Mornington Crescent]

"Outside of the financial markets? Yes - I've been "trading" for financial return for the past 21yrs. Trading my time, energy, thoughts i.e. my labor for a salary."

cosy life.
that will be of no help to you now

as a trader, you are now self employed

as an earlier poster said, its a jungle out there

are you indifferent about taking a loss ?
really ?

ok, walk outside and throw £100 onto the road. Leave it there and walk away

if you cant take losses without a second thought, stop trading right now

its not where you enter that is important; its where you exit that makes the difference

best of luck

 

[Mornington Crescent]

"I'd happily throw £100 on the road and walk away if I thought for a second that by doing so there was a reasonable likelihood of find £200 around the next corner."

you cant wrap conditions around the market

so I guess you also have difficulty taking the first cut

 

[CoconutJelly]

if you cant take losses without a second thought, stop trading right now

its not where you enter that is important; its where you exit that makes the difference

Are you saying then that the developing a positive expectancy system is the most significant part and hardest to master?
thaat seems to make sense to me.

 

[CoconutJelly]

I think the OP has got most of the bases covered, and he's light years ahead of most. My advice is he should stop listening to other people NOW, and just go out and do it.

what's the hardest piece of this business?

 

[Traderesq]

its not where you enter that is important; its where you exit that makes the difference

Where you exit can often be the difference between being a losing trader vs. a winning trader. But when you also focus on getting good entries you can make a lot more money (especially in the current environment rife with high-frequency trading strategies).

 

[CoconutJelly]

Which part of this business do the experts/succesful traders hold closest to their chest and keep the most secretive?

It seems that it is the entry setups and exits.

 

[Savana Jhones]

I am beginner in trading so that, it can be easier for me to update myself with some points or tips that can make my work more easier.

 

[neil]

Find a method for getting into the market...example-break out of a consolidation zone (among many others). Decide beforehand where you will get out if things go wrong. Manage your money. Have you the balls to put your money on the line and leave your ego on the sidelines?
Not much to trading - doing it with the right mental approach is the hard part but you will not understand that until you trade a live account and watch the ticks pulse up and down.

 

[CoconutJelly]

Find a method for getting into the market...example-break out of a consolidation zone (among many others).

Why would this "method" work or result in a positive expectancy system? is it because everyone else is using it that it works in that it's self fulfiling?

 

[neil]

why it works doesn't matter - if it works more often than not - THAT matters.
Read more on TA by GammaJammer and others here.
http://www.trade2win.com/boards/general-trading-chat/101562-technical-analysis-easy-option-6.html
Your question has been debated ad nauseum on this site therefore "search it" for futher insight into your question.

 

[CoconutJelly]

why it works doesn't matter - if it works more often than not - THAT matters.

Thank you Neil.

I should let everyone know that I do beleive that the system which will work best for me is based on Price Action with S/R, trading on the 5 min timeframe and just following the trend after consolidation until it (b)end.

 

[Wino]

I think that anyone starting out trading and expecting trading to be their only source of income is piling on themselves a very large psychological burden.

I have two income streams, one from a small business and the other from trading. Takes the pressure off each side and makes my decisions more objective.

65% ROC in 18 months so far.

 

[neil]

Re: Trading made simple?- when I was young

I think that anyone starting out trading and expecting trading to be their only source of income is piling on themselves a very large psychological burden.

I have two income streams, one from a small business and the other from trading. Takes the pressure off each side and makes my decisions more objective.

65% ROC in 18 months so far.

What you write supports my own experience. I initially put aside cash, the loss of which I would not miss if my trading venture foundered. The result is a settled psychological outlook whereby one is content to sit and wait for suitable trading opportunities to present themselves ; in short - there is no pressure to trade.
Prior to this I carried out a lot of demo trades. It took a few years to reach this stage, but then, I am an old git