What is actually realistic?

[momothebored]

(i) What's realistic in terms of actually getting good?
Have seen some people say don't read books, just practice, but honestly practise WHAT if you're a beginner?

How do people actually get good? I take it everyone has access to more or less the same books. So assuming that many people out there are applying the models accurately, how do some become that much better?


(ii) There are many wild claims of people, without much capital at all, able to generate decent income streams from trading. The obvious implication should be that their ROIs are consistently XXX%. If you have $20K, and make $60K trading p.a which is probably conservative by some of these claims.. etc

I understand of course there are advantages small AUMs have over large ones, but is this even possible? And are there many people doing this?

(iii) So the general idea is:

1. Find a system either from books or by back-testing

2. Backtest

3. Forward test

4. Trade

Anything else?

thanks

 

[Shakone]

(i) There is some value in reading books, in understanding what you'll be trading, basic terminology, order types, risk management etc. Just don't expect a book to turn you into a profitable trader or give you a profitable system.

How do people get good when starting with basically the same material? Same way people get good at anything. Why does one person get an A, and another fails when presented with the same material in school?

(ii) I wouldn't put too much stock in wild claims. It's not about wild claims of others, but what you can achieve. Lots of things are possible. % Returns depend on ability, the volatility of what you're trading, bit of luck, how often you're trading and how much you're risking on each trade.

Is it possible to make 60k from a 20k account? Sure. Are many people doing it? No, I don't think so.

(iii) Well it's a start. If you want some more relevant things to do besides the 4 you've given, then, in no particular order

5) Read up on risk of ruin and money management.

6) Make sure in your backtesting and forward testing you're accounting for costs, that is mainly commission, spread and slippage.

7) Do some research into various markets and decide what is best for you to trade.

8) Do some broker research and decide where it is (relatively) safe to keep your money, and who is good to trade with based on your style.

9) Do some research into the risks you could be facing in your chosen market. What are the news/event risks of the instrument? What is the worst case scenario (not easy to judge, but you can try)

10) Keep a journal of your trades and thoughts while trading and after the results. Analyse the results too.

Need more?

 

[learn2tradewell]

Trading requires a lot of mental discipline and a system that you use. For me, I use multiple timeframes and trend analysis to make my trades. Every trade I make I use the same amount of value for a stop loss meaning each stock (whether it be a $100 stock or a $5 dollar stock) that I trade, if the stock goes against me, I lose the same amount of money based on how many shares of that stock I purchased.

For example: I am involved with one stock right now. PPG industries (ticker symbol PPG). So what I do is I look at the stock on the following timeframes first:

1) Daily
2) Weekly
3) 10 minute

So let's take each timeframe and look at how it's setup.

a) Weekly timeframe:

As you can see this stock is in a nice steady uptrend where its making higher highs and higher lows. That's a good sign because we can see that we have limited overhead resistance so the probablity for it to go higher is good depending on how the smaller timeframes are setting up (the daily and the 10 minute charts)

b) Daily Timeframe:

As you can see the daily is showing a more detailed picture of what the weekly timeframe was showing us. As you can see the stock is holding above the 50 DMA and its been consolidating after the price surge that took place a few days ago (the bounce off the 50 dma represented by the arrow).

c) 10 minute timeframe and my entry point and stop point:

This shows the 10 minute timeframe. The upper arrow shows my entry above the a major short term resistance point (noted by the horizontal line)
The lower arrow represents my stop price should the stock fall beneath that price. The price differental is around a $1.70 so every 1000 shares I buy of that stock Im risking $1,700. Let's say I watnt to risk no more than $200 on this stock. I slash my shares size around 100 shares, and allow the stock to work for me.

Will the stock work? I have no idea...no one knows...but the chart is telling me that probability is on my side, and hence why i traded this stock. If you keep your losses small and let your profits ride, you can make really good money in the markets. I am both a dentist and a day trader and I make more doing the latter because of my equity position now.

 

[ronblack]

Find a system either from books or by back-testing

Anything else?

thanks

Yes... This process make take about a decade to converge to something useful.

 

[Mr O]

(i) What's realistic in terms of actually getting good?
Have seen some people say don't read books, just practice, but honestly practise WHAT if you're a beginner?

How do people actually get good? I take it everyone has access to more or less the same books. So assuming that many people out there are applying the models accurately, how do some become that much better?


(ii) There are many wild claims of people, without much capital at all, able to generate decent income streams from trading. The obvious implication should be that their ROIs are consistently XXX%. If you have $20K, and make $60K trading p.a which is probably conservative by some of these claims.. etc

I understand of course there are advantages small AUMs have over large ones, but is this even possible? And are there many people doing this?

(iii) So the general idea is:

1. Find a system either from books or by back-testing

2. Backtest

3. Forward test

4. Trade

Anything else?

thanks

I would say forget trying to find a 'system' and especially trying to find a system from back testing. Pick a market to trade, and learn how the market operates, put in the screen time and focus on risk management. Then back test and then trade.

 

[natureboy]

Find the repeating patterns. Develop a money management algorithm that allows you to profit long term from them. Learn risk control and money management first. Have you seen Trader, the Paul Tudor Jones video? he mentions "Jesus, jack had a 10% day" but without astonishment.. The leverage and the swings make huge returns possible. Sustainable is something different as markets and conditions change. Hence, what is realistic also fluctuates even for the best traders..

And also, for me at least, i wouldn't want to think i've arrived or that i've gotten good.. Its a continual development and perfection, better and better, yet i think you never arrive if you know what i mean. That said, its mostly putting the screen time in, and the study. Some price factors seem resilient and have persisted over decades or more. Focus on price patterns and relative strength, my vote.

 

[DionysusToast]

1. Find a system either from books or by back-testing

This wont help you.

Do some research on the techniques employed in prop shops. Not the churn & burn style prop shops but the ones that teach their traders for FREE and then fund their accounts.

This may take some time & legwork but it's only time you would have wasted on useless books.

 

[Benj1981]

This wont help you.

Do some research on the techniques employed in prop shops. Not the churn & burn style prop shops but the ones that teach their traders for FREE and then fund their accounts.

This may take some time & legwork but it's only time you would have wasted on useless books.

Why do you think he wants to trade using a prop-shop style?

 

[DionysusToast]

Why do you think he wants to trade using a prop-shop style?

I don't think even prop shops 'want' to trade prop-shop style.

Real prop shops trade the way they do for a simple reason - it makes money.

Picking up a copy of "Come into my trading room" and applying the techniques therein will result in you making no profit at all.

Surely it's better to follow those making a profit than those making none?

 

[Benj1981]

I don't think even prop shops 'want' to trade prop-shop style.

Real prop shops trade the way they do for a simple reason - it makes money.

Picking up a copy of "Come into my trading room" and applying the techniques therein will result in you making no profit at all.

Surely it's better to follow those making a profit than those making none?

The "right" books will give you some very good ideas, however I can't comment on the one you mention, as I haven't read it.

Also, there are traders out there employing very different styles to the prop shop model, who are also very profitable, so it comes down to finding a style of trading he can live with. A certain style isn't "better" or "worse" than another, therefore the newbie is best off researching many different ones (the older the better) to try and find one which sings to him.

 

[DionysusToast]

Which books are those Benj? Could you provide a list of books you think will make the OP a profitable trader?

Unless he can find a profitable trader to bounce ideas off, his chances of finding a profitable style are extremely slim.

 

[Benj1981]

Which books are those Benj? Could you provide a list of books you think will make the OP a profitable trader?

Unless he can find a profitable trader to bounce ideas off, his chances of finding a profitable style are extremely slim.

I wish you wouldn't put words in my mouth. No book alone will make someone profitable, but it can "give them some good ideas", which will provide them with a direction for their research. If the OP wants to message me, I'll provide him with a list of some books to read.

I do agree however, that finding a mentor or someone who's profitable, and is willing to at least talk to you every so often, will dramatically increase your chances of success.

 

[phoenix25140]

Testing is all good, but when it comes to YOUR money its a different emotional ride.

Unless you mean testing with small amounts?

 

[DionysusToast]

I wish you wouldn't put words in my mouth. No book alone will make someone profitable, but it can "give them some good ideas", which will provide them with a direction for their research. If the OP wants to message me, I'll provide him with a list of some books to read.

I do agree however, that finding a mentor or someone who's profitable, and is willing to at least talk to you every so often, will dramatically increase your chances of success.

Why not share the list of books here?

Surely it can't be a problem to do that. It may benefit many people, not just the OP.

 

[Benj1981]

Why not share the list of books here?

Surely it can't be a problem to do that. It may benefit many people, not just the OP.

As you wish - a few to read:

Mind over markets
Fooled by randomness
Trend following
The logical trader
Way of the turtle
The intelligent investor

Happy reading DT.

GVTY. (jokes)

 

[The Leopard]

I would suggest a few titles but I'm waiting to leap. Not sure why I haven't already done so, actually.

 

[VendorExterminator]

I would suggest a few titles but I'm waiting to leap. Not sure why I haven't already done so, actually.

Loved that show dude!

 

[DionysusToast]

I think Mind over Markets is a good book.

Fooled by Randomness too, although it has little to do with the nitty gritty of trading.

Even the best trading books lack in respect of helping you put it all together into a coherent method. If you've never seen a coherent method, you won't know what one looks like.

The best analogy I can come up with is that it's like learning to be a mechanic by reading a Haynes manual.

Certainly for day traders, a book is the wrong sort of media for teaching. You can't describe something that moves in book form. There is so much nuance. For instance, if someone tells you to look for the market slowing down as it approaches a level - 'Slowing down' is totally subjective so the reader never knows if what he observes as 'slowing down' is what the author observes as 'slowing down'.

It is very tricky. Books can teach mechanics but not trading itself IMO.

 

[FringFX]

good point.... someone new must immerse him/herself to the charts or the markets.
'knowledge' found in books won't always translate well into good/proper trading. another issue is that books mostly offer just (incomplete) bits and pieces (worse, recycled materials/fluff) of what a trader needs.

 

[NVP]

(i) What's realistic in terms of actually getting good?
Have seen some people say don't read books, just practice, but honestly practise WHAT if you're a beginner?

How do people actually get good? I take it everyone has access to more or less the same books. So assuming that many people out there are applying the models accurately, how do some become that much better?

thanks

these questions apply to everything we try to achieve in in Life and business

I would recommend you also read more widely and google things like

winning
being the best
achievers
high performance

etc etc

the traits and requirements are the same for anything - including trading

and the answer is 10,000 if you really want to know

N