MoneyTec Traders Community Forum - View Single Post - The learning cycle for a newbie trader

Soul-Trader2004 · 03-06-2006, 08:49

Hello everybody.
Can't believe that it's 18 months since I wrote that thread - Jan 2005 it was.

Well, as they say 'you never stop learning in this game' and that's certainly true.
I thought it was time to add to the original thread with a new one - my last 18 months have been very interesting and many things have happened that I thought I would share with you that you may find useful.

At the time I wrote that thread I was an intraday trader and had been making money consistently for about 18 months - I thought that was it, I had made it as a trader and was at the end of my learning curve.

How wrong I was.

I don't think that this series of threads will ever end, I expect I will be writing another update in 2008.

When I look back at the last 18 months I cant believe how much ive changed from what I thought was the end of my cycle.

At the time I was daytrading several strategies which made me money. In the ensuing months I just kept on testing new ideas - reading systems on here and other forums and testing them also.

I got together with a bunch of traders in voice rooms and again started working on systems and testing. - again day in day out testing and trading - making money yes but never really getting closer to that dream that we all have of trading /easily, without emotion/ and having that millionaires lifestyle.

Systems development started to become easier when I looked at the market holistically - I.e. not tying myself down to a single timeframe and watching at a macro level as well as a micro level.

This resulted in the several screens I now have in my office so I could see all the timeframes at once - I was still specialising in GBP as to have more meant yet more screens and I thought that the study of cable would make me more than enough money.

I did what many of you will do in the future. I developed systems, gave some away and sold some also - The Hilda system was in my opinion my crowning glory - a system that I could trade on any timeframe on any currency. I spent the time and sold my system to many people.

When the fun of selling that and helping others died down I again started improving on it etc etc etc.

But then the realisation started to hit me.

All of this system work, selling etc wasn't getting me any closer to my goal of actually enjoying the money I was making.

You see a journey to a goal is a weird thing. all of the fun is in the actual journey to the goal and when you get there its very easy to start moving backwards to do it again.

what i'm about to explain to you is I think the final cycle in the journey to be a great trader and realising your ambitions. I may be wrong and find a Eighth step within the next two years lol - but for now this is the best I can offer you.

*Step 6 The wake up call

When the newbie trader reaches step five he/she thinks that's it. They now make money well, look back on the forums and chat rooms they've used for so long and with a smile see the struggle they have been through repeated day after day as new people begin their journey.

They see the highs and lows that they experienced, the heartache, the 'head in the gas oven' moments and the movement from sheer despair to brilliant exuberance.

They continue to design systems to test - spend hours upon hours of hand testing with a smile - they know that no amount of computer testing is good enough to give you the confidence to trade the system properly.

They test and test - still believing that there is a system out there which beats the one they are using now.

They continue to get the latest designer indicator - hell, they even pay for them now as they know that a few hundred bucks for an indicator is worth it if it increases the take.

Trading becomes a real chore and the rot starts to set in. Here they are watching charts all day long for that setup which pays the mortgage and buys the new car or house.

The system they are using is still indicator based, still needs a shedload of charts open and still relies on a good charting feed.

Even though they don't realise it for the most part, although their system is mechanical they still have decisions to make - when to close a trade, when not to trade, avoid the news etc etc.

One day they wake up.....

*Step 7 - Learning NOT to trade

Yep, you read it right.

what happens to a trader in this cycle is that they get so wrapped up looking for improvements to their trading that they forget what they started trading for in the first place - for freedom.

Yet here they are every day sat by the pc, still after 4 or 5 years testing new stuff, taking trades and even though they don't realise it making discretionary decisions on their trading.

If they want to go out for the day of course they can - and they can enjoy their money. but whilst they are away they make no money because their systems main component is themselves.

Here's what's happened.

The definition of success according to Earl Nightingale is the realisation of a worthy goal. however success isn't all it's cracked up to be.

The journey to this point in the traders life has been exciting, exhilarating, despairing and all of those things we call emotional.

This emotion is like a drug and we get used to it - it takes so long to reach our goal that the highs and low's become a part of our personality.

when we reach the goal - we can't stop.

until the wake up call of course.

At this point we realise that the answer has been staring us in the face from every book we ever read, every forum we visited and in reality every trade we ever made.

In stage seven the trader realises he needs to work on one more system - the last one he will ever work on. (I think!)

It will be completely mechanical. No user decisions to make, no worry about news, no worry about what the 'experts' say or what's happening in the news.

Now some traders will pooh pooh this - many city traders work on fundamentals etc etc - but ask yourself the question - if they are so good why aren't they trading their own accounts?

Anyway, this is my experience and not theirs - these two extra steps are what's happened to me and that's why I did it in a new thread as opposed to tagging it onto the first one which is kind of generic.

so in stage 7 the trader starts to work on this totally mechanical system and after a lot of backtesting by hand and parameter changes etc etc he finally has it.

he can now work for a few minutes a day or even automate the system and not work at all. if he wants to go out then he makes money whilst he's out.

This is the stage I'm now at and happily enjoying the money I'm making and I may be wrong but I think that's what the majority of people who come into this business would like to happen.

This stage will make me rich beyond my wildest dreams. but what you reading this have to realise is that you MUST go through all that shit to get here - it's like going from being a teenager to being an adult - there are no short cuts.

That's why I laugh when I see people posting that they are consistently profitable after a few months or even a couple of years - they may be, but it wont be for long. I think that even if you say this in chat rooms and on forums like this you know the truth yourself.

So that's the last two stages at the moment - might get bigger with more steps in the future though cos I don't know what I don't know yet.

you may be at this stage and you may be wondering how you will know if you have a truly mechanical system - well if your system is truly mechanical you should answer the following questions with a yes.

1. do you have a clearly defined entry point that wouldn't change no matter who was trading the system?

2. Do you have a clearly defined stop level that would not change no matter who was trading the system?

3. If NFP or a similar high volatility news item was due in 3 seconds and your system signalled an entry would you take it?

4. Do you have a clearly defined way to close your trade that would not change no matter who was trading it?

5. could you tell your 12 year old son what to do to trade the system and his results would be no different to yours?

If you answered truthfully 'yes' to each question then congratulations
you have a truly mechanical system - now you've got to make sure it makes
money - that bit is up to you.

Hope this helps some out there who are struggling away. Know that there
is a light at the end of the tunnel, but it's a bloody long tunnel!
see you at the light end

From The Desk Of ...

Soultrader

.

03-06-2006, 08:49	#1
Soul-Trader2004 moderator Join Date: Apr 2004 Posts: 550 Downloads: 0 Uploads: 0 Rep Power: 0	The learning cycle for a newbie trader - PART 2 Hello everybody. Can't believe that it's 18 months since I wrote that thread - Jan 2005 it was. Well, as they say 'you never stop learning in this game' and that's certainly true. I thought it was time to add to the original thread with a new one - my last 18 months have been very interesting and many things have happened that I thought I would share with you that you may find useful. At the time I wrote that thread I was an intraday trader and had been making money consistently for about 18 months - I thought that was it, I had made it as a trader and was at the end of my learning curve. How wrong I was. I don't think that this series of threads will ever end, I expect I will be writing another update in 2008. When I look back at the last 18 months I cant believe how much ive changed from what I thought was the end of my cycle. At the time I was daytrading several strategies which made me money. In the ensuing months I just kept on testing new ideas - reading systems on here and other forums and testing them also. I got together with a bunch of traders in voice rooms and again started working on systems and testing. - again day in day out testing and trading - making money yes but never really getting closer to that dream that we all have of trading /easily, without emotion/ and having that millionaires lifestyle. Systems development started to become easier when I looked at the market holistically - I.e. not tying myself down to a single timeframe and watching at a macro level as well as a micro level. This resulted in the several screens I now have in my office so I could see all the timeframes at once - I was still specialising in GBP as to have more meant yet more screens and I thought that the study of cable would make me more than enough money. I did what many of you will do in the future. I developed systems, gave some away and sold some also - The Hilda system was in my opinion my crowning glory - a system that I could trade on any timeframe on any currency. I spent the time and sold my system to many people. When the fun of selling that and helping others died down I again started improving on it etc etc etc. But then the realisation started to hit me. All of this system work, selling etc wasn't getting me any closer to my goal of actually enjoying the money I was making. You see a journey to a goal is a weird thing. all of the fun is in the actual journey to the goal and when you get there its very easy to start moving backwards to do it again. what i'm about to explain to you is I think the final cycle in the journey to be a great trader and realising your ambitions. I may be wrong and find a Eighth step within the next two years lol - but for now this is the best I can offer you. Step 6 The wake up call When the newbie trader reaches step five he/she thinks that's it. They now make money well, look back on the forums and chat rooms they've used for so long and with a smile see the struggle they have been through repeated day after day as new people begin their journey. They see the highs and lows that they experienced, the heartache, the 'head in the gas oven' moments and the movement from sheer despair to brilliant exuberance. They continue to design systems to test - spend hours upon hours of hand testing with a smile - they know that no amount of computer testing is good enough to give you the confidence to trade the system properly. They test and test - still believing that there is a system out there which beats the one they are using now. They continue to get the latest designer indicator - hell, they even pay for them now as they know that a few hundred bucks for an indicator is worth it if it increases the take. Trading becomes a real chore and the rot starts to set in. Here they are watching charts all day long for that setup which pays the mortgage and buys the new car or house. The system they are using is still indicator based, still needs a shedload of charts open and still relies on a good charting feed. Even though they don't realise it for the most part, although their system is mechanical they still have decisions to make - when to close a trade, when not to trade, avoid the news etc etc. One day they wake up..... Step 7 - Learning NOT to trade Yep, you read it right. what happens to a trader in this cycle is that they get so wrapped up looking for improvements to their trading that they forget what they started trading for in the first place - for freedom. Yet here they are every day sat by the pc, still after 4 or 5 years testing new stuff, taking trades and even though they don't realise it making discretionary decisions on their trading. If they want to go out for the day of course they can - and they can enjoy their money. but whilst they are away they make no money because their systems main component is themselves. Here's what's happened. The definition of success according to Earl Nightingale is the realisation of a worthy goal. however success isn't all it's cracked up to be. The journey to this point in the traders life has been exciting, exhilarating, despairing and all of those things we call emotional. This emotion is like a drug and we get used to it - it takes so long to reach our goal that the highs and low's become a part of our personality. when we reach the goal - we can't stop. until the wake up call of course. At this point we realise that the answer has been staring us in the face from every book we ever read, every forum we visited and in reality every trade we ever made. In stage seven the trader realises he needs to work on one more system - the last one he will ever work on. (I think!) It will be completely mechanical. No user decisions to make, no worry about news, no worry about what the 'experts' say or what's happening in the news. Now some traders will pooh pooh this - many city traders work on fundamentals etc etc - but ask yourself the question - if they are so good why aren't they trading their own accounts? Anyway, this is my experience and not theirs - these two extra steps are what's happened to me and that's why I did it in a new thread as opposed to tagging it onto the first one which is kind of generic. so in stage 7 the trader starts to work on this totally mechanical system and after a lot of backtesting by hand and parameter changes etc etc he finally has it. he can now work for a few minutes a day or even automate the system and not work at all. if he wants to go out then he makes money whilst he's out. This is the stage I'm now at and happily enjoying the money I'm making and I may be wrong but I think that's what the majority of people who come into this business would like to happen. This stage will make me rich beyond my wildest dreams. but what you reading this have to realise is that you MUST go through all that shit to get here - it's like going from being a teenager to being an adult - there are no short cuts. That's why I laugh when I see people posting that they are consistently profitable after a few months or even a couple of years - they may be, but it wont be for long. I think that even if you say this in chat rooms and on forums like this you know the truth yourself. So that's the last two stages at the moment - might get bigger with more steps in the future though cos I don't know what I don't know yet. you may be at this stage and you may be wondering how you will know if you have a truly mechanical system - well if your system is truly mechanical you should answer the following questions with a yes. 1. do you have a clearly defined entry point that wouldn't change no matter who was trading the system? 2. Do you have a clearly defined stop level that would not change no matter who was trading the system? 3. If NFP or a similar high volatility news item was due in 3 seconds and your system signalled an entry would you take it? 4. Do you have a clearly defined way to close your trade that would not change no matter who was trading it? 5. could you tell your 12 year old son what to do to trade the system and his results would be no different to yours? If you answered truthfully 'yes' to each question then congratulations you have a truly mechanical system - now you've got to make sure it makes money - that bit is up to you. Hope this helps some out there who are struggling away. Know that there is a light at the end of the tunnel, but it's a bloody long tunnel! see you at the light end From The Desk Of ... *Soultrader* . __________________ Come Chat Last edited by Soul-Trader2004 : 03-06-2006 at 09:00.