20k given to me as business start up: need help

[stronghand]

Originally Posted by chriss

Search and search the internet and when you have finnished, search again, read read and read more, google is full of stuff, I found my success route from entering "worst case scenario for loosing trades/period" into google. Look for the worst rather than the image of riches in trading. Systems do not work-period. A big US company spent $50m trying to develope one and scrapped it, the market is moved by beliefs not numbers.

Good luck

I think it depends on what you mean by "systems". I have many techniques I use to stay profitable trading. each of those could be called a system. I think many people think that a system should be able to be profitable always. Thats not the case. Some systems are good for trending markets, some work great in consolidating markets. I think you need to know your system and only trade it in the situations where it works best.

[pipscooper]

Originally Posted by stronghand

I dont think I agree with that. How does the system making/losing money have anything to do with your discipline level? Or are you saying that for an undisciplined person, it is hard to have discipline when things are going wrong, and easy to have it when things are going right?

IMO the system's tradeability (profits, ease of following, etc.,) have a lot to do with the discipline level of the trader. Take a look at an example and see if you still feel the same way:

You have one moderately disciplined trader with two systems. He is trading both at the same time, let's say in automated fashion, so his computer does the actual entries and exits for him. Discipline still comes into play because ultimately the trader determines when to turn the system on, when to turn it off, and if/when to use any amount of discretion when he feels the system should be doing something other than what it is doing (including fading system calls). The trader's first system averages a new equity high every 500 trades. The trader's second system averages a new equity high every 30 trades.

My view is that because system 1 will be in a drawdown most of the time, it will be far easier for the trader to fade signals, turn off the system, and generally mess things up, than with system 2, which continues making equity highs (giving positive feedback for following the system and negative feedback whenever he misses out on profit because he countervails the system.)

Anyway as a moderately disciplined trader that has been my experience.

[stronghand]

Originally Posted by pipscooper

IMO the system's tradeability (profits, ease of following, etc.,) have a lot to do with the discipline level of the trader. Take a look at an example and see if you still feel the same way:

You have one moderately disciplined trader with two systems. He is trading both at the same time, let's say in automated fashion, so his computer does the actual entries and exits for him. Discipline still comes into play because ultimately the trader determines when to turn the system on, when to turn it off, and if/when to use any amount of discretion when he feels the system should be doing something other than what it is doing (including fading system calls). The trader's first system averages a new equity high every 500 trades. The trader's second system averages a new equity high every 30 trades.

My view is that because system 1 will be in a drawdown most of the time, it will be far easier for the trader to fade signals, turn off the system, and generally mess things up, than with system 2, which continues making equity highs (giving positive feedback for following the system and negative feedback whenever he misses out on profit because he countervails the system.)

Anyway as a moderately disciplined trader that has been my experience.

I don't think I would want to trade those systems. 500 trades to make a new equity high? Sounds more like luck than a good system. Basically I could have 499 losing trades and then one monster winner could push my account from 50,000 dollars to 50,001 dollars.

I just always thought that discipline also meant doing something even though it is hard.

[Rufanuf]

Originally Posted by stronghand

I don't think I would want to trade those systems. 500 trades to make a new equity high? Sounds more like luck than a good system. Basically I could have 499 losing trades and then one monster winner could push my account from 50,000 dollars to 50,001 dollars.

I just always thought that discipline also meant doing something even though it is hard.

Heres a different viewpoint. I would have thought the more trades involved in getting to profitable situation the less likely the system your using is luck. if you have system that can cover all those brokers spreads, and still get into profit....your headed in the right direction. The first thing I would do if i had system like that is start looking for ways to reduce my costs.

If on the other hand, its simply one trade that gets you into profit we all know what that means. A big fat zero!

Ruf

[stronghand]

Originally Posted by Rufanuf

Heres a different viewpoint. I would have thought the more trades involved in getting to profitable situation the less likely the system your using is luck. if you have system that can cover all those brokers spreads, and still get into profit....your headed in the right direction. The first thing I would do if i had system like that is start looking for ways to reduce my costs.

If on the other hand, its simply one trade that gets you into profit we all know what that means. A big fat zero!

Ruf

Thats an interesting point. Why would you feel that taking more trades to be profitable would reduce the luck factor? What if its just a good system?

[SoundFX]

This is true. The point is that anyone can make money with just a few trades. What you have to analyze is a broad range of activity. I think you can only truly say you're doing well if you've made hundreds of trades and are in the black. That's not to say that you should trade 50 times a day. But if, after 50 trades, you are profitable, then it likely wasn't luck. if your equity steadily decreases over the course of 50 trades, then your method stinks.

For instance, let's say you catch a trend on the daily chart and parlay 5 trades into $10,000. You may still have an unbelievably crappy system that will make you broke after it placed 5 more trades.

Wow, I'm kind of rambling. Does that make sense?

[stronghand]

Originally Posted by SoundFX

This is true. The point is that anyone can make money with just a few trades. What you have to analyze is a broad range of activity. I think you can only truly say you're doing well if you've made hundreds of trades and are in the black. That's not to say that you should trade 50 times a day. But if, after 50 trades, you are profitable, then it likely wasn't luck. if your equity steadily decreases over the course of 50 trades, then your method stinks.

For instance, let's say you catch a trend on the daily chart and parlay 5 trades into $10,000. You may still have an unbelievably crappy system that will make you broke after it placed 5 more trades.

Wow, I'm kind of rambling. Does that make sense?

Maybe I misunderstood? I didnt think he was saying that after a few trades its luck, but getting profitable after a large number of trades is skill.

The way I interpreted it was that a system is better if it takes you a long time to get profitable, then its probably not luck.

My opinion was that if a system is sound, why cant you be profitable right from the very first trade? Keep the loses small and hang onto the winners as long as they are making more money.

Maybe I think more in terms of running my trading as a business. Its gotta provide enough money to increase the account and enough to cover living expenses. If it takes a long time to get profitable that means I go hungry. And I do not like to go hungry!!!

Looking back on the comment, there wasn't enough info to get a clear picture. If you keep your loses small and let the winners run, then a system that is profitable 60% of the time will be profitable fairly early.

[Rufanuf]

[quote=
Looking back on the comment, there wasn't enough info to get a clear picture. If you keep your loses small and let the winners run, then a system that is profitable 60% of the time will be profitable fairly early.[/QUOTE]

Hi,

Your right stronghand, it was a brief comment, but actually it is a generic truth that the longer a system or person stays profitable in the market the more logical it is to say that trader or system is profitable overtime. I should point out I am an inexperienced trader. I can look at my trading activity over a number of different time frames, and a number of different "trades" (I have exchanged large sums of hard currency in the past too becuase I felt the currencies where cheap, and also thought I might like to live in the countries of origin).

If I consider soley my activities since I got my brokers trading platform at home (about a year ago), I am a loss making trader. If I consider the last 8 weeks I am a profitable trader, If I consider all my currency transactions including changing up hard currency over the last 5 years I am a profitbale trader.

The point I was trying to make is that you cannot rationally measure a system that has only been excecuted a handful of times, be it over the period of a day, month, year. On the otherhand your system may involve making a single huge trade that sets you up for life, and you have no intention of placing another. If it won you could argue you had a successful system...I think such a system is called gambling? And I must confess it holds a certain appeal, when you consider the difficulties of becoming a proficient trader.

If you have executed 500 trades and the 501st turns you profitable chances are that with a little tinkering a good system is in their otherwise your account would have blown ages ago even if you where exposing yourself to a risk factor per trade as low as 0.20% (500trades/100% of account), the fact the 501st could turn the account profitable suggests it would of made you 1500pips (typically the lowest spread per trade 3pips X500)) if you didnt have the brokers fees. Id love a system like that could trade all day and have fun! Instead of having to be very cautious as I am at the moment, as a learner.

Ruf