Any young newbie traders out there?

[bobnat]

The two major errors I see are these.

1. That you will consistently win week after week.

2. That you will be able to consistently raise the amount that you're risking without affecting your psyche. It's easy when just looking at numbers, but what happens when you put on a trade and you've just put $10,000 at risk and it disappears? Sure, it may only be 2% of your capital, but it's still 10k. That'll take some getting used to.

However, before you have to worry about point 2, you've got to get past point 1.

Nat

[OneClickAway]

Bobnat,

Point No. 1--yes I agree that most traders can not expect to win consistantly every week, but I was counting on the average being 25 pips a week which would off set that one week or three week losses. And on Moneytec, the average pips per month that traders make is 371, so that won't be a problem.

Point No. 2--I have to disagree with that, because losing a certain amount of money is all relative to your capital. As long as its only 2%, I don't think I would have a problem with it, especially knowing that later that morning I would likely win that same amount back and more!

If I had 500,000 in capital and lost $10,000 in a 30 second trade---that would not bother me knowing that I had been able to win reletively consistantly up until that point, and that would be because (a) I had a tested system and (b) my emotions would be in check by that point, otherwise, I wouldn't have gotten to that point in the first place!

Warren Buffet made 893 million last year on forex trading with his company Berkhire Hathoway, and he only started two years ago (with larger capital that is).

[psperos]

I'm not, new but I am young. I'm 23 and have been trading for a few years. Recently I graduated from school with an economics degree and am now part of a startup fund. In short, I’m a full time trader. As nice as you think it might be(Dream job etc) the hours are much longer than any normal job. It ends up being more work than anything if you want to be profitable. My work goes over the weekend when the markets are closed too.

Just like any profession, business, law, medical… it takes more than time and effort than one would think if you want to do extremely well in it. There is no easy way to make money. The only thing that will make it easier is to have a passion for whatever you are doing. I have such a passion for the markets, the hours don’t cross my mind.

This is a brutal market when traying to make real moeny. This may not make sense, but the reason for entering it cannot be to make money.

[Rhody Trader]

psperos makes a very good point. Working professionally in the markets is not nearly as glamorous as many would think. For most pros it's long hours and lots of stress. That's why it tends to be a young man's game. There's money to be made, but it's kind of like professional sports. Better get the $$$ while you can, because you may not have a long career.

Trading for yourself too can mean long hours, but the difference is you can choose not to trade.

[OneClickAway]

psperos

You make a good point. However, I think it is difficult to compare professional traders to trading full time from your home computer. Professional traders would have to put in far more time in the profession because there are more considerations in your career such as meetings with co-workers, training for your specific company objectives, climbing the corporate ladder, professionism considerations, constraints on how you can trade your fund money, expectations, certain stress levels, etc.

None of these are present in a home based full time trading environment. Also, home based trading in forex is very specific--once you decide on your trading style and which currency pairs to trade and learn the techniques for making money, the learning curve seems to flatten out a lot. And making money becomes a little more mundane.

But dont' get me wrong---I put in lots of hours after the markets close too, including weekends. You see, I have an absolute passion for trading as you do.

Trader from Rhode Island -- Get the $$ while you can? You couldn't have said it better. And that's the reason that I would not want to go into professional trading---who wants to burn out on the job. Trade from home with a lot less stress!

[DrForex]

Making 5.4 Million Dollars from $3,000 in 25 weeks trading anything is totally unrealistic, so there is a major error in this calculation somewhere, but I don’t know what it is.

Hi all

Let me start to say this is a fascinating thread. Although i am a long time a member of this forum and just frequent it from time to time and found most threads usually peter out to nothing or personal attacks, it was refressing to get to page 10 and none of that. So this one seems to have something going for it.

1. I am not an engineer.

2. I am a full time trader, but also fx service provider for all of the reasons mentioned here.

3. The biggest problem considering expectations and how to achieve it and the reason why this calculation is wrong is as has been said, the problem of inconsistency. Nothing in this market is systematic and it become less so the shorter time frame you use to look at it.

As I said, i am no engineer or finance genius, but you guys can do yourselves a favour and read Mandelbrot's stuff about fractal geometry. I have made both 100% in a month and 100% in two consecutive years with my own money and as a manager of other peoples money i have sofar turned net profits. I mention this because I think it qualifies me to say, what Mandelbrot says about trading in the financial markets is in my experience true. Because he hits the consistency thing for a home run.

4. Bobnat is 100% correct in both his remarks and it is the two main reasons why you can't do it. We are simply not psychologically geared to continue compounding like a machine. The mere absolute dollar value will later play yo-yo with your emotions.

You get attached to sustained profits as one of the posters here perfectly described. (Medran p. 4). Andf then you dont want to lose it, because you love it and you adapt your riskm because you really don't need to take it to make that extra million for this high stakes ... We are motived more by the fear of loss than the prospect of gain.

5. If you want to make money you must have NO PRESSURE and prepared to lose quite some money (percentage wise) on any one or series of trades.

I'll close with this - something on why I think I have been lucky to be successful until now in the financial markets:

A dogged determination to succeed.

From day one when i started out with the same butterflies anyone else probably have, i was seriously motivated to succeed, for the result of failure was too ghastly to contemplate.

Adding to that, I had enough capital not to be dependent on consistent winnings when I traded my own money only (for a living). I had about a year's provision.

Because of the inconsistency I quickly realized I must get some other income stream going that is more stable and thats how i got involved in the FX market (I originally traded treasuries). It's again the pressure story.

I.e. I could really afford to lose the capital i started with (all of it) but I had no intention to go crazy with it. I had a real early wake up call when I lost a significant amount in one day, and saw it almost recover to square one the next. That taught me to stay out of wild markets.

I worked with the priciple that I am prepared to lose all the money I place on margin, but it is only 1/3 of what I venture in the whole exercise and the other 2/3 is progressively more difficult to access. I.e. 1/3 is in margin account and "at risk". I had one third in my cheque account and ready to use to add to margin if necessary. The final third was harder to access from house equity but available in priciple. (It never became necessary).

A last thing on leverage and taking higher risks with one's own money, trying to beat the pro's. It is certainly possible to beat the pro's, because the pro's are not going to risk what you may be prepared to risk. As a small fund manager these things are very real to me.

As a successful trader I can tell you this about leverage: If you can't make money trading 1:1, you wont make money trading with higher leverage.

Oh and a last thing. Don't fall in this one trade at a time trap. Scale into and out of positions on a multi price level and multi day or at least session basis, considering there are three trading sessions in the FX revolving around the bank trading in Tokyo, London and New York.

All of the best.

[OneClickAway]

DrForex

Thanks for your insight, much appreciated. You make several good points. Pschological barriers and inconsistancy in the market will always stop or slow down most traders. I suppose that is why I think I have adopted a strategy of always backtesting and constantly modify my own system (and looking for additional systems when time permits). Profits don't follow straight mathematical formulas, but it is interesting reading, and a goal to shoot for.

It looks like you are doing well.....time will tell for me. However, because i too have that dogged determination to succeed,,,,it will take more than a few bad trades to kick me off the markets.

good trading to you.

[joebarry]

50 Basic Rules
1. Follow the trends. This is probably some of the hardest advice for a trader to follow because the personality of the typical futures trader is not "one of the crowd." Futures traders (and futures brokers) are highly individualistic; the markets seem to attract those who are. Very simply, it takes a special kind of person, not "one of the crowd," to earn enough risk capital to get involved in the futures markets. So the typical trader and the typical broker must guard against their natural instincts to be highly individualistic, to buck the trend.
2. Know why you are in the markets. To relieve boredom? To hit it big? When you can honestly answer this question, you may be on your way to successful futures trading.
3. Use a system, any system, and stick to it.
4. Apply money management techniques to your trading.
5. Do not overtrade.
6. Take a position only when you know where your profit goal is and where you are going to get out if the market goes against you.
7. Trade with the trends, rather than trying to pick tops and bottoms.
8. Don't trade many markets with little capital.
9. Don't just trade the volatile contracts.
10. Calculate the risk/reward ratio before putting a trade on, then
guard against holding it too long.
11. Establish your trading plans before the market opening to eliminate emotional reactions. Decide on entry points, exit points, and objectives. Subject your decisions to only minor changes during the session. Profits are for those who act, not react. Don't change during the session unless you have a very good reason.
12. Follow your plan. Once a position is established and stops are selected, do not get out unless the stop is reached or the fundamental reason for taking the position changes.
13. Use technical signals (charts) to maintain discipline-the vast majority of traders are not emotionally equipped to stay disciplined without some technical tools.
14. Have a disciplined, detailed trading plan for each trade; i.e., entry, objective, exit, with no changes unless hard data changes. Disciplined money management means intelligent trading allocation and risk management. The overall objective is end-of-year bottom line, not each individual trade.
15. When you have a successful trade, fight the natural tendency to give some of it back.
16. Use a disciplined trade selection system...an organized, systematic process to eliminate impulse or emotional trading.
17. Trade with a plan-not with hope, greed, or fear. Plan where you will get in the market, how much you will risk on the trade, and where you will take your profits.
18. Most importantly, cut your losses short and let your profits run. It sounds simple, but it isn't. Let's look at some of the reasons many traders have a hard time "cutting losses short." First, it's hard for any of us to admit we've made a mistake. Let's say a position starts going against you, and all your "good" reasons for putting the position on are still there. You say to yourself, "it's only a temporary set-back. After all (you reason), the more the position goes against me, the better chance it has to come back-the odds will catch up." Also, the reasons for entering the trade are still there. By now you've lost quite a bit; you sell yourself on giving it "one more day." It's easy to convince yourself because, by this time, you probably aren't thinking very clearly about the position. Besides, you've lost so much already, what's a little more? Panic sets in, and then comes the worst, the most devastating, the most fallacious reasoning of all, when you figure: "That contract doesn't expire for a few more months; things are bound to turn around in the meantime."
So it goes; so cut those losses short. In fact, many experienced traders say if a position still goes against you the third day in, get out. Cut those losses fast, before the losing position starts to infect you, before you "fall in love" with it. The easiest way is to inscribe across the front of your brain, "Cut my losses fast." Use stop loss orders, aim for a $500 per contract loss limit...or whatever works for you, but do it.
Now to the "letting profits run" side of the equation. This is even harder because who knows when those profits will stop running? Well, of course, no one does, but there are some things to consider. First of all, be aware that there is an urge in all of us to want to win...even if it's only by a narrow margin. Most of us were raised that way. Win-even if it's only by one touchdown, one point, or one run. Following that philosophy almost assures you of losing in the futures markets because the nature of trading futures usually means that there are more losers than winners. The winners are often big, big, big winners, not "one run" winners. Here again, you have to fight human nature. Let's say you've had several losses (like most traders), and now one of your positions is developing into a pretty good winner. The temptation to close it out is universally overwhelming. You're sick about all those losses, and here's a chance to cash in on a pretty good winner. You don't want it to get away. Besides, it gives you a nice warm feeling to close out a winning position and tell yourself (and maybe even your friends) how smart you were (particularly if you're beginning to doubt yourself because of all those past losers). That kind of reasoning and emotionalism have no place in futures trading; therefore, the next time you are about to close out a winning position, ask yourself why. If the cold, calculating, sound reasons you used to put on the position are still there, you should strongly consider staying. Of course, you can use trailing stops to protect your profits, but if you are exiting a winning position out of fear...don't; out of greed...don't; out of ego... don't; out of impatience...don't; out of anxiety...don't; out of sound fundamental and/or technical reasoning...do.
19. You can avoid the emotionalism, the second guessing, the wondering, the agonizing, if you have a sound trading plan (including price objectives, entry points, exit points, risk-reward ratios, stops, information about historical price levels, seasonal influences, government reports, prices of related markets, chart analysis, etc.) and follow it. Most traders don't want to bother, they like to "wing it." Perhaps they think a plan might take the fun out of it for them. If you're like that and trade futures for the fun of it, fine. If you're trying to make money without a plan-forget it. Trading a sound, smart plan is the answer to cutting your losses short and letting your profits run.
20. Do not overstay a good market. If you do, you are bound to overstay a bad one also.
21. Take your lumps, just be sure they are little lumps. Very successful traders generally have more losing trades than winning trades. They don't have any hang-ups about admitting they're wrong, and have the ability to close out losing positions quickly.
22. Trade all positions in futures on a performance basis. The position must give a profit by the end of the third day after the position is taken, or else get out.
23. Program your mind to accept many small losses. Program your mind to "sit still" for a few large gains.
24. Most people would rather own something (go long) than owe something (go short). Markets can (and should) also be traded from the short side.
25. Watch for divergences in related markets-is one market making a new high and another not following?