The learning cycle for a newbie trader

[tim_nn]

Originally Posted by taxmem

Yet i have to make up a system to be able to do so correctly most of the time?

No.

Would you like to come up with a system that is correct 30% of the time and wrong 70% of the time?

How about if each time it's wrong (70 times out of 100 trades) you lose 20 pips including dealing costs and each time it's right (30 times out of 100 trades) you win 70 pips net of dealing costs? That would mean that out of 100 trades, you would win 2100 pips and lose 1400 pips. Net profit 700 pips = 7 pips per trade. Do you see what I mean?

I'm not suggesting that that's the sort of system you _should_ be looking for, and in fact that sort of system might have some other problems (like making sure your money management can cope with the _really_ long losing run you'd definitely have at some point!), but it's just an example which helps to show that it's possible to get "direction" wrong more often than right and still make a living if you cut losers short and let profits run.

[taxmem]

Midge

Not true. You need a system that works, whatever the reason!

Quite true ,the trend is your friend;repeated to me a thousand times by many.So the basis of making a system is there?Yet it proved no friend of mine.
Maybe my impatience is my worst friend?

[taxmem]

Thanks Tim_nn ........ and Midge,

[quote=tim_nn]No.

That would mean that out of 100 trades, you would win 2100 pips and lose 1400 pips. Net profit 700 pips = 7 pips per trade. Do you see what I mean?



Guess all three of us are right.1.There is no way to predict. 2.Never the less the trend is always right.3.Of course it can turn on me if i over ride it.4.I should maximize my wins and cut my losses that way i'll be a winner even if the trend is mostly against me.

Fine i'll try only that and try and forget the rest of the TA theories for the time being.Wish me luck.

[homish]

The succesful trader, the ones that are making consistantly are the ones that have discovered the "Holy Grail". Trouble is 95% spend their time looking for it in the wrong place. Thankfully I found it. So I guess I have been through all the stages. You don't half kick yourself and smile when you do find the "Holy Grail" though

[Soul-Trader2004]

quite true - found mine in a most unexpected place :

Once youve found it tho youve gotta make money with it - there are many languages in the holy grail and heres the key....

When you have found a grail spend the time to optimise it to reduce max drawdown to below 10% when playing straight lots.

then find the optimum compounding formula to keep max dd below 30%

then trade it.

The important part is that the initial max drawdown is below 10% otherwise compounding will hammer the hell out of it and a system which wins flat trading may in fact blow your account when compounded.

and compounding is the key to wealth in this game.

my grail = 7% max drawdown uncompounded = 27.3% compounded 7:1

[homish]

Na, still off the mark, Soul-Trader.So better put everyone out of their missery....
The "Holy Grail" exists within each one of us, anyone can trade successfully, that is what is so beautiful about this business. We just have to find that Grail within ourselves.
Bad news perhaps if we all find it at the same time though!

[Soul-Trader2004]

yes, all within us mate - just sat in our brain - many even find their own 'grail' so to speak but their head doesnt let em play it long enough to prove it and they swap and turn from one strat to another eventually blowing their account. (did it several times in my own case!)

[Atomised]

Dunno if anyone is familiar with a guy called Henry Rollins ? Well anyway read something in one of his books that i thought was very true and also very related to trading........

"Long ago i threw out the idea that the world was against me, trying to undermine all that i was trying to do. I used to think the same thing about life itself. I used to think that life was hunting me down and trying to destroy me. I have found that to be untrue. It's always the easiest way out, trying to blame your problems on something else, someone else. I threw out the ideas that the world and life were my enemies. I found that i was protecting myself from the real enemy that i had not yet dealt with - myself. As soon as that was stripped away, i saw things more clearly."

Maybe change the words "world" and "life" in this for "markets" and it'll seem more relative ? Basically we are our own enemies, not other traders, not the markets not such and such and so forth !!! Took me over 3 yrs to learn that one !