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Old 05-12-2011, 08:20 AM   #1

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Advice for Beginners....don't Try to Make Money.

I hear you say. But really. I think that this is perhaps the single biggest factor in the high failure rate of new traders. Perhaps it would be better put that you should not expect to make money.

Let me put it in a different way. A beginner will come into trading and have had very little experience of anything similar. The market will however look familiar somehow and tease them into thinking small successes are down to skill. After all, humans like certainty and are quite happy to congratulate themselves when they think they are good at something.

Would you expect to pick up a guitar and then a month or two later be playing at a rock concert? Would you expect to pick up a paintbrush and shortly after have an exhibition on display at the Louvre? Probably not. The difference is though that poor trading costs you your money. Coming into trading, you will be pitted against seasoned professionals, massive hedge funds, banks and computer systems to name but a few.

Losses early on affect more than just your bank balance. They affect your emotions and your ability to learn and develop confidence in your understanding of markets and methods you use to trade. If you don't understand how to 'take a loss' this can be catastrophic.

Do yourself a favour, when you start trading, trade to trade well, not to make money!
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Old 05-12-2011, 07:56 PM   #2

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Re: Advice for Beginners....don't Try to Make Money.

I have a suggestion. When someone first registers at Traders Laboratory, automatically send them some tips, or links for beginners. They may not be a beginner, but it won't hurt.
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Old 05-13-2011, 01:32 AM   #3

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Re: Advice for Beginners....don't Try to Make Money.

Quote:
Originally Posted by TheNegotiator »
Would you expect to pick up a guitar and then a month or two later be playing at a rock concert? Would you expect to pick up a paintbrush and shortly after have an exhibition on display at the Louvre? Probably not.
Those are good analogies. The underlying comparisons have to do with:
  • Level of proficiency
  • Time spent practicing
  • Time spent studying
  • Professionalism
  • Performing to a degree of excellence

If you are a "C" grade student of trading, I doubt you will make money. To make money trading, you need to get an "A" for a grade on the test. A 75 score out of a possible 100 won't get you anywhere. If you are not on the "honor role", you won't make any money. In school, you can take a few notes, rely on short term memory, and hope the True/False answers come out in your favor, and get a passing grade. In trading it's a different story. You not only need an "A" on the test, you need to be able to apply it to the real world of trading.
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Old 05-13-2011, 08:49 PM   #4

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Re: Advice for Beginners....don't Try to Make Money.

Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start. Just remember to look for trades that have a decent probability for a high reward to risk ratio (such as 5 or 6 side-by-side bars on a 120 minute chart in just about anything breaking out into a steady move on a 15 minute chart: trade any 15 minute bar that shows price rejection, such as a rattail candlestick; risk half the rattail range and lock in profits as the move breaks from your entry zone...)
How dare you advise people to settle for mediocrity when one needs to build successes in this business to stand a modicum of a chance at success???

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Old 05-14-2011, 10:51 AM   #5

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Re: Advice for Beginners....don't Try to Make Money.

Quote:
Originally Posted by phantom »
Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start.
I once read that if you trade to trade well, money naturally follows. I think this is good advice because it takes the trader's focus away from the money aspects and more towards trading itself. This fact alone typically means better control of emotions for the trader.

It's especially good advice for new traders because it can help dampen those "get rich quick" urges.
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Old 05-14-2011, 12:38 PM   #6

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Re: Advice for Beginners....don't Try to Make Money.

Quote:
Originally Posted by phantom »
Don't try to make money? Are you out of your mind??? Of course you should go after profits right from the start. Just remember to look for trades that have a decent probability for a high reward to risk ratio (such as 5 or 6 side-by-side bars on a 120 minute chart in just about anything breaking out into a steady move on a 15 minute chart: trade any 15 minute bar that shows price rejection, such as a rattail candlestick; risk half the rattail range and lock in profits as the move breaks from your entry zone...)
How dare you advise people to settle for mediocrity when one needs to build successes in this business to stand a modicum of a chance at success???

Luv,
Phantom
I think you missed the point. In your example you cited a few examples of a particular high probability setup. But how would a beginner know and identify that- even after reading your advice?

What the originator of the thread is suggesting is that emotional capital is as important as financial capital. If one has "beginners' luck" he really does not know why he made money. When that beginner starts to lose he does not know either, but ends up being in a situation where he becomes afraid to trade, and even with increased skill cheats himself because of the fear.

What I think the originator is suggesting is that the beginner build a set of skills, a system and practice before putting much capital at risk. You wouldn't see a baseball player (even a Little Leaguer) go to bat in a real game without batting practice would you? Well... There are no Minor Leagues of trading.
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Old 05-15-2011, 12:51 PM   #7

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Re: Advice for Beginners....don't Try to Make Money.

How dare me? Well you definitely missed the point I'm afraid. As Stanton said, how does a beginner know what a high probability setup is? Otherwise why is there such a high failure rate and so many blown up accounts? Everyone who tries to trade should be a millionaire right? Maybe even a billionaire. J/k. But the likelihood is they will think they know how to trade. Trading is a highly competitive game and it's unlikely that you'll make money as a beginner by being more skillful and faster than seasoned pros. You probably were just lucky. But you won't know it. Losing the money by trading in a way you think is correct, will piss you off. You'll probably start pushing harder to make it back. Maybe start averaging in on losing trades. Before you know it you'll have an empty account and a damaged ego.
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Old 05-15-2011, 02:54 PM   #8

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Re: Advice for Beginners....don't Try to Make Money.

I missed no point. I understand all of the ins and outs of the beginner's plight. But its been my personal experience after working one on one with many individuals over the years that the number one reason people wash out in this business is a lack of patience waiting for high probability breakouts to occur. Trade selection and risk management are the ONLY two factors a trader has control over.

I see beginners time and time again try to chase a moving market and take unnecessary losses because they get trapped in the volatility.

I realize that newbies don't know enough to know why they are correct or incorrect in their trading but there are myriad books available on trade setups, And way back when, I was able to make ten thousand dollars on a single trade I got from the Street Smarts book just by cookbooking it when I had no idea how to trade correctly.

My point is this: this business is about positive expectancy and execution. If you bypass the "action junkie" mentality and use a modicum of emotional control while waiting for good setups like the one I gave you above, you stand a much greater chance of not only surviving the game, but actually making money while gaining the experience necessary to trade well week in and week out.
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