amatulic

What I'd pass on to traders just starting out: Learn price action. Fancy indicators and robotic trading techniques are no substitute for knowing price action. Try taking all your indicators off the chart, maybe leave a moving average and volume. Chart some trades, figure out how to enter and what exit targets to use. Learn how to identify trends and chop and waves. Learn price patterns. Trade this way in a simulator for a month. You'll be surprised. I can now look at a crude oil chart with only price and volume and see right away whether price is trending or about to reverse, and where I should place my orders. Books by John Hill are useful for this learning. Draw by hand your trades on a chart for at least 5 days or 50 trades before going to the simulator. That way you know better what to look for in real time. Use the simulator. Don't go live until you can demonstrate a winning record for 3 weeks, like 13 out of 15 winning days if you're day trading. This is hard work. Your live performance will be worse than your simulated performance, due to the emotions attached to having real money at risk. If you can't do well in simulation, you will fail when going live. Everyone knows that under-capitalization is dangerous, but so is over-capitalization, because an inexperienced trader can just as easily lose a large account as a small one. For me a good rule of thumb is the starting account should be 7-10X the margin requirement for 1 contract for whatever you're trading. Money management isn't just to determine order size. There's another kind of money management for setting limits on when to quit for the day. How much can you lose before you quit for the day? How much must you win and by what time, to allow you to continue? For example I have a rule "If my 1-contract losses exceed $300, or if I'm profitable but haven't exceeded $200 in profit by lunch time, STOP, my day is done. If I have exceeded $200 I continue as long as I'm above $200." If possible, find a mentor who is successful at what you're trying to do, not someone who makes a living teaching others, but someone who trades for a living. Discipline. Be consistent in applying your rules. It is so tempting to make changes and exceptions, to try un-tested ideas as you go along. Resist doing that. If you get a new idea, test it thoroughly. That's from the top of my head. I'm sure others will come up with other useful nuggets of advice. About learning to code: Not necessary. I'm an experienced programmer, and I find that to be a useful and helpful skill, but it isn't mandatory. A couple experienced and highly successful traders I know (one has been trading for a living 35 years) couldn't write code if their lives depended on it. They know price action, and use two or three basic indicators to add some clarity. -A

The best thing about CL, though, is that it's a great market for learning price action. Of all the markets, CL seems to adhere the most to chart formations, elliott waves, double tops and bottoms, and so on (at least on time scales of 3-10 minute bars); everything a trader would want to practice charting trades without indicators. -A

A few things wrong with this article. Not really. There's an incredible degree of randomness too, depending on who the players are at any given moment. Price action is more about understanding how the big guys who drive the price are screwing the little guys, what each population is thinking, what they are doing. It's understanding that brokerage firms already know what price patterns the newbies are looking for, and knowing when those firms are likely to trade against them, and deciding that you'd rather be on the winning side than the newbie side. Nothing wrong with that, but it's an unnecessary waste. Screens are fine. The best thing you can do for yourself is take all the indicators off and start trading, first by charting trades, then in real time on the screen, using only price (and volume if you're on a time frame of at least 5 minutes where volume starts getting meaningful). My mentor once got all upset with my focus on indicators and forced me to trade without them for a couple of months. It was the best learning experience I've had, a real epiphany to realize that I could trade profitably without any indicators at all. -A

Those are all highly correlated markets, so it really doesn't matter. I have ES, TF, and NQ displaying at the same time, and I use the price action on one to validate decisions I make on another. That said, I have noticed a certain trend-continuation entry signal I have works best on TF, worst on ES. NQ and Dow are so-so for that signal, not worth doing it on those. You could try the agricultural contracts like ZC too. For a good-trending market, try CL. Fast moving, strong trends, but unforgiving of mistakes (that is, if you make a wrong entry on ES, it's easy enough to get out at the same price, but not so easy on CL). If your usual trade duration is 15 minutes, stand aside at least that long before the crude oil report comes out. -A

Paper traded? As in, drawing trades on a chart? Or are you doing it in real time simulation? Charting trades and real-time sim are completely different things. If you can achieve your goal in simulation, that's a good first step. Personally I think it's too high. See if you can make consistently half that on a weekly basis ($150/day average) before you dip into trading real money.

One thing that one must remember is that the population of successful traders is rather stable while the population of unsuccessful traders is likely a different group of people every day. It isn't necessarily true that at any given moment there are 9 unsuccessful traders in the market for every successful one. Over time, however, a broker might see 9 losing clients come and go for each winning client. The 10% of traders who are successful rely on newbies continually coming in, because who else will the successful ones take money from? This is a zero-sum game, so it needs a constant source of fresh blood to extract. -A

I disagree with most of the responses here. I've written about this elsewhere. I see it this way. You have three independent attributes to trading: entries, exits, and money management. Your trade entry determines your initial risk. Entries don't determine winners or losers. The exit determines your profit or loss on a trade. Money management (position sizing) determines your overall return and drawdown. Of course, your entry and exit rules must result in something with a positive expectancy. You need all three to maximize your return. Most traders are ruled by fear whether they admit it or not -- that's why they focus on entries so much. It's a psychological need to avoid being wrong. A trader knows (perhaps subconsciously) that a good entry means less risk, and less risk means less chance the trader has to face the uncomfortable fact that he made a wrong decision. -A