[TimRacette]

If you have $10,000 to put towards your trading account, don’t waste your time. As a matter of fact if you have $15,000 or even $25,000 in your trading account, don’t waste your time. That is, don’t waste your time with careless mistakes because every trade counts.

The Learning Curve is Flat
The learning curve for learning how to trade futures for a living can be extremely flat, that is you may spend countless hours learning all there is to know about the trading the markets, but you aren’t seeing a return in profits. Your time spent learning increases, but your account stays the same, or in many cases shrinks.

If you want to win at this game and become consistently profitable over time then you absolutely, positively, must be disciplined 100% of the time, all of the time.

Don't Waste Your Money on Tuition
Many people like to credit their trading losses in the early years towards “tuition” or “paying their dues” and while there is something to be said for learning by doing, there is no reason for justifying a trading mistake. Every error you make in trading is costing you money.

That First Step
When starting out as a trader, you probably traded a practice account for a couple of months and began to learn the ropes, testing your strategy (my broker of choice is Infinity Futures for both practice accounts and live trading). After becoming anxious you make the switch to live trading and realize that most of what you learned goes out the window when you’re in a live trade. Your emotions come into play and your methodology becomes foggy.

And the Light Bulb Goes Off
There are many “light bulb moments” along the way, but limiting the mistakes when you’re trading a small account is crucial if you want to prevent blowing up your account. Along with reading the material on the EminiMind Blog I recommend reading and learning from the mistakes of other top traders in the Market Wizards series.

3 trading mistakes that will lead to disaster:

Impulse trades – If you find yourself clicking sporadically on the trading ladder you need to stop immediately and reevaluate your trading plan.

Revenge trading – Just because you had a loss doesn’t mean your next trade needs to be a home run, try for consistent singles and doubles with a few strikeouts in the mix.

Trading too big for your account size – If you’re trading an account size of $10,000 then the max number of contracts you should be trading on the ES or 6E is 2, enough said.

The Only Guarantee
While no one can guarantee your success trading the markets (if you come across such claims be leery) I can guarantee you that if you make any of these 3 trading mistakes you will lose money. Treat your trading capital like you would your children, or if you don’t have children, like a one of a kind Porsche, you wouldn’t throw your kids in front of a bus so don’t piss away your trading account with avoidable mistakes.

Patience pays in trading the markets so don’t waste your time trading a small account. Every trade is a valuable step towards generating consistent income trading futures for a living.

[MightyMouse]

If you are expecting that curve to ever materialize, don't waste your time trading.

[TimRacette]

Can you elaborate? The gist of it is it's not a game of knowledge it's a game of execution.

[MightyMouse]

Tim,

The graph looks like the more trading knowledge you have, the higher the profits. At some point your profits increase geometrically compared to the additions of knowledge.

If, as trading knowledge, you are including inside information, I will agree; otherwise, acquisition of profits won't be as attractive as the chart makes it appear.

I am more likely to agree that trading success has more to do with your ability to execute than trading knowledge. But, execution alone won't do it. You can execute your account away if you have a poor plan.

MM

[TimRacette]

The way I read the graph is that you learn and learn and learn about the markets, but really don't see much results in terms of profits. It's not until you learn about yourself and can detach yourself from the money and can objectively manage your trades the same way each and every time that the profits begin to roll in. This is that last bit of learning that comes on the spectrum.

[Tams]

good post...
but some people will not read it in time to be of use.

[Tams]

Originally Posted by TimRacette »

...
Trading too big for your account size – If you’re trading an account size of $10,000 then the max number of contracts you should be trading on the ES or 6E is 2, enough said.
....

.......... that's generous.

[eqsys]

Originally Posted by TimRacette »

The way I read the graph is that you learn and learn and learn about the markets, but really don't see much results in terms of profits. It's not until you learn about yourself and can detach yourself from the money and can objectively manage your trades the same way each and every time that the profits begin to roll in. This is that last bit of learning that comes on the spectrum.

I don't think it's possible for anyone to "detach yourself from the money".

When my accounts were smaller I didn't mind experiencing 20-30% drawdown, but now I always know my max backtested intra-day drawdown and make sure if that happens again I will be down net overall less than 10%.

The max drawdown may only happen once every year or two, but half that amount can and does happen frequently - just look at your daily equity runs.

If you aren't backtesting your strategies over at least one year of data, and don't know the max intra-day drawdown that happened over that test period, so will absolutely run into a series of bad trades that will cause you to do something "stupid" - like selling out at the bottom, doubling down, making the wrong trade by mistake, bailing on your system just when it's about to get profitable again, etc. The list of mistakes is endless...

What I sense, by reading posts from novice traders, is they think this is easier than it actually is. The problem with trading is in the drawdown - whether it be the losing trades, or the down days, or the maddening wild market swings that make absolutely no sense.