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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Cormac who wrote (5006)	10/23/1999 5:26:00 AM
From: Matthew L. Jones	Respond to of 18137

Eric and Thread, Thought you might like this: theonion.com Matt

To: Cormac who wrote (5006)	10/23/1999 10:05:00 AM
From: Dave O.	Respond to of 18137

< key ingredients to successful daytrading? > Just my thoughts ... there a mutitude of ways to succeed at trading. When I was trading for teenies, 1/8ths, etc. I had a 76% winning percentage yet wasn't making money. Why? Commissions ate up so much of the small profits and a few losers got away. I used my engineering "logic" and realized that trading less meant lower costs and that I am a TA type trader so I needed to focus on TA and get away from momentum plays, from CNBC touts, etc. So by being more selective in my trades I've upped my batting average and trade much less now, more successfully and with less stress. And most of my trades are shorts, at least this year. In the end you need to determine what feels OK to you. Is the risk/reward of going for home runs worth it? Is hitting singles a better way to be consistent and likely a higher probability way to success? Each individual must determine that and can't necessarily try to emulate someone else's trading philosophy. < Why is it that successful traders can not successfully share their hard earned lessons > I think many do share such. Many of the lessons are the expensive ones ... letting a trade get away, first 1/2 point, then a point, then 5 points. Then it's an investment. Many never recover financially and/or psychologically. For me, trading has been an evolutionary process. I started with TA, did okay but became fascinated with pure day trading and did that for a while. Didn't do as well so I reverted back to what I feel I do best, the TA approach. One has to understand their emotional makeup and find a system that is compatible. It often doesn't happen overnight and can take years. Many don't have the time ... either they're too impatient, don't have a real desire to truly learn trading or wash out financially during the process. It's a tough road at times. Here's an article from another thread recently posted. Note the guy is not a 20something, not doing 100 trades a day. Rather he's in his 50's, does about 40 trades a month. Just goes to show there all kinds of ways to make it and all kinds of people who succeed. Message 11670056 Dave

To: Cormac who wrote (5006)	10/23/1999 12:36:00 PM
From: TraderAlan	Read Replies (1) \| Respond to of 18137

Cormac, <what is the weak link in the chain> The trader is always the weak link. This has been said before but I'll say it again: traders fail due to lack of discipline, not lack of knowledge. For the most part, trading knowledge isn't proprietary or secret. There (mostly) is no Rosetta Stone that, once known, will turn your lead into gold. It doesn't work that way and never has. Quite frankly, I've become convinced that all the recent talk about "mentoring" is a lot of horse manure. Not that the concept is wrong. I just don't believe new traders really want anyone to know how badly they screw up. Here's one: I'm a professional trader, respected author, teacher, blah, blah, blah. Suppose I told 10 people it was OK to send me their last year of trading slips/reports and I'll tell them all the ways they messed up, made bad choices, failed to exercise risk management, didn't follow their own written trading plan or chased the crowd. Chances are that few of them would take me up on it because their egos could not handle the humility of knowing just how poorly they acted on what they already knew and how little discipline they had exercised. Folks ask me why I only charge $99.95 for a trading course other organizations might push for $999.95. The answer is that they are pushing the illusion that you can actually buy their knowledge if you pay the right price. And they know that's nonsense. Only time and experience keep you in the game after you get the basics. You don't need anymore than the basics to set firmly along the path. You need time and experience and the trader-experts can't give you that. After doing TA for many years, I still discover completely new things about it. Should those "secrets" have been taught to me by Murphy or Elder when I first read them? Of course not. They're my realization, not theirs. I own that inside knowledge, they don't. Instructors/teachers/mentors cannot transfer ownership of inside knowledge. That always comes from personal realization, period. Alan

To: Cormac who wrote (5006)	10/23/1999 1:17:00 PM
From: Threei	Read Replies (1) \| Respond to of 18137

Hi Cormac, very interesting random thoughts and questions... here are some random answers. About teaching and weak link. My strong conviction is that weak link is always student, doesn't matter how good/bad teacher is. As a matter of fact, there are NO secrets hidden by those who trade successfully (I don't mean some particular setups/strategies, we all know they don't make difference between successful and failed trader). All trading "secrets" were published zillion times, and they all are valid. But their availability makes people feel like their value is questionable, and there are some more secrets, not that easy to access. I, for one, was asked plenty of times what is the secret of trading, and was not trusted by many when answered that there is no great mystery... The problem is, not enough to read/hear what are DOs and DON'Ts... One has to go through live experience. It can be more or less painful, depending on ones discipline, willingness to work hard, to papertrade first, ability to control emotions etc. But it still will be painful. Interesting analogy with teaching chess... and very close. Many great chess players becoming teachers/coaches try to pass their experience. Of course their teaching is of great value, and new grandmasters grow thanks to old ones teaching. But there is no chance that ALL who being taught by great chess players become as successful as he was. About those 10 stocks and 10 traders... my answer would be - no one knows what result of such experiment could be. And this is why. Not enough to have moving stock. For me, to trade it successfully, it should match my risk criteria and move in a way readable by my method of reading. If those 10 hypothetical stock would be Inet hiflyers with wild spread and thin levels, some of those 10 hypothetical traders would be OK playing them and some not - depending on their personal style. It's a long winter ahead - give us more those random thoughts to chew on :) Best regards, Vadym

To: Cormac who wrote (5006)	10/23/1999 4:02:00 PM
From: Eric P	Respond to of 18137

What are the key ingredients to successful daytrading? Is it a high % rate of winning vs. losing trades, is it keeping a tight stop loss on losing trades, is it having a few big gainers that outweigh your cumulative losses - what is the goal to aim for - singles, doubles, triples or home runs. DISCIPLINE gets my vote for the most important ingredient for successful daytrading. To have a chance of success, the prospective trader must have the discipline to refrain from trading until he/she develops a rational trading plan, then maintain the discipline to actually follow the plan. If a prospective daytrader can do these two things, he/she has a fighting change to be successful. The initial trading plan used by a trader will unlikely be successful, but it forms the foundation for modifications and improvements which will ultimately lead to profitability and success. Throughout this development process, the trader must maintain the discipline to stick with the plan, even as the plan evolves. If a trader deviates from his trading plan, he is lost. His gains are no longer reproducible and his losses cannot be learned from since the trader can't even define what he was doing which led to the profit or loss. This early developmental period should be viewed as a scientist doing research. Everything must be well documented and the research plan must be followed. Otherwise the results (good or bad) will be suspect and unreproducible. So my vote for the key ingredient for daytrading success is discipline, and my second vote would be for patience (#reply-10605291). Good luck, -Eric P.S. Keep those weekend 'random thoughts' coming. It keeps the discussion interesting!

To: Cormac who wrote (5006)	10/24/1999 2:24:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 18137

OK, I will take a stab at this based on my own experience and also the few years I have been observing other traders at work here at SI and elsewhere. Some of this material is very opinionated, but I hope you will still find it worthwhile. Q: What are some key ingredients that make up a successful trader? 1. Have good setups that when they do trigger and provide moves, will yield good thrusting moves. This makes managing the risk of the trade much easier. A related issue is that the setups must occur frequently enough in the chosen market to trade in order to help produce the trader's profit objectives. Another important aspect of this is the successful setup needs to occur frequently enough in the market for the trader to manage the series of losing trades that the setup can provide. 2. Money management and knowing when to cut losses short and also let profits ride. A corollary to this is understanding the potential profit to risk profile of a trade and how this picture can change during a trade. This is where the beginner and even a surprising number of experienced traders make their mistakes. 3. Recognizing when the profit to risk profile of a market has changed and is not conducive to their approach. This is related to the one listed above. A corollary is to not overtrade. Not every setup, no matter how perfectly formed, is worth trading. It is important to be selective about the instances of a setup to take as trades, and the type of markets to trade in. One secret here is to watch the price action that lead up to the setup. This is where many experienced traders make their mistake. 4. Have a system or approach that is made as mechanical and objective as possible and simple enough for the trader to execute. One that relies too much on intuition and the trader's own sense of "fuzzy logic" will have its swings in the trader's equity curve as the frame of mind of the trader can change and the trader can eventually get thrown around by market sentiment by not having a more objective reference to work from. Also the intuitive approach over time can generate anxiety that ends up burning the trader out. This can happen quickly when for instance the trader runs into a series of losses and starts to second guess their approach to the markets, feeling on some level that that they are losing their "touch" to the markets. 5. Discapline and focus. This IMO is one of the most significant problem areas for the inexperienced trader. For that matter, the same qualities in the person that makes the market look attractive to them can work against their success in the market. I am talking about this "gambler" mentality that even some of the most experienced and successful traders have in them. The difference here is that the successful trader learns to redirect his gambling desires and impulses toward a more productive end. Q: Why cannot any successful trader's share their knowledge and experience in such a way that a new trader can be successful too? I think this relates to two areas. One is that a good and successful trader has a approach that is not only part systematic, but also part judgemental and intuitive. This is particularly true in relationship to price action in how the trader selects the instance of a setup to trade, and also in how the trader executes the trade in knowing when to get out before the trade turns bad or knowing when to increase their position before the trade moves through a strong continuation leg. I have had the fortune to "look over the shoulder" of a few successful traders. You know what I found to my surprise? First, they will take what appears to me as borderline trades that may not and sometimes did not work out. They are always putting themselves "in the water" looking for that trade that will follow through. Also part of this approach is part intuitive, so what looks marginal to me may not to a given trader with experience in a setup. Second, they can actually misjudge setups and market conditions, and take losing trades as a consequence. This can happen not infrequently in some types of markets. Money management keeps them out of trouble here. Thirdly, and the most interesting, is that what they see on an intellectual level as their methodology or system turns out to be different in significant respects from what they actually are doing. I think this is true for any process that has a significant intuitive aspect to it. And the only way for a trader watching them to overcome this hurdle is to continually ask them questions on their trades. This assumes the aspiring trader understands what questions to ask, and is also in the position of understanding the significance of the answer. This most new traders are unable to do, and for that matter, most experienced traders are unwilling to submit themselves to this. Then the idea at this point is to develop ones own version of a trading approach using as a model what they are seeing that works (and does not work) for them in what the other trader does. This process of making an approach to the market one's very own approach is essential for the new trader's success. Finally, I think one can only hope to understand the markets and what it takes to execute successful trades not by watching, but by doing and then relating it to what you saw that worked for the another successful trader. This is where a mentor can be very helpful, but nothing can replace actual market experience. Q: Give a group of successful traders any given market that oscillates enough to generate potential profits, can these traders make money in it? This depends on if the specific market is conducive to a trader's approach. Just because the market wiggles does not mean a given experienced trader can make money in it. However, I will add a very important point here. If the trader's approach is based on a good understanding of how the mechanics of the market operates and its underlying structure, then I think they would find some way in making money in a given market, even if it means spending some initial time developing a technique that would work, even though it would not turn out to be their preferred market. This ability is IMO the essential difference between the experienced trader and one that will be around still trading well into the future. This is an essential skill of a trader that allows them to adapt to the market. This skill IMO most current experienced traders simply do not have. I have seen this show up most in how a trader of this caliber can be given a tool new to them to consider like Bollinger Bands. They can quickly utilize it in their trading to see how it works and actually make money doing this. In the end they may go back to their original method, but they were able to make an approach based on a new tool work for them and do this quickly. That is because these technical constructs are just tools that the trader understands does not make the money. The trader does not let the tool obscure what they are seeing clearly in the market. But many traders use these tools to paint the picture for them in place of the reality that the market is actually providing them through price action. Technical indicators are an imperfect solution at best when used in this "training wheel" fashion. Eventually the trader moves on to other set of constructs to make money, trading one imperfect solution with another. I have found that even setups can be used in the same way. Just some thoughts. Bob Graham