Monthly Archives: November 2011

Learning to spreadbet hint – get good tuition

Most people who read this blog are interested primarily in trading and so won’t be aware of a certain personality trait that I possess. In actual fact it’s possible that anyone reading this who does actually know me (hi!) may not be aware of this fact…

I have a tendency towards extremes…

How does this manifest itself in the real world? I took up running (from a standing start) and went on to complete an ultra-marathon a few years later. I’ve spent a lot of the last five years in the gym and now look totally different physically… These are a couple of the more obvious examples.

So when it comes to trading my intention is to become really, really proficient. One way I’ve done this in other areas is to read about whatever subject (like psychology) a lot… and with trading I offer up exhibit A) which is a pile of about 30 books just on trading.

Yes, I don’t yet have a smart phone (see older post as to the reason why) and the picture resolution is bad so apologies for that…

It’s a big pile and I’ve read them all. Some I’ve read twice.

Now here is the hint I’m giving to people trying to learn to trade. You can learn a lot of things from books. However all the big steps forward that I’ve personally made as a trader have come from direct exposure to someone who is actually trading in the current market environment.

Let me repeat that.

You need to find someone to teach you to trade.

You need to get exposure to people who are successfully trading at the same time that you are trying to learn. They will know what works ’cause they’re doing it. For all sorts of psychological and other reasons listening to someone talking about trading is way more applicable to the real world of your trading now than the stack of books I’ve (badly) photographed above.

As a side note, stay off forums. Traders aren’t posting shit on forums. Traders are trading. Much the same way that the people talking about the markets with hindsight on TV aren’t trading either 😉

Here’s where new people wanting to make money trading get conned (notice I said make money trading, not learn to trade – I’ll come back to that some other post) There are people selling all sorts of shortcuts that promise to teach them to trade in a weekend. These sharks promise the earth but delivering less than sod all. If you want to learn properly about trading then you will more than likely need to invest in some training but please check them out first

Happily, there are also some genuine individuals out in the world who do want you to succeed and even better are prepared to give away free and useful advice!

People! Grab these opportunities with both hands and listen to what they have to say. If you were an aspiring professional sportsman and one of the guys who is out there winning medals offered to give you advice for free then you’d take it, right?!

So with the point I’ve made in mind (find a good tutor – duh!) I suggest you grab the last few remaining free training spots being offered this week from Mike (@FTSEDay on Twitter) which are on a first come first served basis so email traders@ftseday.co.uk

I wrote a blog about the last session here which has helped me get my head around an issue I had with trading. So there you have it. Find someone to teach you that’s doing it, not writing books about how they used to do it and practice

‘Issues’ with risk vs. reward

I’m about to argue for the slaying of a sacred cow… In an awful lot of trading literature you see the following. If you have a system that delivers a certain amount of ‘x’ reward for every ‘y’ risked then you only need to get a low(ish) percentage of trading decisions right and you will be profitable over time.

Frankly this sounds like a crappy basis on which to build a business.

What people do all the time is confuse and interchange the probability of success of a particular trading idea with a high reward vs. risk ratio.

THEY ARE NOT THE SAME THING

What is far more important to me is having a clear understanding whether a particular trade idea has a high probability of success in a given set of market conditions…

If your trade entry is crap then it doesn’t matter one hoot what your ‘risk/reward’ is it’ll never bloody get there. You’ll either lose straight off the bat or will never reach the target you need to justify the crappy position you took in the first place.

Now here’s where this applies to me, before I get into a flame war with anyone 😉

The only way to realise whether you’re entering a trade for good reasons is if you compare your reasons with what happened and your exit later. This isn’t possible unless you record all your trades. Have I been doing this? What do you think? Hell no.

But I will be from now on. Every single one. Without fail.

Only then will I have a clue whether taking a trade for ‘x’ reasons under ‘y’ conditions is likely to work. This is the percentage/probability I’m interested in.

The reward/risk can take care of itself 🙂

Where I’m at…

So I thought I’d draw on some other skills to illustrate where I’m at with my trading at the moment…

Yep… Behind the mountain of information, voodoo and lies that people are telling you (as well as stuff you need to unlearn) about trading is a bigger mountain.

The bit between your own ears is where psychology enters the frame and regardless of your technical competence in understanding what’s happening with a price on screen it’s even more important to have your mental/emotional approach sorted out…

Here’s another graphic which will make it clear where I’ve got to on the journey.

So clearly section (A) is basically me not actually having a clue how to trade at all

Section (B) is after having been exposed to Jimmy Young’s FX approach which is the best I’ve seen to date and is eminently trade-able. But clearly I’m still the issue 😉

At the moment I can place trades, they are good, low risk ideas but I just can’t seem to stay in them long enough as well as having challenges with accepting being off-side.

Still, it’s a huge improvement from section (A) and this is where a lot of people give up!

This week I was on the right side of two moves which if I had stayed in them should have got me >300pts but because the bit between my ears hasn’t actually had enough experience of dealing with being on the right side of a trade (this is very ironic) I made 2% of the potential from these decisions.

Silver lining

1) I made two good trading decisions
2) I am not losing my shirt consistently anymore (ok that one’s a bit thin)
3) The only way is up 😉

So hopefully this proves helpful for some and amusing for others.

More updates to follow over the weekend