Tag Archives: money

Ooh! Ooh! Statistics and Progress

So rather than continue to flail around blindly in the dark I decided to have a schlep through all the trades made so far from Jan’11 to present.

This was mainly to search for statistical support for my ‘feeling‘ that I’m finally improving as a trader.

Yes, this may come as something of a shock ūüėČ

Keep in mind that I’ve worked full time (and more) through this entire period and continue to do so. This means that I’ve not really placed a lot of trades in comparison to most I guess. In addition I’m still getting to grips with the seriously useful information I need to process from my last post here.

Anyway to avoid duplication¬†and because people always, always check this out I’ve written the actual info as an update to my Results Page here

Thanks for everyone’s continued support, comments and feedback

 

First time in a trading room – fun and very useful

So here’s a new experience for me that’s been something of an eye opener.

I had Thursday and Friday completely off work so took up Mike’s (@FtseDay on the twitter) kind offer to hang out with him and the crew in the trading room he’s created all focussed on trading the FTSE100 using a few really simple setups.

It was great fun since trading can be an entirely solitary experience plus the banter keeps everyone on their toes. The last thing you want to do is trade like a total d**k-head in front of a bunch of people ūüėČ

I’m pretty gutted that due to me work commitments I’m unable to spend more time in this environment because as a learning experience I’d reckon it’s pretty awesome. To come back to a previous post (here) I’d suggest that in order to be successful at trading you need someone to teach you. Books on trading don’t work. Books on psychology are on the other hand extremely useful. I’ll come back to this point in another post.

Anyway, being in a trading room would (imho) be the top of the list for the fastest way to learn and importantly make money at the same time. Some of the advantages:

  1. Multiple people looking at the same chart – many hands make light work
  2. Can see the same thing from lots of angles – you may be wrong but someone else is probably gonna nail it.
  3. See other people’s psychology at work – if someone’s more patient then it’s easier to ask/learn from them how they do it
  4. Quickly learn from others what¬†not to do ūüėČ
  5. Moral support
  6. It is competitive and that’s a good thing. Props to eddie and especially James for winning the ‘balls of steel’ award last thing on Friday.
  7. Nothing worse than someone taking a trade (which you didn’t) and see them making their target while you sit on the bench – thanks eddie (lol)
  8. You learn faster as you’re learning from the ‘collective’ not just yourself
  9. The market is¬†live and you’re trading it. You’re not learning from some static chart where the resolution (and success) is obvious with hindsight… This is a key advantage

Now this was all based on everyone learning/trading using the same kind of approach that Mike trades the FTSE100 with. I can imagine that if it was a ‘free for all’ room with no underlying ‘this is our approach’ theme then it wouldn’t be half as effective. However it was extremely useful.

If you’re new to all this and want to learn to trade effectively straight off the bat then I could do a lot worse than recommend you go check out what Mike is offering. Major bonus for the newbies is that he’s not taking the piss by charging stupid amounts of money for stuff that doesn’t work.

BUT before anyone gets way too excited though I’m going to point something out that I hope is obvious by now… There are still no short-cuts. No-one is going to hand you a guarantee that trade ‘x’ is going to work because it’s still your own psychology and experience that will determine whether you take a trade/setup or not.

I missed some absolute corking opportunities on both days but I still made some money while having a blast. So if this sounds interesting to you then go check out Mike on the twitter or here

In light of recent events, maybe a different approach to trading is needed

It’s important, if you’re learning a new skill, to meet and learn from people who are already very good¬†at the thing you’re trying to learn. This is self evident I think but if anyone needs proof then read some psychology. With this in mind it’s quite difficult to meet successful traders because they are thin on the ground, busy actually trading and not accessible to the ‘average’ punter.

However a few weeks ago I received an email from H2O promoting a day’s trading seminar by Anton Kreil – if anyone needs reminding this is the guy from the BBC2 TV series Million Dollar Traders. There were a couple of compelling reasons for me to attend this paid event: –

  1. Learn from the experts (see opening paragraph)
  2. Excellent value – compared to some stuff I’ve seen offered with little real ‘weight’
  3. Talked about taking a ‘different approach’ to trading
  4. Anton actually doing the talk rather than someone else
Now, without giving too much away I have to say the information Anton covered was easily the most useful I’ve seen and more importantly it just made sense.

I’ll break down why I think that last sentence is so important.

Looking at the experience I’ve had learning (teaching myself to trade) so far it’s moved in a number of stages: –

  1. Trading under a large number of false assumptions
  2. Losing and unlearning assumptions
  3. Getting educated but still making mistakes
  4. Questioning everything but still not being consistent
  5. Improving psychologically but still not having an edge and therefore still losing
  6. Taking a step back to look at the ‘big picture’
Currently I’m at stage 6 but I reckon lots of people give up before this point. It was also helpful that the seminar was on the Saturday following the first week of stock market falls…

Let’s concentrate on spread betting and the spread trading approach for the moment. I’ve posted this before but it’s worth repeating that people that start trading (especially opening spread-betting accounts with over inflated expectations) are told all about technical analysis and that it’s the way to approach the market.

No-one starts trading because they like looking at charts and love trading

On the face of it technical analysis looks simple to people who are starting trading and it’s sold as the answer to making money or even as a method for profiting from market moves.

This is where a lot of people spend an awful lot of time searching for the perfect trading system that delivers profits to them in all types of markets and regardless of what’s happening in the world. This plays into the market efficiency hypothesis and the quote that ‘everything is already in the price’… Unknown future events cannot possibly be factored into the price however.

Why was Anton’s seminar so very useful and why would I recommend it?

Simply because he’s managed to clearly present the framework¬†that professional traders adopt in looking at the macro-economic environment in order to decide what trading ideas¬†are going to make significant gains over the long term. This isn’t a ‘here’s a great strategy’ seminar – you can buy these by the dozen – but it covers how the professionals look at the world in order to make money.

Maybe I’ve been looking in the wrong places but after months of reading and trying to learn how to make money trading I can honestly say I’ve not run into the material presented by Anton anywhere else. So, if you wanted to look at the world and trading would you want to do this through the eyes of professional? I hope you’ve answered yes to this question!

I’d very much recommend anyone that is interested in learning a different approach to trading attend Anton’s next event here¬†http://futuretraders2nov.eventbrite.com¬†which contains more detail on the content.

Before anyone asks I’m not getting anything for promoting this event – it’s worth going to so go. Also, please don’t have the ‘technical analysis is the answer to everything’ argument with the guy at the front of the room. You’re in the audience for a reason and while TA is extremely useful you’ll learn why it’s not the be all and end all ūüėČ ¬†¬†¬†

Thinking of trading? Read this first…

Here’s something that’s been on my mind for a while.

Partly this relates to me but also relates to a lot of people I know who’ve either traded, are trading or have stopped for whatever reason… Maybe I’ll fall into one of these categories in the future. Who knows? We shall see… anyway, now I’m just procrastinating on getting this out there… here goes…

I don’t think most people get into trading because they like trading.

My belief is that the majority of people open a trading account because they are focussed on the end goal (which is sold as a Midas-like ability to pluck unlimited cash from thin air) rather than any stage in between.

For whatever reason they have an issue (usually around lack of money, what a surprise) that they think trading can fix. Trading is seen and sold as a short-cut to an amazing lifestyle of ‘working’ 30 minutes per day, sitting on a beach and not having to answer to a boss. Here’s some bullet points cut from some spam I received this morning: –

  • Set your hours to suit you. To succeed as a trader requires as little as an hour a day.
  • It’s easy to start. All you need is a computer, trading account, charting software – and the right training, of course!
  • You can trade from anywhere. As long as you can plug into the Internet, you can trade.
  • No tax on earnings. Spreadbetting in the UK is not taxed, so you keep everything you make.

Yep, you’ll notice it promises you’ll be able to trade. Great. No promises about being able to make money though – haha ūüėČ

Statistical probability shows that if you have enough people doing the same thing then x% of them will be completely awesome at it. They may be naturally talented. However, at this initial stage it will actually be a small number of people winning if you’re getting them all to perform a complex task.

Now, if you enter this arena when focussed on the end goal but don’t immediately (or quickly) begin moving towards this goal then you will get frustrated, upset and angry. Then you will quit. That was the end of your trading journey. How much you lost in the process depends on your emotional make-up… This is what most people do I guess.

Of the 40+ people I met who all started their trading journey in about Oct 2010 I know of 2 who are still trading… Everyone else has stopped or isn’t replying to email… probably also indicating that they stopped ūüėČ

The reason I’m writing this post is to remind myself to forget about the end goal when trading and to focus on enjoy the process of trading and getting this bit right.

I’ll readily admit that I too was sold the ‘shiny thing, make it all better’ idea of trading which was enough to get me hooked on the whole idea.

However, I’ve noticed that when I’m enjoying the process¬†of analysis I am able to approach trading decisions calmly without lizard brain dreaming up shite about fast cars and a life of luxury. Focussing on the process also means you don’t succumb to fear/dread/indecision around placing a particular trade which means you’re less likely to miss seeing/noticing something important.

What just gets in the way of making good trades is too much thinking/dreaming about the results you’re trying to achieve. The job is to trade well. If you can trade well then the money will sort itself out.

Ask yourself whether you can be flexible, disciplined and open enough to learn to trade.¬†You’re learning a multi-disciplined skill so that’s the thing to focus on. If you are worried about your ability to achieve the end goal of endless luxury, fast cars (as sold) then that’s very self defeating and de-motivating.

Your lizard brain will be doing it’s level best to ensure you screw it up to ‘keep you out of danger‘ Lizard brain absolutely hates taking risks.

Your reward for going to the gym = fitness. Your reward for turning up at work = salary and career progression. Your reward for making a good trade = money (potentially – you can make a good trade and still lose)

The main point though is you have to love the activity to benefit from it. Dreaming about the results is ok now and again but forget about them when you’re doing the work¬†to get yourself there. At this point dreams become a distraction and source of frustration.

Do the work.

This week… losing cash, gaining knowledge…

I guess if I was a pessimistic person I’d have given up learning to trade by now… However, this week had several high points, even though I traded out a >6% loss on my account. Here they are in no particular order: –

  1. I learnt a whole bunch of stuff (see below for details)
  2. I know what I didn’t do right
  3. My blog (here) got >300 views in a day (Sweet! Thanks everyone!)
  4. I didn’t repeat previous mistakes (mostly)… and¬†invented some completely new ones! LOL

So overall I’m still feeling positive about the whole experience. I really love trading and completely appreciate the support and interest of everyone reading my stuff so a big and humble¬†thank you¬†for all those showing interest. It’s extremely motivational and that helps greatly!

Let’s look at Thursday when, essentially, I got way too active and just took a truck load of dumb trades. Then I’ll go through the stuff I did today and subsequent improvements… PRE-READ warning… This is a long post… Get a cuppa and some biscuits… and lets begin!

Trading mistake number 1.

Placing orders to open on the FTSE before opening…

Yes, I realise I’ve done this before – but this time it’s different! No, honest guv! Except it’s not, and is still a rather random move. Who know’s really what direction the market will move in and why? Essentially my crystal ball is the same as everyone else’s.

So, entered long at 5896 at about 6:50 am without due care and attention to the fact that the price was slap in the middle of exactly nowhere and it thrashed wildly between profit and loss till 4pm when I got stopped out (stop too near previous support) then proceeded to rally 50 points when the US session kicked into high gear.

So retrospectively pretty ridiculous however I’ve now traced the root ’cause of the problem so read on for some thrilling conclusions…

Trading mistake number 2.

Making dumbass bets against the trend without due care and attention…¬†

Here it’s truly possible to say that a picture paints a thousand words… Went short somewhere in the early morning of the 26th… A thousand dumb, dumb words painted right here… ūüėČ

Trading mistake number 3. and 4.

Completely wrong entry based on (a) trying too hard (b) no real entry confirmation

This is quite an interesting one because I was kind of ‘half’ right on the first count… in fact the best entry point was actually passed when I went long on this trade. Looking back there was a bounce off 14,150 about 10.30 a.m. confirmed by a nice big up bar from support. I guess by this time I was feeling a little bit desperate about the whole situation and as I’ve mentioned before ‘lizard brain’ gets all frantic when it feels under pressure… Essentially I’m just winging it at this point…

In the second part I was slightly more sensible but failed to really consider what was going on. Where as ¬†the previous drop (10:30 a.m.) was followed by a pretty immediate and sharp reversal the price bounced across a 50 point range for around 45 minutes before I decided (bizarrely) to go short in a market that was overall trending up! Wow! Yes, I too am amazed. Anyway, I just wasn’t patient enough to wait for a proper entry signal…

Trading mistake number 5.

Didn’t stay in the trade…

This one’s especially galling because I went short on USDCHF and it was going in my direction… However, by this time I closed the trade for a tiny¬†profit essentially because I was pissed off with the whole proceeding. Now, if I’d have let that one run I’d have made all my losses back at least while I was asleep¬†which is almost ironic. Take myself out of the equation and I’m a great trader. LOL…

So, some people might say that’s pretty darn shocking. Purely on a ‘results’ basis they’d be right. Right! However, failure is only really failure if you give up or don’t learn anything from the experience. Here are some of the things I learnt and the actions I’ve taken.

Learning number 1

SIMPLIFY…

If you’ve looked at previous charts on my blog you might have seen a bunch of indicators and other stuff. This is now all gone. Frankly it’s confusing and doesn’t really assist me in making decisions. In fact all this extra information means my poor brain gets confused and I actually don’t¬†trade. Informational paralysis sets in and I think too much about thinking rather than simply looking with my eyes.

I also removed the day bar settings i.e. instead of alternating grey/white stripes for each day on shorter time-frames so the whole screen is grey, whatever time frame I’m on. Why? Well, because I found my self trying to ‘analyse’ the price movement in relation to day sized chunks. Does the market know it’s 12:31 on a Tuesday or 19:42 on a Friday evening? No. Is thinking about this getting in my way? Yes! So it’s magically gone.

Learning number 2

RELAX…

This could also be entitled ‘Hold onto your money and wait’ ūüôā Hopefully you can see from the examples above that in most cases I was too eager to trade. What do I mean by that? Well… what I’ve observed and also seen in various books is that when prices reach zone’s of previous potential¬†support/resistance they will react in a specific way. Ultimately they will go long or short and there may be some false breakouts on the way but when a level is broken up or down it’s usually followed by a fair bit of movement and a confirmation signal (candle)

So, since these moves occur around specific levels the strategy has to be to simply relax and wait for the price to confirm a move.

The worst¬†thing you can do is think “Well, I missed that confirmation by 90 minutes but I’m still going to enter the trade long/short.” STEP AWAY FROM THE KEYBOARD! You are now inviting the market to take money from you. A whole 90 minutes ago the consensus was ‘X’ and now it could be ‘Y’ going in the opposite direction! Who knows? Berlusconi could have been found in the ‘Blue Oyster Bar’ (see Police Academy for the reference)¬†and is threatening to leave the EURO unless the whole thing is suppressed… A lot can happen in the intervening time but what should have happened if you had noticed the trade is you could have moved your stop up to reduce risk/potential losses ūüėČ

The market doesn’t care about you. You must care about you and your money enough to not risk it unduly and take punts. Take properly managed risks instead. There will be another trade along soon. What I actually did today was program IG Index’s advanced charts to pop-up an alert when the price got to a previous area of support or hit a previous area of resistance. THEN¬†you can decide, from what actually happens to the price whether there’s the opportunity to go long or short.

Wait and let the market do the heavy lifting. Here’s trade I placed today that illustrates the right¬†way to do things…

With this new found wisdom I was able to pay attention and notice the following…

  1. The price is on an uptrend (that’s a victory right there)
  2. It’s gotten to 14,250 a couple times and dropped back
  3. It’s dropped¬†sharply back and then reversed to carry on in the original¬†direction

Actually what I did was put a price alert in first thing in the morning and wait. Secure in the knowledge I’ll get a pop-up when something interesting might happen and I can get on with other stuff in the meantime… I have no idea whether it’s going to carry on up or drop but what I do know is that it did drop previously but when it falls then reverses this is a great LONG opportunity. Or alternatively it’ll stay above 14,250 and keep piling onto new highs for the day.

I’m aware of this being tradable and I’m looking for a good entry point which is confirmed by the price doing something. Now, one thing I didn’t quite get right here is that I brought my stop up to entry too quickly and was stopped out on a temporary retracement shortly afterwards. However I did two things right. I followed my newly aquired strategy (SIMPLIFY) and waited for the trade to come to me¬†(1) which is way more RELAXING¬†and I didn’t lose money (2)

I do also have a theory I’m working on based on the following two graphs which will illustrate the point. It may as well go here so I can go for the longest blog post record attempt ūüėČ

Graph A

Graph B

Both graphs represent 10 trades but graph B¬†shows the effect¬†on overall profitability of the stops being moved up to break even aggressively. In this (admittedly) textbook example the results overall of graph A¬†is a¬†+120 point gain. Graph B illustrates a +240 point gain. I know which one I’d rather have. Now, of course there might be occasions where a potential 60/80 or 120 point¬†winner could have been never happened because¬†it had been stopped out in the first¬†few periods… this does¬†need looking at further and tracking over a lot more trades.

Think about it this way though. If you’re trading it’s about managing risk.¬†Placing a trade with a stop (always) and then waiting for the price to rise to a point¬†where it might at least be sensible to consider moving that stop to break even is where all the risk is in the trade. This is the bit you’re going to lose in a trade if you’re going to lose anything.

Now, this is only in here because it’s¬†on my mind at the moment. It’s absolutely not something I recommend people go and implement in their trading at all! I guess for this to work you’d have to combine selecting (and taking) a good entry with the trade going pretty much in your favour¬†immediately. It might prevent lots of little losses on more marginal trades or it might well mess up the overall profitability of your approach altogether.

Overall I had a great week trading. No, I didn’t make money but I made¬†some positive changes to my technical approach and¬†the mental/emotional management of what I was doing improved hugely. I can look at a chart and decide how to react when the price reaches levels of previous importance. I’ve cleared up what I’m looking at so that¬†trends/direction should¬†be much more obvious in future and I can react accordingly.

Technical approach

Only trade from levels and with the trend (unless it’s obvious the world has ended) I will post about this some other time…

Mental/emotional approach

Relax and let the trades come to you. If you missed it then you missed it. Don’t try to force the market. You are not a Jedi

So¬†now it’s simply a matter of practice, and buying more biscuits… Ach no! My tea has gone cold!

Realistic targets and why people quit…

On another (closed) forum I’m a member of we’re engaged in a fierce debate (ok, there seems to only be a few of us left… lol) about what happened to the other 40+ members of the original courses that we went on. Where did everyone go?

I believe that in undertaking any new venture it’s extremely important to have realistic expectations and to understand that learning a new skill requires time, effort and patience…

I’m sure a lot of people are prepared to fork out huge sums on training and courses because they fully expect to make it back almost immediately. Unfortunately, unless they’re extremely fortunate in their initial trading I think it will take¬†most¬†people a while to get themselves to a point where they’re making consistent profits week in week out. As far as trading for a living goes? Well, I’ll come back to that…

So there’s a bit of conflict here. Companies need to sell courses so are prepared to put a rose tinted glow on what they’re offering. Hence many fall at the first hurdle when cash doesn’t magically fall into their lap…

So what is realistic? Let’s start¬†really small

Target 1. Make ¬£50 per week. No, seriously just ¬£50. That’s ¬£200 per month or ¬£2400 per year.¬†
You’ve possibly just given yourself a 10% pay-rise (remember it’s tax free) or paid for a very decent holiday… well done!

Target 2. Get twice as good and make ¬£100 per week. That’s ¬£5200 per year.
First rule Take some of this money and buy you and your family something nice. Make sure they know this is a direct result of you looking at a bunch of wavy lines on a chart.

Now, again if you’re starting with a small account and you can pull this off you are already a superstar. Give yourself a pat on the back and keep going. Don’t get cocky and pay very close attention to risk management. I think you realistically need a trading account over ¬£5K to achieve this with minimal risk but that’s just my opinion.

Target 3. What are your daily living costs? Take the amount you actually spend in a month and divide it by 30 days. So for me this is £83 per day (holy crap!)

Work on increasing your account size to be able to use¬†leverage¬†to achieve this modest goal. Yes, a 42 point rise at ¬£2 per point will cover it. Don’t try to place a trade on everything under the sun!

Minimize risk to reduce stress¬†and don’t trade with your last ¬£200 in the bank because you will trade like a scared monkey brain. If this means you have to wait a bit then bloody wait!

If you can achieve target 3 then you are¬†FINANCIALLY INDEPENDENT¬†Yes, this is what all the guru’s talk about. Your activity¬†outside your job¬†is paying for your life. Now here’s the interesting part.

Target 4. What is target 4 for you? 

Do you want to trade full time? How much money in your account do you need to do this while generating a positive equity curve? What size ‘buffer’ do you need to trade comfortably and live without financial stress? Is this the point at which you are going to give up your job? Is this something you’d never consider? Do you need to?

I believe everyone is sold on the basis of what they believe ‘Target 4’ to look like for them. What people tend to forget is that the way to eat an elephant is one small bite at a time…

What have I been doing??

Right, so no posts for a couple (6?) weeks! Which begs the question – what have I been doing? I guess the main thing is attempting to get my head working in a correct way and deal with a couple of underlying issues.

1) I firmly believe that if you don’t have enough money then you don’t have enough money to trade with! How can you be expected to make a rational decision which involves managing risk if your outlook is that you actually can’t really afford to take the risk int he first place! Putting it like that of course it makes no sense ūüėČ

2) There has to be a process for trading and the key thing to concentrate on is loving the process and making it into a habit. You might get the opportunity to analyse the market for 3 hours on a Sunday BUT you probably need to spend this time looking at what’s going on EVERY day to not get caught out by something.

3) Measuring, recording and tracking what you’re doing… VERY important. I’ve just finished building a Filemaker Pro database to help me do this. It’s extremely useful and helps me put what I’m doing into some logical and questionable framework. Now, I’m of course not in control of the markets BUT at least I can use this as a framework for recording trades, ideas and analysis. The key point here is to be able to measure your own performance/learning against your results.

I hope to put up more details and information up here in the next few days