a few questions from an interested trader

1) TIME. I am currently working on my PhD in physics at UC - Santa Barbara. As a result, Between classes, homework, and research, I probably put in 80 hours a week. Is it even realistic to think I can learn to trade successfully by putting in only 1 hour per day? If so, what is a realistic amount of time one would need to commit to trading each day? Speaking of times, what hours of the day would I have to spend in front of the PC to trade in the pacific standard time zone?

2) INVESTMENT. From what I've read, it seems that to come up with a succesful trading system, one needs to be able to back-test said system. Unfortunately, all the trading platforms that have back-testing capabilities cost about $200/mo. Seeing as I don't have enough capital to realistically make 200/mo, I can't see splurging for such a program. So, is it really necesary to be able to back-test a system? If not, how do you know if a system gives you and edge (a statistical advantage)?

3) I've looked at both the James16 and Rob Booker training options. Has anybody tried both of these and would be willing to compare the two? I've read the previous threads regarding James and Rob, and they both sound like honest guys. I'm really looking for a comparison.

4) Lastly, it seems to me that the holy grail of trading would be an 100% automated trading system. Is it worth spending time trying to program such a system? Or, would one just be wasting there time chasing something that doesn't exist?

Thanks in advance for any advice you can offer.

1) TIME.
You could learn forex at one hour per day but it will take alot of days... I work full-time and am now transitioning to trading for a living. I spend at least 15 hours a week and the average is closer to 25 hours per week. I've been working at this for 12 months and still feel like I am not putting enough time into it. Forex takes a different mindset (refer to Mark Douglass's book "Trading in the Zone" to learn why so few professionals and academics succeed at trading) and you must be able to focus on trading at the exclusion of other things.

2) INVESTMENT.
To test forex (backtesting and historical trading) doesn't require any money. MetaTrader (www.metaquotes.net) is easy to learn and can fully test and optimize just about any trading system. But this requires time. If you want someone to make it easy for you be prepared to pay (and pay and maybe not even get what you expect).

3) Tradings Instruction/Mentors
I am a Rob Booker student and I highly recommend him. He has worked with hundreds of students from all backgrounds, countries, and circumstances. He will cater his instruction to your needs. But again, Rob (nor anyone for that matter) will not remove the need for you to do the work. He will help you make less mistakes and work smarter.

As far as James16 goes, I was reviewing their self promotion for the first time today. I have read dozens and dozens (100's?) of their posts and I have always thought their advice and views to be a the greatest caliber. I am in fact considering their monthly subscription because I believe they could teach me more and one never has enough knowledge.

A bottom line here: get a mentor/coach. It will pay. No matter how smart you are there is just too much information to sort the applicable from the nonsense. In the beginning read everything there is on this forum for information and instruction. If you don't have the time to do the fundamental work then you have no business in Forex. In fact, if you throw your money in before you have done your work, I will be glad to take it from you! Should I send you my address?

4) Automated Trading Systems
I am not convinced that a truly successful automated system exists. Joseph DiNapoli spent 25 years looking for such a system and claims that none exist. Some give good results but for a short time. I know there are many people on this forum that claim to have such and I don't want to be flamed. Suffice it to say, that I believe Forex requires very hard work over a sustained period of time. Looking for a Holy Grail in an automated system seems to belie that fundamental truth.

I wish you the best.

Dennis J

Thanks for your advice Dennis. By the way, am I correct to assume when you say "do the fundamental work" you mean learn as much as you can and practice before investing, and not research a currency's fundamentals (interest rates, inflation, etc.)?

I think I'll pass on just giving my money away for now. But, I'm sure that if I do decide to try my luck on the FOREX, I'll lose money at some point. If you're raking in the dough at that time, consider it a payment from me to you. Seriously though, thanks for your advice.

I should have been more specific on what I meant by fundamental work.

1) Read through all the sticky posts (Permament) on this forum. Learn all the basics that are available here.

2) Go to FXStreet (www.fxstreet.com) and read through the stuff there. A lot will be duplicate information but repitition is the pure fuel of learning.

3) Read a couple of e-books on Forex. FXStreet has several, Rob Booker has several and will provide you with a link if you email him and ask.

Thats a good start and costs you nothing. If you can do this then you can progress further. If this is too much then you might as well flush several hundred dollars down the toilet because it will be much more fun watching it swirl down the sewer hole than it will be watching it leave as price moves against you.

Also part of the learning is to understand the difference between technical (graphing/technical indicators/etc.) and fundamental (Interest Rate/Macroeconomics/etc) analysis. There is much to learn grasshopper!

Again, this site is GREAT and you can get your bearings with great effeciency just by devoting some time.

Please keep us all posted on your progress. Many of us get great enjoyment when others succeed.

Dennis J.

i think when he means fundamental work ...
you have to prepare all aspects of your trading style ..

if you choose to become a position/long term trader, then maybe your 'fundamental work' would involve fundamental analysis(interest rate/inflation/etc) ..



my interpretation of what 'fundamental work' would mean to me is:

-a suitable trading style
-a suitable money management/risk management style
-a suitable trading timeframe
-a suitable mindframe


I myself work full-time as well, but since I'm on a support-type job, I normally do spend a good part of my workday reading about trading as well.

judging at your circumstances, the best way you can trade is scalping in a time when you are free to stare at the computer, or trade daily charts and hold longer term.

There is a holy grail for everyone. There is no one holy grail that fits everyone.

hope that helps,
ken

Thank you MattLorig for posting questions I have been struggling to formulate. I think the responses are thoughtful and useful if a bit daunting. Yet, if this was easy, why isn't everyone making a fortune? I view all this as a great challenge and adventure. I go through cycles of optimism and depression as I try to wrap my mind around this.... not sure where its going for me. Don't know if I'm Don Quixote or King Arthur; they were both on quests and had rather different outcomes.

Hi Matt,

Since djfx has already given you an excellent reply, I'll just add a couple of tidbits here.

The best time to trade is when the market is moving, and that is during the European/London/US session overlaps, 2am - 12noon EST (11pm - 9am PST).

In addition to the book "Trading in the Zone" by Mark Douglas, I would also highly recommend "High Probability Trading" by Marcel Link.

To reiterate what djfx has said, read all the links and attachments in the stickies of this, the Beginners Forum. I've only started this forum recently so there isn't a great deal of content yet, but I'll be adding more as time passes.

Above all, continue as you've begun. Ask many questions.

Dial

Thanks everybody for your advice. I really do appreciate it. Here's one question I forgot to ask in my initial post. I think we've all heard the phrase, "the trend is your friend". Obviously, this means one should trade with the overall trend. But, I guess I'm a little confused as to what the "overall" trend is. Obviously, the trend on the weekly chart has little or nothing to do with trading on a 15 minute chart. Heck, I imagine the overall trend on a daily chart doesn't even have much correlation to a 15 minute chart either. So I guess my question is, when we're say that you should trade with the trend, which trend exactly are we talking about? For example, if I'm trading a 15 minute chart, should I look at the overall trend on the 15 minute chart, the 30 minute chart, the hour chart, etc.? By the way, I've been using the 15 minute chart for illustration purposes only. I have no idea which trading style will best suit me if and when I do start trading.

Every time I see the words Holy Grail I think of this quote. I know it is a bit long, but as I can't post the link, here it is in total:

"The Search for the Holy Grail"
Chris Tate

When traders talk about trading system design and its pitfalls they often talk about the search for the Holy Grail. They talk about the obsession of finding one specific indicator that will guarantee them continual success in the markets. Some software packages even come with indicators that are known as the Holy Grail and this only adds to the mythology of an ultimate indicator. Unfortunately whilst all traders talk of their search for the Grail few actually understand the legend behind this search and even fewer understand its relevancy to trading. And most importantly how understanding the legend can improve trading performance.

Most are familiar with the Christian myth surrounding the Grail and the search for it by knights of the round table. This myth itself first appears in written form in a 12th century French fable entitled Conte del Graal (Story of the Grail), this tale is also known as Perceval and is believed to have been written in about 1180. The myth itself revolves around a vessel from which Christ is supposed to have drunk at his last supper and which was also used to catch some of his blood during his crucifixion. The Grail was then carried to Britain by Joseph of Arimathea, where it lay hidden for centuries. The search for the Grail became the principal quest of the knights of the round table. It was thought that the Grail was guarded by a custodian known as the Fisher King. King Arthur believed that the finding the Grail would cure Camelot of its ills and restore its glory.

Given its supposed history it is easy to understand the importance of the Grail to Christian mythology but the question remains as to why this is important to traders is less obvious. Most traders look merely at the external features of the legend, the fact that it was a fruitless search, the grail was never found. Traders associate this with their quest for the perfect indicator yet this is only half the legend. Being a parable the legend of the grail requires a bit of interpretation. King Arthur send his knights on the quest to enable Camelot to recover. At the time of the quest Camelot was racked by both internal dissent and an external threat. Arthur thought finding the grail would fix these problems. The meaning of the parable is clear it is about the individual not the situation. It is about individuals looking for an external solution to what is an internal problem.

Such a situation manifests itself in traders. How often has the lament been heard, if only I had a better system, or if only I had different data, or maybe if I tried Fibonacci numbers for my moving averages. Many traders have even believed that if they change the colour of their indicators that this will somehow improve their trading. As if altering these external variables will alter their trading performance.

It is undoubtedly true that we need entry signals or setups to enter the market but their importance in trading is vastly overrated. Tomes have been written about signas generation, indicators move in and out of vogue, the current trendy indicator appears to be the moving average ribbon. Charts of price action are now being buried beneath layer upon layer of coloured lines. It is as if by obscuring raw price action traders somehow hope to divine its intent.
Yet Charles LeBeau author of The Technical Traders Guide to Computer Analysis of Futures Markets claims to have tested every possible combination of moving average conceivable and found their performance to be little better than random probability. In any serious testing trend following indicators struggle to have a reliability of above 50%. The MACD histogram, which is thought to be among the best of all indicators, often has a reliability of below 50%. I have personally run a test trading the SPI on an intraday basis by tossing a coin in the morning and found it to be profitable. It is extremely difficult for traders to accept that the tools they use may not be as effective as they thought, or that their methodology may have a reliability below that of simply tossing a coin.

If your trading breaks down then it is more than likely due to some psychological block not your indicators and finding new indicators will not improve your trading. What will improve your trading is an understanding that trading is far more than a search for the ultimate indicator. What has been demonstrated from interviews with top traders is that methodology or the means by which they engage the market is largely irrelevant. What is important is their underlying psychology and how they apply this to the market, it is not what number they use for their moving averages.

Top traders have numerous features in common, they are organized, disciplined, self reliant, analytical. All of these are characteristics of individuals who excel in any endevour but there is one characteristic that truly sets them apart. They are all grown ups, this may seem like a somewhat facetious remark but top traders realize that ultimately their success or more importantly failure comes down to them as individuals. Traders who look for the Grail are looking for an external crutch to lean on and to blame when things go wrong, these are the same sort of people who blame their broker when a trade goes wrong. If you have chosen to take someone else's advice or you believe that indicators are all there is to trading then that is your problem no one else's. No magic indicator will save you from yourself and your own folly.What will save you is an understanding that internal problems such as a lack of discipline or an inability to accept personal responsibility for your trading cannot be solved by some external solution such as downloading hundreds of indicators for either your Supercharts or Metastock packages."

Outstanding article! Thanks for sharing this MrWhipple. I'm going to add this to the Beginners Forum.

Would you mind PMing me the link to the source of this article?

Thanks

Dial

My first book on trading was a waste but the second one was so good I forgot what the first was. That book was "Tading with DiNapoli Levels" by Joseph DiNapoli. He gives a trend definition as this: Any close above a chosen moving average in a chosen time frame is an up trend; any close below is a down trend.

At first I thought it was a peculiar definition but then after long study and several books and dozens of articles and hundreds of forum posts and many thousands of candles watched/studied, I realized that it is the truest definition I have heard. At least it is the clearest and most simply stated.

However true it may be, though, it does not emcompass a very good working definition to guide your trading because such a definition allows for too rapid a reversal of trend. So I prefer to think in terms of sustained trend. I define sustained trend with three indicators: 62 EMA (exponential moving average), 248 EMA, and a 7x5 DMA (7 period moving average displaced forward 5 periods -- this is for containment of whipsaws). When all 3 averages are slanted in the same direction I consider trend sustained and well defined. I almost always trade with such a trend.

If they differ I fall back to plan B.

Plan B is secret.... I could tell you but I would then have to beat someone silly... I haven't beaten anyone silly for a long time.

Good Luck in your quest.

Dennis J

I spend maximum 1 hour a day for trading using Daily charts. I'm a technical trader. I use pending orders.

A little about timeframe.
http://specutrade.blogspot.com/2007/...-to-trade.html


Holy grail system doesn't exist. The holy grail is inside everyone. It's called discretion/experience.