WALL STREET
QuoteDislikedYou can be free. You can live and work anywhere in the world. You can be independent from routine and not answer to anybody. This is the life of a successful trader. Many aspire to this but few succeed. An amateur looks at a quote screen and sees millions of dollars sparkle in front of his face. He reaches for the money -and loses. He reaches again -and loses more. Traders lose because the game is hard, or out of ignorance, or lack of discipline .Many traders say they want to be successful but keep making impulsive trades -going for the short-term thrills of gambling in the markets. People deceive themselves and play games with themselves. Lying to others is bad enough, but lying to self is hopeless.
What we need to aspire to be is a Professional Trader. This thread(not me) sets out to turn as many as are willing here from amateurs to professional traders. Learning to trade takes hard work, time, energy, and money. Few individuals rise to the level of professionals who can support themselves by trading.
Professionals are extremely serious about what they do. They satisfy their irrational goals outside the markets, while amateurs act them out in the marketplace.
The Master Plan:
Our very own Wall Street right here on FF. Real professional traders; people who can be looked upon as successful traders! That is the master plan. I am setting out to create an elite group of traders who can actually trade professionally here on FF.
I am not a professional trader, far from it. I am getting there, thats what I should say. We intend to create a tight knit group of traders with this aspiration and get there.
Just like it is easier to stay sober in AA, this group will help keep in check our emotions and discipline and help us become better traders one day at a time.
All members (loosely using the word, not that there is subscription or anything) will need to recognize they are not perfect. They will need to be ready to keep learning (we will all teach each other).
The Main Goal is to have traders create excellent track records with draw down below 10% per month and making money consistently year after year. My personal goal is 15%-30% per month (25% is the sweet spot)
This will be achieved by following the wisdom set out in the book, Trading For a Living byDr Elder Alexander. The whole idea of this thread is derived from the book. Hugely quoted.
You will be required to:
Post analysis of your trade before entry
State your risk on the trade (No more than 3% per trade)
State your stop loss
State your view of trend direction
To enforce discipline, we will look to discipline traders who (will be decided by members):
Have no strategy
Overtrade
React to prices emotionally
Have no stops
Use martingale system(not allowed on thread)
Trade against trend
Let losses run
Cut profits short
Why do we love trading?
Why did we become traders? Trading appears deceptively easy. It seems to offers an opportunity to make a lot of money in a hurry. Trading is a fascinating intellectual pursuit: chess, poker, and a crossword rolled in one. A trader keeps odd hours and puts his capital at risk. Many traders are loners who abandon the certainty of the present and take a leap into the unknown.
One prominent trading advisor wrote that the pleasure of trading was higher than that of sex or flying jet aircraft.
For me, it is a passion.
The markets are full of rags to riches to rags stories. But in here we want a true rags to riches story, or something close. The hallmark of a successful trader is his ability to accumulate equity. This will happen automatically to those who follow the rules of this thread.
A Good Trader
The idea is that several years down the line, all active members of this thread will be good traders. But who exactly is a good trader?
Good traders tend to be hardworking and shrewd men. They are open to new ideas. The goal of a good trader, paradoxically, is not to make money. His goal is to trade well. If he trades right, money follows almost as an afterthought. Successful traders keep honing their skills. Trying to reach their personal best is more important to them than making money.
The one field in which grown-ups let their fantasies soar is trading. However, a successful trader is a realist. He knows his abilities and limitations.
A real pro devotes all his energy to practicing his craft the best he can - not to counting money. This will be our goal here on Wall Street, to bettering our craft
We should concentrate on quality- on finding trades that make sense and having a money management plan that puts us in control, focusing on finding good entry points and avoiding gambles. Then the money will follow almost as an afterthought. You may count it later, well after a trade is over.
Losers
We are all losers to some extent. In fact, we should each get into the habit of saying it out loud, like at AA meetings, Good Morning. My name is Sammih, and I am a loser. I have it in me to do serious damage to my account. We should learn to do this every morning even if we had a winning day yesterday.
Losers buy, sell, or miss trades thanks to their fantastic ideas. Once their trades are on, they act like children who are afraid to pass a cemetery or look under their bed at night because they are afraid of ghosts.
Many losers think that they would be successful if they could trade a bigger account. All losers get knocked out of the game by a string of losses. A loser is not undercapitalized - his mind is underdeveloped. A loser can destroy a big account almost as quickly as a small one. He overtrades, and his money management is sloppy. He takes risks that are too big, whatever the size of his account. No matter how good his system is, a streak of bad trades is sure to put him out of business.
A loser never knows why he loses. If he knew, he would have done something about it and become a winner. He keeps trading in a fog-
It hurts to see a loser in the mirror.
A loser cannot cut his losses quickly. Most losers go bust trying to trade their way out of a hole. Good money management can keep you out of the hole in the first place. This will be un acceptable.
Robots
The purpose of this thread is to deal with the emotional part of trading. Therefore, EAs are not permitted here. Machines and systems can help but not replace humans.
Market is not your Mother
The market is not your mother. It doesnt know you and it doesnt really care who you are.
Your trades must be based on clearly defined rules. You have to analyse your feelings as you trade, to make sure that your decisions are intellectually sound. You have to structure your money management so that no string of losses can kick you out of the game.
Trading is a very hard game. A trader who wants to be successful in the long run has to be very serious about what he does. He cannot afford to be nave or to trade because of some hidden psychological agenda.
No Gambling
The end product of a member of this thread will be a Professional trader, not a Professional Gambler.
Gambling means betting on games of chance or skill. The key sign of gambling is the inability to resist the urge to bet. If you feel that you are trading too much and the results are poor, stop trading for the rest of the month. This will give you a chance to re-evaluate your trading. If the urge to trade is so strong that you cannot stay away from the action for a month, then it is time to visit your local chapter of Gamblers Anonymous or start using the principles of Alcoholics Anonymous.
Failure is Curable
The reason we dont stop losing is this; it hurts to look within yourself for the cause of your failure. But if we did, we would realize that failure is a curable disease.
You would realize that your success or failure depends on your ability to use your intellect rather than act out your emotions.
To do this, start keeping a diary-a record of all your trades, with reasons for entering and exiting them. Look for repetitive patterns of success and failure. Those who do not learn from the past are condemned to repeat it.
Your feelings have an immediate impact on your account equity. When you trade, you compete against the sharpest minds in the world. If you let the market make you feel high or low, you will lose money. The market does not know you exist. You can do nothing to influence it. You can only control your behaviour. You can never control the market but you can learn to control yourself.
A professional trader uses his head and stays calm. Only amateurs become excited or depressed because of their trades. Emotional reactions are a luxury that you cannot afford in the markets.
Trading is a heady experience and can be very addictive. You act emotionally instead of using your intellect. What is the difference between a trader trying to get back at the market and a monkey kicking a tree stump? Acting out of anger, fear, or elation destroys your chance of success
Safety Net and Mentorship
Trading is more dangerous than most human endeavours. The markets offer many opportunities to self-destruct without a safety net.
You need to be aware of your tendency to sabotage yourself: Stop blaming your losses on bad luck or on others and take responsibility for the results.
This thread will be the ultimate safety for most traders here. The members of this thread will look out for each other, will be kind and considerate to each other and will correct each other.
If you see your friend overtrading, risking too much, correct them in a kind manner. If they are breaking their own rules, tell them.
Let us all mentor each other, PM each other and discuss trading matters.
When we finally hit rock bottom, the pain feels intolerable. This pain penetrates denial. I hope this pain isnt the reason you are here. I hope you are here because you realize the need to be a better trader.
Goals
1. Be in the market for the long haul- that is, you want to be a trader even 20 years from now.
2. Learn as much as you can. Read and listen to experts, but keep a degree of healthy scepticism about everything. Ask questions, and do not accept experts at their word.
3. Do not get greedy and rush to trade - take your time to learn. The markets will be there with more good opportunities in the months and years ahead.
4. Develop a method for analysing the market- that is, "If A happens, then B is likely to happen." Markets have many dimensions -use several analytic methods to confirm trades. Test everything on historical data and then in the markets, using real money. Markets keep changing-you need different tools for trading bull and bear markets and transitional periods as well as a method for telling the difference
5. Develop a money management plan. Your first goal must be long-term survival; your second goal, a steady growth of capital; and your third goal, making high profits. Most traders put the third goal first and are unaware that goals 1 and 2 exist
6. Be aware that a trader is the weakest link in any trading system
7. Winners think, feel, and act differently than losers. You must look within yourself, strip away your illusions, and change your old ways of being, thinking, and acting. Change is hard, but if you want to be a professional trader, you have to work on changing your personality.
The Market
Key Points:
Buying by bulls pushes markets up, selling by bears pushes markets down, and undecided traders make everything happen faster by creating a sense of urgency in buyers and sellers.
Prices leap when masses of traders become emotional about a trend. An astute trader tries to enter the market during quiet times and take profits during wild times.
Many traders are puzzled why markets always seem to reverse immediately after they dump their losing position. This happens because crowd members are gripped by the same fear-and everybody dumps at the same time. Once the fit of selling has ended, the market has nowhere to go but up.
Optimism returns to the marketplace, and the crowd feels greedy and goes on a new buying binge.
You need to base your trades on a carefully prepared trading plan and not jump in response to price changes. It pays to write down your plan. You need to know exactly under what conditions you will enter and exit a trade. Do not make decisions on the spur of the moment, when you are vulnerable to being sucked into the crowd
You have to observe yourself and notice changes in your mental state as you trade. Write down your reasons for entering a trade and the rules for getting out of it, including money management rules. You must not change your plan while you have an open position.
This is a trend following thread. We believe that one should never buck the trend. We respect the strength of the crowd.
Money Management
This will be our main objective. All traders will need to practice sound money management strategies. Here are a few pointers:
The first goal of money management is to ensure survival. You need to avoid risks that can put you out of business. The second goal is to earn a steady rate of return, and the third goal is to earn high returns- but survival comes first.
"Do not risk thy whole wad" is the first rule of trading.
An amateur trying to get rich quick is like a monkey out on a thin branch. He reaches for a ripe fruit but crashes when the branch breaks under his weight.
Main Objective: Trade to establish the best track record, with steady gains and small drawdowns.
If you bet a quarter of your account on each trade, your ruin is guaranteed. You will be wiped out by a very short losing streak, which happens even with excellent trading systems. Even if you bet a tenth of your account on a trade, you will not survive much longer. A professional cannot afford to lose more than a tiny percentage of his equity on a single trade
Extensive testing has shown that the maximum amount a trader may lose on a single trade without damaging his long-term prospects is 2 percent of his equity. This limit includes slippage and commissions
Most amateurs shake their heads when they hear this. Many have small accounts and the 2 percent rule throws a monkey wrench into the dreams of quick profits.
Most successful professionals, on the other hand, consider the 2 percent limit too high. They do not allow themselves to risk more than 1
percent or 1.5 percent of their equity on any single trade.
The 2 percent rule puts a solid floor under the amount of damage the market can do to your account. Even a string of five or six losing trades will not cripple your prospects. In any case, if you are trading to create the best track record, you will not want to show more than a 6 percent or 8 percent monthly loss. When you hit that limit, stop trading for the rest of the month.
Use this money management rules: Never average down; never meet a margin call; if you must lighten up, liquidate your worst position; the first mistake is the cheapest.
Protective stops
Always place your stop the moment you enter a trade.
When you are long, you may keep your stops in place or raise them but never lower them. When you are short, you may keep your stops in place or lower them but never raise them. Cutting extra slack to a losing trade is a loser's game. If a trade is not working out, it shows that your analysis was
Analysis.
The point is trade with an edge. If you have a system that works, whether fundamental or technical, post your live trades here. We will not allow exited trades. This way, you don't get to post only your winners.
We encourage you to post all your trades. Dont be afraid on losing, that is what we are trying to get out of you.
Write down a good description of your analysis.
A cool, intelligent analysis does you more good than gloating about profits or wallowing in regrets.
Start keeping a "before and after" notebook. Whenever you enter a position, print out the current charts.(Post here) Paste them on the left page of your note-book and jot down your main reasons for buying or shorting. Write down your plan for managing the trade.
When you exit, print the charts again( again, here) and paste them on the right page of your notebook. Write down your reasons for exiting and list what you did right or wrong. You will have a pictorial record of your trades and thoughts.
This notebook(the thread) will help you learn from the past and discover blind spots in your thinking. Learn from history and profit from your experiences.
Please Introduce yourself in your first post, and your intentions here
I'm high on trading, cant you tell?
