The process to becoming a traderIntro:
Imo most hedge funds are bad, just marketters trying to get as much funds under management as possible.
Alot of traders are not speculators but execute orders for clients, sometimes arbitrage, etc.
Those that do speculate are often (most of the time?) degen gamblers that are in the red in their entire career but have some very green years where they get a big bonus and red years. So you end up seing them drive ferraris even thought they're not even profitable. Dumb system.
And once in a while you see rogue traders, they manage to lose millions to billions with all sorts of checks in place (maybe, just maybe, some are set up but some are clearly not for sure).
All the stock funds, they consistently under perform the Snp... so...
And most institution traders, when they try going solo, guess what? They fail.
Big banks get fined all the time for cheating.
They are actually mostly garbage.
Floor traders same story, when they had an unfair advantage and could front run their clients they were making tons of cash and once came electronic trading they all vanished. They were done. None was heard from again. I haven't heard of a single trader making money since then. Now robinhood hft clients algos do all the front running.
Lmao which reminds me of hearing people that waited 2 minutes to get filled on small orders on big volume companies, no suspicious at all XD It's actually hiralous. Like children. So obvious.
THESE ARE MY COMMANDMENTS. This applies to a new trader, in this order. But to every one too even profitable... just some steps might not be necessary anymore or can be fast forwarded. New traders are the ones that need it more but I just know profitable traders are the ones that look at this kind of info and care more about it. That's why they are profitable.
1- Thou shalt: Set your goals
Conserve Capital, Make Money, Increase Bet & Account Size.
Have realistic goals, try running the numbers to see if it is possible (example "I want to turn 1000 in 100,000 in 1 year oh for this I need to make nearly 10% every single week how much do I need to risk for that will I blow up oh yes I will with 99% odds therefore this goal is too ambitious and anyway I cannot take positions big enough for this").
1 of your goals will always be: be patient. This will take time so accept it.
2- Thou shalt: Spend several hours a day reading & watching videos.
Just absorb all the knowledge. You can make it fun. Social networks, youtube, articles, trading view, documentaries...
It's going to take a while anyway so take it easy. It's better of course if you have an absolute obsession and can't even get enough ;)
16 hours a day was a slow day for me when I started. I wanted MORE. Typically I slept 6 hours and read or looked at videos 18 hours. Idk what's wrong with me.
Well it's not like there is anything else to do in this pointless life is there, I think something is wrong with casuals that like to do nothing simply exist.
During this time have fun on a demo account or better a live one with micro lots. You will very probably lose money so have a tiny account with tiny sizes. Make sure whatever happen you won't owe 3 millions to your broker. EU has account protection now so whatever.
3- Thou shalt: Look at charts and backtest. A lot.
No skipping this. It may be boring but you ABSOLUTELY HAVE TO do it. I'm going to write a huge paragraph on this.
It shouldn't be too boring either, if it is, speculating is not for you, it's fine, go find something else there are plenty of other things to do, you don't even have to leave finance you can be an investor.
There is so much to look at. I recommend starting slowly because you can quickly get overwhelmed with too much info, too much ifs, trying to overoptimize.
I would personally recomment getting familiar with charts, looking at ideas, have fun just clic play, follow trades and see what happens, get a feel. This can go for a couple of months. You should not become stubborn in that time and be persuaded that some things work some things don't.
I have been backtesting for ever, but in particular in 2017-2018 I spent over 12 months looking at charts and noting what happened. I could not stop, I did it at home, I did it in the morning, I did it at night, I did it in the train I did it at work. There must have been a period of at least 6 months where I was completely addicted and just backtest charts more than 12 hours a day.
This is what it takes. I was looking for turn based video games just so I can alt tab and grind little by little without losing my mind.
I started just looking at charts but ultimately I filled excels with data, and I made it a little more complicated where I looked at a chart and noted the various levels the trend the EW count fib what drives the market etc. So it wasn't just checking a simple indicator or line and noting what happened but actually more advanced with "full" analysis, each example would take me 5 to 50 minutes (if I wanted to really dive in depth).
I just ran a search on a drive that contains such screenshots going from november 2018 to today. There is over 10,000 screenshots. I clic on a random one, an old one. Some indicators are on. Divergence + resistance. I noted how far past the peak it went, and how far down it went. This is how I know where to enter, where to set SL, what targets to aim for what to expect.
10,000 screenshot in a year. I haven't done much in 2019. That's 27 a day, but really more like 50 a day during 2018. 10 minutes each only would mean 8 hours a day which is more or less what I did in 2017 & 2018. And 8 hours watching videos etc.
THIS IS WHAT IT TAKES.
"It is harder than competing in the Olympics". This means something.
They don't say this just to mess around.
I can assure you less than 5% succeed, I believe it is less than 1%.
EU brokers say "78% of accounts lose money" this does not mean that 22% of new traders make money, it does not even mean that 22% of traders currently on the platform do. The 22% count takes into account all traders that have been active for a very long time, the 78% number is almost entirely made up of new traders that will soon quit. So for 100 traders on the platform you have 22 winners 78 losers even if we assume the 22 are making real money and not just short term lucky (which I KNOW is not the case) understand the 22 will still be here in the next 3 months but the 48/78 will be gone, and replaced by 48 new losers, then 3 months after 48 new losers then next 3 months 48 new losers and in a year you actually had: 22 winners, 78 + 48 + 48 + 48 = 222 losers.
In 10 years ==> 22 winners 2222 losers or 1% winners.
It's simplified just to make a point.
When I started I looked for data, I didn't want to go through the hours, but after a while, a few months I understand I just had to bite the bullet.
Let me guide you on the first steps:
Go look at Oil, draw every swing high & low and look at what the price did. A basic backtest like this might be easy to automate.
It takes seconds at first, when you just look at the basics.
You need a database to know what works what doesn't how often etc.
It's not that hard. At least start with the basics like this. Then you'll decide what next maybe you'll want to take it slowly if you can't be spending 8-16 hours a day doing this like insane people like me. I'm sure alot can be automated. If you want to be a discretionary trader like all the famous ones back in the day eventually you will have to go manual and do alot of thinking, what is good is you have the internet full of articles and other at your fingertip, you can know anything you want instantly, there is tremendous info on everything.
Empty your mind and do it. Do not overthink it or it will drive you crazeeeeeey. Focus on 1 pattern at a time. Over and over until you have stats with a sample size of hundreds and you became really comfy about it charts look less random already.
Depending on your own capacities, patterns might pop out often. History does repeat itself. Here I don't know how much you can work on this. Pattern recognition (Both as you backtest and in real time as they are created) is pretty much dictated by IQ. And then you need a good enough memory to remember what you backtested or experienced.
This is a big reason why I think an IQ of at least 110 is necessary. Anyway even research has shown it made a big difference. Warren Buffet says past 125 it doesn't make a difference for investing. Propably does but with diminishing returns for speculating. It's not like these patterns are rocket science either an IQ of 190 isn't necessary lol.
But the faster you see them... And memory access is as important.
OF COURSE REMEMBER: you spend alot of time analysing the market. You have time to remember etc. You don't just sit 1 hour a day look at charts and instantly guess what to do, this is what trading educators do. This is why they sell courses to make money.
You might have heard of Paul Tudor Jones that traded the 1987 market crash by comparing it to the crash of 1929. He saw the situation was similar and then analysed it in depth...
Doing this is what will make the difference. Being smart is an advantage, and necessary and those that say otherwise are idiots but it won't make the difference.
It is like boxing. The "purists" will not allow you to lift weight and force their trainees to focus on the technic, and yes, muscles is not what makes a champion, even thought they all have muscles. The best boxers are not the ones with the biggest muscles. (That said weight categories are there for a reason don't go suicide on someone 30 kilos heavier purists are right to make people focus on technic but they are a little crazy).
Put in the hours, the boring grinding work. This is where your gains will be made. Knowledge and a database of probabilities. I repeat myself it should not be TOO boring either.
This is the big secret. This is the big main thing that separates REAL trader from jokers.
Who has spent this much time (thousands of hours) doing this? Make sure you take money from others by putting in more PRODUCTIVE hours in than they did.
4. Thou shalt: Choose your tools.
You choose what markets you were interested in during steps 2 & 3. May I recommend futures? :D You do not care about scaling to billions on your 5000 bucks account, you can even trade orange juice. You also have an idea of what strategy you will use and your time frames (please no daytrading).
You probably already chose TradingView MT45 Ninja Trader or Sierra Charts for your backtesting. Investing dot com uses TV charting tools and has some tickers they don't (Nickel Zinc...)
Once your charting tool(s) is chosen, next you will choose:
- A solid broker with good reputation, commissions, execution. Not a scammer stop hunting and selling order flow. Price is important but quality before price. Your goal is to make money not zero comissions so you lose more slowly.
- News service: CNBC as a counter indicator, FT, Bloomberg, Twitter, Broker feed, fxfactory, forums, tradingview chat & ideas, WSJ, and so on. Get comfy.
- A good alert system (probably included with the charting one).
- Your setup: PC internet desk.
5. Thou shalt: Capital management.
- Choose how your money is spread around, how much is with a specific broker
I spread my money between brokers, and bank accounts. And even crypto wallets actually. It is almost impossible something crazy happens that way. I don't just mean a broker going bankrupt.
And it's convenient too, you can have a broker for your 12 hours to 2 week trades, another for longer ones multi months, and an account for holding stocks years...
- Choose how much you want to risk per trade.
- Choose how much you want to risk over a certain period (a month?)
- Allocate capital and risk per strategy/broker/timeframe
- Calculate and choose your drawdown for the per trade risk you have
- Set a max drawdown, what to do when you lose a certain amount, what to do when you win a certain amount
6. Thou shalt: Set rules, decide on how you execute.
Decide on what to do once you have decided your bias/goal for the month/week/day (please no no daytrading yikes):
- What technical patterns are you looking for or news you are waiting for, or Trump tweet ;)
- Where do you want to see this continuation or reversal pattern? (Typical answers: At a certain resistance or just below or just above)
- When do you want to see the pattern (not just before a central bank meeting, never)
- Where exactly - almost exactly - will you enter to have a risk reward that will make you profitable? NO FOMO.
7. Thou shalt: Plan your trade management. And your trade management system.
You're going to need a general method for managing trades once you got in.
And you're going to need a general method for managing specific trades you got yourself into.
What do you want to see? What do you not want to see? Do you exit as soon as Trump tweets? Do you trail your stop? What are your targets? How fast should they be reached? Etc.
Up to your and your backtest + experience.
8. Thou shalt: Learn to know yourself.
Know if losing 10 in a row makes you rage. Decide how to avoid raging. Do you have a hard time staying in trades, and get nervous when they reverse? (LOL COWARD WEAKLING)
This step can be skipped if you are a super alpha bodybuilding mastermind with an ego over 9000 and testicles so big you can barely walk. Umm your ego should not be making you risk 90% per trade thought.
But seriously, I don't have much to say on the "psychology" part. I am not sure it really is a big deal, just something "trading educators" say all the time. I just don't understand how people can become illogical and fail for no real reason just "their feelings"
Pretty sure all the best have zero psychology issues and those that say they sometimes might have, are just losers looking for excuses to bathe in their own mediocrity.
I am happy when I have a big winner that keeps going my way, and I get angry if I lose 10 or more in a row. Sorry but it has zero impact on my trading. ZERO.
Doesn't mean you can't be successful if you have some issues. By the way, I read somewhere psychopaths did not do very well, and why should they? Having no empathy and manipulating people won't help when dealing with the market. Ignore the "be a robot" nonsense it's coming from struggling try hards 3000 games still gold 4. Getting euphoric and angry makes it fun and keeps it interesting. Tyson was angry and still number 1 prodigee. Just don't lose control and start biting Evander Holyfield ear. If you have serious mental issues do not trade. If you attempted suicide in the past trust me DO NOT TRADE. I think being "emotionless robot" isn't even good, being healthy and balanced is optimal. Probably like what is asked of astronauts. Ok enough on this.
This is more important and makes sense:
Apart from the tender feelings aspect, you need to ignore your weaknesses and play on your strength. You can work on weaknesses but usually it's best to find a trick to ignore them (just don't trade at all) and really focus on what you naturally are good at.
9. Thou shalt: Have a routine.
All I can say is I usually look at all of my currencies (about a dozen currencies and 20 pairs) and futures (half a dozen) during the week end (on top of continuously following what is going on), set/reset alerts. Plan what I want to see for the week, I tag the 3-4 tickers I am interested in (such as AUDUSD and EURJPY I posted about and will never get filled on).
I have my habits and all but it's not all written down and I don't even know what I do apart from what I just said lol.
10. Thou shalt: Hold a journal.
I kept the best for last: Keep a log of all your bets.
This is not a suggestion.
Also screenshot your past trades after they are complete + you let a while pass.
Excel is good here. Note the pair, note the date, note a couple things. Was the trade a winner? Then it's up to you. You could write what EW extension it was. You could note if you bent the rules. You could not what pattern you entered on (hammer flag double top...). You could write what broker it was with. You could write what was the long/short positions. What was the market conditions (negative rates with bad unemployement news and price in sideways). And so on, figure it out.
Focus on doing what works, and the opposite of what loses money, breakeven has no edge. Note how the market evolves. Improve strategies. The journals help you know yourself.
You get to figure out your performance over hundreds of trades, if it's good enough maybe you can afford to increase the risk from 1% to 1.25% or something.
Think about noting the trades you missed out or decided not to take too. You will learn something from those too.
You will get so much out of it. Don't forget to go re-analyse your past trades and spend time learning from your journal.
Practice does not make perfect. You can practice for 10,000 hours and still remain at step 0 (go take a look crossfit idiots god I hate them so much, it's incredibly good at getting disabling injuries thought, look at pot belly "social gym activities" goers). Perfect practice makes perfect. This includes having a journal and analysing your results constantly.
11: The facts
Surprise bonus one.
Always look at the data... The facts... It's obvious and most don't do this.
Don't listen to "some dude" because you think he has authority because his grandpa called the 1929 crash. What is this? Divination?
There is no authority there is no consensus there is just facts.
Complete autists end up disconnected from everything and ignoring everything they call it noise.
If you need to do this I think it's too much and just no.
How hard is it? Form a clear logical reasoning using facts. Then intuition comes into play to here I can't help you if you naturally have a tendency to overly focus on bad news and act on it I'm sure you can work on this flaw a bit, but not sure you can be saved. You need "good" intuition. Ye I guess this is lottery at birth probably.
Just try your best to stick to the facts. Learn to.
Do what it takes: Write down a system, here is a random example (you'll want to add steps, detail, and write down your strategy for each step) ==>
Easier to do things right & to stick to facts when you have this. That's not the only advantage.
This is not going to have its own number.
I am still working on designing my own system. My problem is I want to grab as many good opportunities as I want but I can't be spending 48 hours a day analysing everything I don't have a time machine. And I don't even want to spend 12 hours aggressively hunting as fast as I can.
So for me, do I look for patterns on 20 charts every 4 hours? Or do I analysing charts tag a few and then look for patterns on these few? Do I make a bit of both?
It's very uncomfortable right now, really, giving me a headache, and I'm analysing the optimal procedure, that will make it more comfortable and efficient.
I used some inspiration from a Trader Dante (Tom Dante) video on youtube, it is certainly an interesting presentation. You can find it easilly. "A blueprint for Trading Success".
