13 tips for traders
Updated
I had this on my hard drive, I thought I would wipe the dust of it and write in in a clean manner in a post, helps me think more clearly.
I need, and everyone can benefit from (new intermediate advanced legend even), having all of this in their mind:
1) Advice that trading is 95% psychology ===> Throw it in trash container
Worse advice I have ever seen, or I totally missed something.
Anyway, simple proof that this is all a load of feces: 5% of the population are psycopaths (not the murdering kind) so if this was that important they would all driving roll royce's. Also I am not a psycho (I think) and I do not have much issues with this... I guess not beeing dumb enough to go ALL IN *100 helps.
Also... then, let's just let a bot do the trading.
Making lists like this learning more everyday and always evaluating our own performance and track record, filter what does not work in certain market conditions... This matters 10000000 times more than "muh feeling :'("
2) Look for ideas opposite to yours, especially beginners (less than 1000 hours trading/learning)
Watching what others are doing helps, and when you have an idea looking for views opposite to yours really helps.
Famous billionaires do this alot. Especially they surround themselves with people that view the world differently.
Of course, do not waste time arguing with bagholders, and sadly alot of ideas opposite to yours you might find are trolls drawing arrows pointing up to unrealistic targets, it could even convince you that the "opposition" are clowns and there is no way you could be wrong, so do not fall for that trap. Just because someone is stupid does not mean they are always wrong. Consider bad TA as 50/50.
3) Noobs want a sure thing. Good luck with that one.
4) "It is impossible or super hard to make money you are competing against the best" ==> Trashcan advice...
First, for lighting fast scalping they are using microwaves now... You are not going to win, sure.
But not only is the competition really not that good (maybe I am a little biased here idk), but you do not even have to compete with them. Big money buys, just follow the momentum, ride on their backs.
Forex is full of huge money (central banks, international companies buying a currency) they are not trying to rip traders off by hunting their stops, they actually need to exchange currencies, nothing more.
Beeing arrogant and thinking every one is a dumb ape but you is probably a big plus :)
All that matters are facts, "Is this pattern profitable?" "What is the winrate?" "What is the risk reward I get on average" "How long does the trade last?" "What are the fees?" "What are the odds of a massive selloff?".
5) "We dropped 90%, this HAS to be the bottom. How much further can we drop?"
We can drop another 90%. And another 90%. And another 90%. And so on.
I did not find any statistics but I am pretty sure that looking at ANYTHING that lost 90%, you would find that the vast majority of the time it was not "a huge opportunity" well it was, but not for buyers. Afaik some great traders made and make big money by shorting dead trash before it goes to zero. If a company is dead, how do shortsellers find buyers? Because to sell you need a buyer. Well, all the idiots that skipped math class and think "this is a great opportunity".
Quit trying to fool me, I am insanely bad at maths, how can you drop 90% if you alreayd dropped 90%? How many more times can we drop 90%? * points and laughs with his redneck friends that only have 5 great-grandparents *
x is a real positive number (R, +, .).
y is an integer.
x^1 > 0 since we have said that x is >0 and x^1 = x
Now, consider x^y > 0. If that is the case, x^(y+1) >= 0 since x^(y+1) = x^y * x and the product of 2 positive number is positive. And if the result was 0 then it would mean than 1 of the 2 numbers was 0 (I think I don't need to prove this) so it will be > 0.
There are plenty of stories of money managers that fell for "it CANNOT fall lower" and got destroyed. The internet is full of bagholders that get destroyed all the time with that insane logic. I do not even profit from this... Maybe I should rethink my whole strategy, when I see the sheer amount of bagholders with "buy the dip" mentality I could profit from...Might have been wasting my time this whole time when I could just short bagholder crypto's/stocks. Well maybe not crypto's as they are long sideways (complacency) lmao complacency @ -95% :D
6) "Soooo this means... y can be as high as we want it to, or in other words the number of times we can go down 90% before touching 0 is INFINITE."
I do not know what the "record" is. I know that some companies have started at 10000$ and more and did not disappear even when their price was at 10 cents, that is a drop of 90% 5 times in a row.
There are several examples, but 1 I see alot on social networks (lots of experts were recommanding to buy the dip "opportunity of a lifetime" when it dropped 90%)
Of course it made 5 90% drops in a row looking at bottoms, but if we look at bounces from the tops after it bounced, it is obviously going to be more than 5.
You just... cannot make this up..
And there are people defending it and claming they did the right thing when they "bought cheap" and are thinking of their yacht color etc. I cannot make this up.
7) Use excel. Have a process. This kind of stuff.
Here is what I have for 1 of my strategies, I just wrote it down yesterday, helps me think more clearly and stop thinking about it:
Pre-entry: Check previous occurrences on the chart, do some TA. Note where structures are.
Entry: Entry is on the level or if we're past it a little after previous low.
Target and stop loss: Initial target T1 is next structure, usually 1% for FX. Set stop loss to get a reward:risk of 2.
Trade management: Close half at my target 1, stay until final target as long as the price stays above 0,382 to 0.5 fib.
Here is an example of a winner I would have shorted following that strategy:
Another one:
8) Money is made missing out.
You make money when you miss out.
Let me type this a second time:
YOU
MAKE
MONEY
WHEN
YOU
MISS
OUT
"You missed out" that sentence... wow.
I do not know about others, but when I miss out a move, I like it, I am happy now, I really am. Because I know I am filtering all the bad trades. If even some good ones get caught, then I must be doing a good strict job right?
Let's check the Bitcoin chart real quick. Here are a few moves I missed out:
a- False break
b- Buy the dip
c- Big money is stepping in
- Yes, people really thought a major bull market was starting. Easy to say how foolish that was in hindsight, but back then I was pretty lonely saying that was a bull trap. Even got banned from TV for calling it a bull trap.
9) Do you want to have a life? Or be exceptional at one thing?
Having a life translates too: beeing basic sheeple that tries to mirror the people around him to avoid feeling different, does not have it in him to do whatever he wants but a slave to what others think of him/her, and has a boring depressing life he hates and should hate. Be a sheep or be a winner, your choice.
10) Day trading is bad, you can only make money bla bla bla.
The only reason why daytrading is less profitable than say swing trading is spreads. I do not have the exact numbers here, but a broker analysed the millions of trades his clients took, and the majority of losers... Their losses equaled the fees... You aiming for an intraday 0.3% move and the spread is 0.02%? That is 6.6% of your profit. It can add up really fast. You need a large edge and alot of "margin" as in much more profit than losses to not get hit by fees. I was daytrading a couple of months ago, I filtered so much I had 3 trades a week. And all winners. 3. In a week. "More is better". There is NO WAY that someone making 10+ trades a day is only taking really awesome trades and not giving up alot of his profit to his broker, unless he is trading crypto on Gdax/Bitmex but crypto trading is dead now.
I did it all, and it all works, from scalping for a few seconds to holding for 2-3 months. But you have to spend a little while writing down what you want to do, make sure the fees are small compared to the profit you realistically aim for.
11) Become a specialist.
Find 1 strategy and spend all your time on that.
Or find 1 market... but that one... Nah find 2 markets... What will you do when your market is sideways/dead?
I have 1 single strategy, I am learning about other ones at the moment but I only really have one.
12) If you are new... go for a SIMPLE strategy, do not try to reinvent trading and be greedy.
These are the strategies I am looking at:
- My strategy is picking tops and bottoms where reversals happen (advanced, I would not recommend to most :p)
- I am learning about hidden divergence (trend continuation) (intermediary difficulty)
- I am interesting also in continuation inside bars when there is strong momentum (beginner friendly)
Actually my strategy has to be one of the hardest there is. I use divergence as a filter + additional reason to go against the trend. I have become an amateur-expert at reversals.
I know, this is terrible, every one says not to go for this, but it worked for me till now. I still can use ALOT more experience. Maybe one day I will call myself an expert.
This strategy, if I am correct, is where greedy noobs get slaughtered. It is not easy, it is so dangerous. Sure you look at the chart and think "oh these divergences pop out, I could easilly buy here and sell here".
Or "This was a clear bottom/reversal I could easily buy here". Nope. Sorry. You could not.
What I started with was basic trendlines. I would look for anything bullish and buy when the trendline is touched, then sell when it goes ballistic, if it drops below the line I AM OUT. I was not very excited about making money when I started, but I really really did not want to lose any. I think this is the approach people should have (right?).
Here is an example of a trade I took a year ago before I got bored and switched to another non recommended highly dangerous strategy :D
13) Trading is easy, but it takes time, and all these other qualities you have heard about.
Take something simple: Support and resistance. Pretty basic. Just horizontal lines.
Well, I think I am someone smart, I am a very fast learner, and I do not exagerate when I say I spent THOUSANDS of hours analysing support and resistance. Plus at least several hundred looking at RSI divergence alone. Plus hundreds looking at market life/cycles. Plus hundreds looking at different market conditions. Plus hundreds looking at moving averages. In total I am at 5k in a year.
To become an engineer, you will need 5 years (is this the same in all countries? Can't be much different). You get 200 class days a year, 8 hours a day + 1 for homework (well maybe some people need more idk OR skip all lessons skip homework and rush rush before exams works too I guess) so that's 1800 hours a year or 9000 total. Of course you learn alot of useless stuff, but when you start working you have to learn your new craft anyway.
Would you let an 18 yo surgeon on his year 1 operate on you? Would you expect him to reinvent surgery? Yes actually, but not in the good way :D
Now trading does not require 10 years of studies (hey especially if you full specialize on 1 thing and 1 thing only), but I think you will need a couple thousand years under your belt to really know what you are doing.
If you are lucky and have the qualities of a good trader in you as you start, and go for that 1 simple strategy and nothing else and respect all the rules (easy as you already have all the qualities) you could start making money pretty quick but not too quick (you have all of the qualities = you don't risk too much when you don't know what you are doing), you might get hit when a bull market turns to bear, but you will not get hit hard as you have all the qualities a trader needs. Otherwise, it will take time (or beginner luck), and in both cases before being really good you will need a couple thousands hours under your belt.
So, the best advice you could get: if you do not like this, forget about it. Do not force yourself. The power of greed is not going to turn you into a millionaire even if you really really want to. It will turn you into a hobo thought, for sure.
I need, and everyone can benefit from (new intermediate advanced legend even), having all of this in their mind:
1) Advice that trading is 95% psychology ===> Throw it in trash container
Worse advice I have ever seen, or I totally missed something.
Anyway, simple proof that this is all a load of feces: 5% of the population are psycopaths (not the murdering kind) so if this was that important they would all driving roll royce's. Also I am not a psycho (I think) and I do not have much issues with this... I guess not beeing dumb enough to go ALL IN *100 helps.
Also... then, let's just let a bot do the trading.
Making lists like this learning more everyday and always evaluating our own performance and track record, filter what does not work in certain market conditions... This matters 10000000 times more than "muh feeling :'("
2) Look for ideas opposite to yours, especially beginners (less than 1000 hours trading/learning)
Watching what others are doing helps, and when you have an idea looking for views opposite to yours really helps.
Famous billionaires do this alot. Especially they surround themselves with people that view the world differently.
Of course, do not waste time arguing with bagholders, and sadly alot of ideas opposite to yours you might find are trolls drawing arrows pointing up to unrealistic targets, it could even convince you that the "opposition" are clowns and there is no way you could be wrong, so do not fall for that trap. Just because someone is stupid does not mean they are always wrong. Consider bad TA as 50/50.
3) Noobs want a sure thing. Good luck with that one.
4) "It is impossible or super hard to make money you are competing against the best" ==> Trashcan advice...
First, for lighting fast scalping they are using microwaves now... You are not going to win, sure.
But not only is the competition really not that good (maybe I am a little biased here idk), but you do not even have to compete with them. Big money buys, just follow the momentum, ride on their backs.
Forex is full of huge money (central banks, international companies buying a currency) they are not trying to rip traders off by hunting their stops, they actually need to exchange currencies, nothing more.
Beeing arrogant and thinking every one is a dumb ape but you is probably a big plus :)
All that matters are facts, "Is this pattern profitable?" "What is the winrate?" "What is the risk reward I get on average" "How long does the trade last?" "What are the fees?" "What are the odds of a massive selloff?".
5) "We dropped 90%, this HAS to be the bottom. How much further can we drop?"
We can drop another 90%. And another 90%. And another 90%. And so on.
I did not find any statistics but I am pretty sure that looking at ANYTHING that lost 90%, you would find that the vast majority of the time it was not "a huge opportunity" well it was, but not for buyers. Afaik some great traders made and make big money by shorting dead trash before it goes to zero. If a company is dead, how do shortsellers find buyers? Because to sell you need a buyer. Well, all the idiots that skipped math class and think "this is a great opportunity".
Quit trying to fool me, I am insanely bad at maths, how can you drop 90% if you alreayd dropped 90%? How many more times can we drop 90%? * points and laughs with his redneck friends that only have 5 great-grandparents *
x is a real positive number (R, +, .).
y is an integer.
x^1 > 0 since we have said that x is >0 and x^1 = x
Now, consider x^y > 0. If that is the case, x^(y+1) >= 0 since x^(y+1) = x^y * x and the product of 2 positive number is positive. And if the result was 0 then it would mean than 1 of the 2 numbers was 0 (I think I don't need to prove this) so it will be > 0.
There are plenty of stories of money managers that fell for "it CANNOT fall lower" and got destroyed. The internet is full of bagholders that get destroyed all the time with that insane logic. I do not even profit from this... Maybe I should rethink my whole strategy, when I see the sheer amount of bagholders with "buy the dip" mentality I could profit from...Might have been wasting my time this whole time when I could just short bagholder crypto's/stocks. Well maybe not crypto's as they are long sideways (complacency) lmao complacency @ -95% :D
6) "Soooo this means... y can be as high as we want it to, or in other words the number of times we can go down 90% before touching 0 is INFINITE."
I do not know what the "record" is. I know that some companies have started at 10000$ and more and did not disappear even when their price was at 10 cents, that is a drop of 90% 5 times in a row.
There are several examples, but 1 I see alot on social networks (lots of experts were recommanding to buy the dip "opportunity of a lifetime" when it dropped 90%)
Of course it made 5 90% drops in a row looking at bottoms, but if we look at bounces from the tops after it bounced, it is obviously going to be more than 5.
You just... cannot make this up..
And there are people defending it and claming they did the right thing when they "bought cheap" and are thinking of their yacht color etc. I cannot make this up.
7) Use excel. Have a process. This kind of stuff.
Here is what I have for 1 of my strategies, I just wrote it down yesterday, helps me think more clearly and stop thinking about it:
Pre-entry: Check previous occurrences on the chart, do some TA. Note where structures are.
Entry: Entry is on the level or if we're past it a little after previous low.
Target and stop loss: Initial target T1 is next structure, usually 1% for FX. Set stop loss to get a reward:risk of 2.
Trade management: Close half at my target 1, stay until final target as long as the price stays above 0,382 to 0.5 fib.
Here is an example of a winner I would have shorted following that strategy:
Another one:
8) Money is made missing out.
You make money when you miss out.
Let me type this a second time:
YOU
MAKE
MONEY
WHEN
YOU
MISS
OUT
"You missed out" that sentence... wow.
I do not know about others, but when I miss out a move, I like it, I am happy now, I really am. Because I know I am filtering all the bad trades. If even some good ones get caught, then I must be doing a good strict job right?
Let's check the Bitcoin chart real quick. Here are a few moves I missed out:
a- False break
b- Buy the dip
c- Big money is stepping in
- Yes, people really thought a major bull market was starting. Easy to say how foolish that was in hindsight, but back then I was pretty lonely saying that was a bull trap. Even got banned from TV for calling it a bull trap.
9) Do you want to have a life? Or be exceptional at one thing?
Having a life translates too: beeing basic sheeple that tries to mirror the people around him to avoid feeling different, does not have it in him to do whatever he wants but a slave to what others think of him/her, and has a boring depressing life he hates and should hate. Be a sheep or be a winner, your choice.
10) Day trading is bad, you can only make money bla bla bla.
The only reason why daytrading is less profitable than say swing trading is spreads. I do not have the exact numbers here, but a broker analysed the millions of trades his clients took, and the majority of losers... Their losses equaled the fees... You aiming for an intraday 0.3% move and the spread is 0.02%? That is 6.6% of your profit. It can add up really fast. You need a large edge and alot of "margin" as in much more profit than losses to not get hit by fees. I was daytrading a couple of months ago, I filtered so much I had 3 trades a week. And all winners. 3. In a week. "More is better". There is NO WAY that someone making 10+ trades a day is only taking really awesome trades and not giving up alot of his profit to his broker, unless he is trading crypto on Gdax/Bitmex but crypto trading is dead now.
I did it all, and it all works, from scalping for a few seconds to holding for 2-3 months. But you have to spend a little while writing down what you want to do, make sure the fees are small compared to the profit you realistically aim for.
11) Become a specialist.
Find 1 strategy and spend all your time on that.
Or find 1 market... but that one... Nah find 2 markets... What will you do when your market is sideways/dead?
I have 1 single strategy, I am learning about other ones at the moment but I only really have one.
12) If you are new... go for a SIMPLE strategy, do not try to reinvent trading and be greedy.
These are the strategies I am looking at:
- My strategy is picking tops and bottoms where reversals happen (advanced, I would not recommend to most :p)
- I am learning about hidden divergence (trend continuation) (intermediary difficulty)
- I am interesting also in continuation inside bars when there is strong momentum (beginner friendly)
Actually my strategy has to be one of the hardest there is. I use divergence as a filter + additional reason to go against the trend. I have become an amateur-expert at reversals.
I know, this is terrible, every one says not to go for this, but it worked for me till now. I still can use ALOT more experience. Maybe one day I will call myself an expert.
This strategy, if I am correct, is where greedy noobs get slaughtered. It is not easy, it is so dangerous. Sure you look at the chart and think "oh these divergences pop out, I could easilly buy here and sell here".
Or "This was a clear bottom/reversal I could easily buy here". Nope. Sorry. You could not.
What I started with was basic trendlines. I would look for anything bullish and buy when the trendline is touched, then sell when it goes ballistic, if it drops below the line I AM OUT. I was not very excited about making money when I started, but I really really did not want to lose any. I think this is the approach people should have (right?).
Here is an example of a trade I took a year ago before I got bored and switched to another non recommended highly dangerous strategy :D
13) Trading is easy, but it takes time, and all these other qualities you have heard about.
Take something simple: Support and resistance. Pretty basic. Just horizontal lines.
Well, I think I am someone smart, I am a very fast learner, and I do not exagerate when I say I spent THOUSANDS of hours analysing support and resistance. Plus at least several hundred looking at RSI divergence alone. Plus hundreds looking at market life/cycles. Plus hundreds looking at different market conditions. Plus hundreds looking at moving averages. In total I am at 5k in a year.
To become an engineer, you will need 5 years (is this the same in all countries? Can't be much different). You get 200 class days a year, 8 hours a day + 1 for homework (well maybe some people need more idk OR skip all lessons skip homework and rush rush before exams works too I guess) so that's 1800 hours a year or 9000 total. Of course you learn alot of useless stuff, but when you start working you have to learn your new craft anyway.
Would you let an 18 yo surgeon on his year 1 operate on you? Would you expect him to reinvent surgery? Yes actually, but not in the good way :D
Now trading does not require 10 years of studies (hey especially if you full specialize on 1 thing and 1 thing only), but I think you will need a couple thousand years under your belt to really know what you are doing.
If you are lucky and have the qualities of a good trader in you as you start, and go for that 1 simple strategy and nothing else and respect all the rules (easy as you already have all the qualities) you could start making money pretty quick but not too quick (you have all of the qualities = you don't risk too much when you don't know what you are doing), you might get hit when a bull market turns to bear, but you will not get hit hard as you have all the qualities a trader needs. Otherwise, it will take time (or beginner luck), and in both cases before being really good you will need a couple thousands hours under your belt.
So, the best advice you could get: if you do not like this, forget about it. Do not force yourself. The power of greed is not going to turn you into a millionaire even if you really really want to. It will turn you into a hobo thought, for sure.
Note
14) Use trading view replay mode when you have 5 free minute.What if I told you there is a way to take as many trades as you wanted without having to wait, any time you wanted, so you can practice and gain infinite experience?
No idea what happens next, step 1 do TA
Step 2: discover if you did it correctly if you made a mistake, do this enough times to get an idea of what winrate to expect for a strategy, gain experience.
I am bullish at first sight. Really looks like it is going up. So what happened in the end?
Wups I guess not
Note
15) Do Retail Trades Move Markets? (2009 paper)Over short horizons, such as a day or week, retail trades
move stock prices in the direction of their trades. Over long horizons like a
year, the retail trades move only the prices of small stocks in the direction of
their trade.
Note
Want to be a counter trend trader?You better be patient. Never enter too early even if it means missing out often.
Never forget to have a stop loss ready going against the trend like this, price could just catapult down.
And once you enter, be prepared to wait more, they are not all V shaped recoveries.
Long medium short time frame, they all require patience. With really long time frames you cannot miss thought, if you get 1 punch in your Charlie Munger card every 6 months or 2 years. But there is plenty of time so it's impossible to miss as long as one is free of course.
Patience & nothing to do. And the weekend is starting. Trading autist occupation. Actually I'm pretty sure there isn't a single autist in this game thought :D
I guess don't attempt playing this game if you're not well in your head have the worse diet etc.
Also, why does every one want to counter trend trade? That's where every one loses. Leave that to the big boys :D Jk. But it's true that it's not noob friendly I'm serious about that part.
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