A 17-year-old blog reader asked me recently if he is too young to start learn trading and how can he start. That got me thinking. Mmm, how would I teach my girls if they expressed interest in trading?
You need to have spare money
Well, how young one may start to learn trading depends on when he can save up the capital to start trading. Nowadays, this barrier is lowered greatly with forex brokers that allow trading of nano lot sizes. A broker I know of allow trading of any lot size and this allows starting capital of US$500 and still allow proper money management to be applied.
It is easy to lose everything
This is up to individual. I was thinking some parents may like to let their children understand the risk of trading. Let them start trading without any rules. Let them fiddle and familiarize with the trading platform. Let them experience margin call, let them experience account blow-out. US$500 is cheap to learn all that.
You've got to execute the trades without fail, even if you've lost the last 10 trades!
After that, I would give my girls a decent trading system (including money management rules) that they can trade without interfering their studies (and their studies also don’t interfere with their trading too!). I would monitor that that trade the system consistently even if they experience losing streaks. Children are unpolished gems. I would think children are more likely to follow trading systems.
Side dish
Also, importantly, treat it as a means of bonding with our children, a game that we can play together!
Is this how you will teach your children how to trade? Or would you even teach them at all?
Feb 23, 2012
Feb 21, 2012
Successful Traders and Professional Gamblers
Books such as "The Way of the Turtles", "The New Market Wizards" and "The Market Wizards" tell very nice trading battle stories. These books are really about the war stories of the many successful traders of our times.
The 3 books seem to resonate that professional gamblers (poker, black-jack etc) have a high chance of becoming successful traders. All 3 books describe trading as very similar to professional gambling.
In professional gambling, gamblers:
It is with this edge that turns the game into a positive expectancy game. In the long run, the professional gamblers will win, provided they stick to their rules strictly and patiently.
As you can observe, trading borrowed many terms from professional gambling: risk management, edge, expectancy etc.
Hence, it is so important to trade with a edge. By trading with an edge, we know that we will be profitable in the long run, and we will not suffer from trade execution paralysis - especially we have lost many trades consecutively. As we know that we will ultimately come back because we trade with an edge.
The next question is: How to trade with an edge?
The 3 books seem to resonate that professional gamblers (poker, black-jack etc) have a high chance of becoming successful traders. All 3 books describe trading as very similar to professional gambling.
In professional gambling, gamblers:
- Bet small when the odds are unknown. This is their risk management strategy.
- Will have many losses
- Bet bigger when the odds favour them. For instance, professional black jack gamblers have strategies to count the cards and know when the odds favour them. This is their edge.
It is with this edge that turns the game into a positive expectancy game. In the long run, the professional gamblers will win, provided they stick to their rules strictly and patiently.
As you can observe, trading borrowed many terms from professional gambling: risk management, edge, expectancy etc.
Hence, it is so important to trade with a edge. By trading with an edge, we know that we will be profitable in the long run, and we will not suffer from trade execution paralysis - especially we have lost many trades consecutively. As we know that we will ultimately come back because we trade with an edge.
The next question is: How to trade with an edge?
Feb 20, 2012
The Most Expensive Trading Book?!
Well, we know trading books are notoriously expensive. I believe this is inarguably THE MOST expensive book on trading. Well, at least the most expensive one I have come across so far. Let me know if you have come across one that is more expensive than this: Day Trading With Short Term Price Patterns and Opening Range Breakout by Tony Crabel.
A new copy is retailing on Amazon for a whopping $1,293.18! See below:
Tony Crabel's book is a classic that talks about breakout strategies - ORB, NR4, NR7 etc.
BUT!!! I manage to find the ebook version through Google! Save me $1,293.18!
A new copy is retailing on Amazon for a whopping $1,293.18! See below:
Tony Crabel's book is a classic that talks about breakout strategies - ORB, NR4, NR7 etc.
BUT!!! I manage to find the ebook version through Google! Save me $1,293.18!
Feb 19, 2012
Our Students Has Traded Successfully Since
Many trading educators like to claim this.
First up, how many students? Remember there is only 5% successful traders in the world? Does it mean all the successful traders come from your classes? :-D
I remember a popular forex trainer once admitted truthfully that after having conducted so many classes (and mind you, it is really MANY), there is only a handful of students whom he knew begin to trade well. He cited perseverance as the key to trading success for his students. He offered to check his students results but they just dwindle along the way.
First up, how many students? Remember there is only 5% successful traders in the world? Does it mean all the successful traders come from your classes? :-D
I remember a popular forex trainer once admitted truthfully that after having conducted so many classes (and mind you, it is really MANY), there is only a handful of students whom he knew begin to trade well. He cited perseverance as the key to trading success for his students. He offered to check his students results but they just dwindle along the way.
Feb 18, 2012
US Unemployment - Let's Visualize It
Double dip recession...market recovery...sometimes I just get so sick of what the analysts are saying everyday. I still remember back in end 2008 when many were saying that the subprime crisis was just a storm in a cup. The total value involved in the subprime crisis was only a fraction of the entire US economy? Sigh, I have learnt to just take "advice" with a pinch of salt.
Numbers don't ring a bell? Let's try graphics. See here for an animated visual representation of the US unemployment numbers throughout US (up to May 2010). Quite scary when things get glimmer, doesn't it?
So I guess the US government still has a lot of work to do.
Then again.
From Sam Stovall's theoretical model, the market cycle precedes the economic cycle. SO, the stock market has to pick up before we see improvements in the economic numbers, don't we?
Then why those analysts are basing on economic numbers to predict the stock market?
Numbers don't ring a bell? Let's try graphics. See here for an animated visual representation of the US unemployment numbers throughout US (up to May 2010). Quite scary when things get glimmer, doesn't it?
Then again.
From Sam Stovall's theoretical model, the market cycle precedes the economic cycle. SO, the stock market has to pick up before we see improvements in the economic numbers, don't we?
Then why those analysts are basing on economic numbers to predict the stock market?
Feb 17, 2012
Approaching the market with the right attitude
I have asked myself many times over.
Why Ed Ponsi's strategies in his book Forex Patterns and Probabilities are so simple but yet he is able to make money trading forex?
Why Linda Raschke mentioned in her book Street Smarts that we only need to be good in 1 strategy to be profitable?
Again, Curtis Faith brought up the same idea of simplicity in trading in his book Way of the Turtle:
Why not everyone makes money trading complex concepts like Gann or Elliot waves?
Why so many traders say K.I.S.S? Keep it simple and sweet?
There is a lot to learn from Jesse Livermore's attitude and approach to the market. I really take my hat off him for recording the prices with pen and paper. And the rules are not trivial at all. I believe many of us started with studying the strategies to approach the market but how many of us started with studying the market itself? I also realized that it is not wrong to begin with a strategy. However, the focus should always be on the market. Beginning with strategy helps us to zoom in and to filter out the noise such that we can concentrate on a part of the market and develop our research of the market from there. Can you imagine Jesse Livermore merely traded with the quotes from the ticker tape? No charts at all. He treated the stock prices like a giant puzzle, like how we play Sudoku or any other games. And that should be the right attitude - To crack the market puzzle, a piece at a time, using a strategy that we personally believe in.
Why Ed Ponsi's strategies in his book Forex Patterns and Probabilities are so simple but yet he is able to make money trading forex?
Why Linda Raschke mentioned in her book Street Smarts that we only need to be good in 1 strategy to be profitable?
Again, Curtis Faith brought up the same idea of simplicity in trading in his book Way of the Turtle:
...The funny thing is that most of the principles that Richard Dennis taught us were not new. Some were basic principles that had been espoused by other famous traders since before Richard was born. Yet the very simplicity of the principles we were taught in some respects was a hindrance for those of us who tried to follow them in those initial months. People have a tendency to believe that complicated ideas are better than simple ones. Many find it hard to comprehend that Richard Dennis could have made several hundred million dollars by using a handful of simple rules...Why Fibonacci levels work like miracle for Joe DeNapoli but not for everyone?
Why not everyone makes money trading complex concepts like Gann or Elliot waves?
Why so many traders say K.I.S.S? Keep it simple and sweet?
There is a lot to learn from Jesse Livermore's attitude and approach to the market. I really take my hat off him for recording the prices with pen and paper. And the rules are not trivial at all. I believe many of us started with studying the strategies to approach the market but how many of us started with studying the market itself? I also realized that it is not wrong to begin with a strategy. However, the focus should always be on the market. Beginning with strategy helps us to zoom in and to filter out the noise such that we can concentrate on a part of the market and develop our research of the market from there. Can you imagine Jesse Livermore merely traded with the quotes from the ticker tape? No charts at all. He treated the stock prices like a giant puzzle, like how we play Sudoku or any other games. And that should be the right attitude - To crack the market puzzle, a piece at a time, using a strategy that we personally believe in.
Feb 11, 2012
3 Steps To Achieving Consistent Profits With An Expert Advisor...
We have to take a step back and think about if this statement is possible at all.
Personally, I have forward tested more than 5 expert advisors in demo accounts. After some time, I decided on running the most promising one on a live account. Right after I set up everything, funded live account and leased the expert advisor and all, I saw reports from a very popular forum that people had suffered up to 80% losses in their accounts almost overnight...when the expert advisor was catching the correct tops and bottoms and making phenomenal profits for the last few months or so. This has really shaken my belief about expert advisors.
Kathy Lien mentioned at one of her seminars that she used to work in big banks and she revealed that banks are spending millions of dollars to find the "switch". A "switch" that will allow their sophistically developed trading software to switch between trend trading strategies and range trading strategies as the markets alternate between the two states.
William Boatright (2nd runner-up in Autmoated Trading Championships 2007), mentioned in an interview that when he tried to optimize his expert advisor for trading trends, it would not perform as well for trading ranges and vice versa.
Another clue would be...have you ever wondered why there are so many discussions and forums on the Internet actively engaging to find THE expert advisor? And those people have been evaluating experts advisors after expert advisors for so many years already...
Having said that, I still believe it is still possible to achieve consistent profits with expert advisors. Below are the 3 essential steps on how to do it:
For me, I took a break from expert advisors.
Personally, I have forward tested more than 5 expert advisors in demo accounts. After some time, I decided on running the most promising one on a live account. Right after I set up everything, funded live account and leased the expert advisor and all, I saw reports from a very popular forum that people had suffered up to 80% losses in their accounts almost overnight...when the expert advisor was catching the correct tops and bottoms and making phenomenal profits for the last few months or so. This has really shaken my belief about expert advisors.
Kathy Lien mentioned at one of her seminars that she used to work in big banks and she revealed that banks are spending millions of dollars to find the "switch". A "switch" that will allow their sophistically developed trading software to switch between trend trading strategies and range trading strategies as the markets alternate between the two states.
William Boatright (2nd runner-up in Autmoated Trading Championships 2007), mentioned in an interview that when he tried to optimize his expert advisor for trading trends, it would not perform as well for trading ranges and vice versa.
Another clue would be...have you ever wondered why there are so many discussions and forums on the Internet actively engaging to find THE expert advisor? And those people have been evaluating experts advisors after expert advisors for so many years already...
Having said that, I still believe it is still possible to achieve consistent profits with expert advisors. Below are the 3 essential steps on how to do it:
- Still be able to do market analysis manually - pull out your indicators, watch the supports and resistances and the candlestick patterns...you must be able to tell if the market is trending or ranging in the first place.
- Understand how the expert advisor works - for 2 reasons. Firstly, so that you know when you can deploy the expert advisor (remember, they don't work in all conditions). Secondly, so that you can intervene when necessary. That is, you would want to close all the positions earlier (be it in profit or losses) when the market is entering a stage which the expert advisor will not perform well. I termed this "cyborg trading" - half man, half machine :-P
- Optimize the expert advisor regularly - another reason for knowing your expert advisor well. Expert advisors usually come with a set of programmable parameters which is configurable, depending on market conditions, to let the expert advisor be able to perform at its best (but still, it is either best for trending or best for ranging, no one set of parameters for both).
For me, I took a break from expert advisors.
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