Trading Lessons

http://eotpro.typepad.com/my_weblog/2007/11/daily-lessons-8.html

My suggestion? Start slow. Trade 1 contract. Regardless if you have a $2000.00 account to start or $100,000.00 account - TRADE 1 CONTRACT to start. Earn your second contract from the market.

If you can not earn money with 1 contract... you will not make money with 2. It is as simple as that. Even if it takes you 3 months of trading going up and down before you earn your 2nd contract, once you get there the Magic of Quantified Objective will prevail and once you start adding contracts you will be well on your way.

I also highly suggest that if you earn a contract and then suffer a trading loss that you take off the contract until you earn it back. This way you are only risking Market money and your own personal capital is still yours. When you have earned 5 or 10 contracts, cash out. That's right... the market is now paying you. Start over at 1 contract and re-earn your way all over again. This will ensure that you don't go so large as to create FEAR as well you ensure that the Market is paying you. This is your ultimate goal, to draw a paycheque from the market and by cashing out once you have reached a specific goal this will ensure that you are drawing the money out of the market, limiting your risk.

Be prepared to establish Goals in your trading. I highly suggest creating Goals that are attainable. If your goals are NOT attainable it will prove your demise. If you have anything in your trading plan that takes you psychologically into failure it will be impossible to succeed. Remember:

1) YOU WILL NOT WIN EVERY TRADE:
Don't expect to because it is impossible

2) TRADING IS A NUMBERS GAME:
Your trading plan needs a higher win/lose ratio... that's all

3) TRADING IS ALL ABOUT YOU:
Your capability to follow YOUR rules will determine if you will succeed or not.

4) YOU MUST LOVE WHAT YOU ARE DOING:
It is detrimental for your overall happiness to LOVE what you are doing.
Having a Passion for Trading will ensure you follow through with all the steps to ensuring your
overall future success. If you don't enjoy it... find out what you truly love and follow your heart.


http://eotpro.typepad.com/my_weblog/


http://eotpro.typepad.com/my_weblog/2007/11/daily-lessons-l.html

LESSON 1: CHOOSE YOUR MARKET!
Before any other study can be done and before you flail around from market to market trying to trade them all... study each market and CHOOSE 1. Your chances of success are higher if you stick to one market and become intimate with how it moves during all market conditions. If you continuously change from one market to another you will not be able to create a disciplined and consistent plan as each market has its own idiosyncracies that must be learned individually. There is nothing saying you can't expand to another market once you are trading your Primary Choice successfully.

Lesson 2: CHOOSE YOUR TIMEFRAME!

This lesson will take some time to implement. In my opinion, one should take a week or two of watching their distinct market in several timeframes to assist in their end choice.

The obvious choice is longterm vs shortterm intra-day trading. For instance do you want to trade a 10minute chart? Does your personality prefer a scalping method or do you like to see your efforts payoff in the bigger picture trending days? Do you have patience or a lack of it? All of your personality traits will determine what form of trading is best suited to you as a person. IMO one's personality must play a factor in their trading style and trading plan. Trading truly is all about you and the earlier you realize this, I believe the higher your chance of success.

Now most charting software today offer more than only intra-day minute charts. There are Tick, Volume, Daily, and Weekly to name a few more. It is imperative that you know what style is best suited to you and the tools you choose in order to have the highest probability outcome.

The only way you will decide which timeframe and style of charting is best suited is by watching your chosen market, researching back in time with several timeframes, and understanding your own personality, level of patience, and maximum risk.

------
Lesson #7 - Knowing when to Review...

You have been trading your plan live for a few weeks now and doing very well thankyou.
Suddenly, one day, you wake up and you do everything wrong. In a matter of a morning you wipe out 1/2 of the profits that you have earned since turning on your trading live. Now, you are sitting there stunned- could you really have done this? What do you do now? Do you take the next trade? The indecision alone could cost you and it seems that now your mind is questioning everything and fear has set in. So... what do you do?

First:
Shut down your live account. Obviously there is a severe mental and emotional issue happening with your trading and continuing when you are in such a state it is best to shut it all down, and walk away for the day.

Second:
After you have had some time to clear your mind and calm yourself down. Go back to your charts and start the day over. Go through one tick at a time until you reach each and every trade that you took, win or lose, and ask yourself ...

1) "Did this Trade meet my criteria?" YES - Good /NO - WHY?
2) "Were the stops too big?" NO - Good /YES - WHY?
3) "Was I trading on emotion?" NOW - Good /YES - WHY?
4) "Did I overtrade?" NO - Good /YES - WHY?
5) "Was there outside influence against my trade?" (Sudden News, etc...)

If you Answered incorrectly on just one of these questions then you have to ask yourself WHY?

With exception to number 5 because sometimes there will be a news event that you just aren't aware of or prepared for and it is anyone's guess how the market will react... chalk this scenario up to the cost of doing business in trading.

Until you know the answers to what you may have done incorrectly... I would not trade live.
Re-open your simulator account and get back to re-establishing your discipline and the consistent execution of your trading plan. Even if you take a week to get back to your disciplined execution take that time. This will re-build the confidence that you need for long term success.