Sunday, March 21, 2010

Confessions of a Street Smart Trader

Like most noobs (or newbies), I entered into this business with my eyes wide open and my ears wired shut or as an old friend of mine used to say, with a fat hope and a slim chance. I saw what I wanted to see and ignored what I did not want to hear.

If all the marketing hype and misinformation is to be believed, this is a very easy business which allows one, with little or no experience and a small amount of seed capital, to make a six to seven figure income quickly.

After several years of striving, I can safely say that nothing is further from the truth. Here are some of my observations:

  1. Is day trading eMinis and Forex an easy way to make money?

    Definitely Not
    . It requires a lot of hard work, diligence, patience and above all discipline.

  2. Can you start this business with very little capital?

    Relatively speaking, yes. Realistically speaking, be prepared to lose money in the early part of your quest.

    The biggest problem I personally faced was finding the first trade that worked for me. I must have trialled hundreds and even with the most thorough of testing I eventually had to go live with the final shortlist to lock down the ones that work and it would be safe to say that none of my first live attempts cut the mustard.

    Dumb as it may seem, it took a while for me to catch on that not every trade works in every market e,g, a trade that is successful in a strong trending market may fail miserably in trending but volatile market and vice-versa.

    And finally, no trade is bulletproof. Even the best of the professionals get it wrong from time to time.

    In fact, it is not the number of times you get it right or wrong that dictates success and failure, it is how profitable you are at the end that really counts.

  3. How many good trades does it take to be successful?

    Before we launch into this, lets define a trade. What I call a successful trade is a consistent set of signals and/or events that trigger a profitable entry and corresponding exit.

    The short answer is one. Having said that, it is not really realistic to rely on one trade unless it occurs reasonably frequently during your trading session.

    Imagine sitting in front of your computer for 24 hours waiting for a trade only to miss it because of a moments distraction.

  4. How long does it take to be successful?

    This depends very much on the individual. For some, this may never happen. The average in our small community, for those who persisted, is about 2-3 years. This of course includes the learning curve of our original group who had no mentors to guide us.

    But even with the knowledge and tools available within our community, I would allow at least 12 months as a minimum.

    The biggest issue is not the knowledge and/or tools but the rate at which the individual can attain the correct discipline that is so vital for success in this business.

  5. Was it worth it at the end?

    Absolutely. Once you get it right, you have a fully scalable business which allows you to work at your own pace and under you own rules.

Saturday, March 20, 2010

Hard Lesson #1: Plan your trade, trade your plan

Welcome to the first of the hard lesson series. This was not the first of my hard lessons but it was certainly the costliest.

I love the line from the movie Man in the Iron Mask where, D' Artagnan said
"When I draw my sword, I ask not what I am killing but what I am allowing to live".
 
After an eternity of costly losses, I now ask myself not
"What could I make on this trade?" but "Does this trade meet my trade plan entry requirements?".

It is so tempting to hop in when you see a run, especially if you had instinctively predicted that it would happen but that is what differentiates traders from gamblers. My experience to date has been that trading on instinct is gambling.

Planning your trade imposes various important "pre-launch" checks:

  • Do you have a trade that you are comfortable with?

  • Do you know your risk/reward ratio?

  • Have you sized your trade appropriately?

  • Have you predefined your exit criteria and/or conditions?


A trade is defined as a consistent set of signals and/or events that deliver a profitable entry and corresponding exit.

I will elaborate further in later posts but sizing your trade, or trade sizing, is basically adjusting your trade to what your account can sustain.

Trading your plan is the converse of planning your trade and is by far the more important of the two.

Having a plan is intent, trading your plan is discipline.

Simple as it may sound, this is one of the definitive lessons that will dictate your success or failure in this business.

The bulk of my personal trading disasters lead back to this one single factor, not having the discipline to trade my plan.

Welcome to streetSmartTraders.com

Welcome to streetSmartTraders.com, a small community of street smart traders who make a living out of day trading eMinis, eMini currency futures and Forex.

This is primarily a collection of thoughts and observations pooled from our share experiences in this challenging but rewarding arena.

Please note our disclaimer/terms and conditions.

  • We do not provide nor imply financial advice in any way, shape or form.

  • We do not profess ourselves to be experts in this arena.

  • We are not promoters and/or resellers of trading systems and strategies.


We are merely a small community of street smart traders who are sharing our pool of hard earned knowledge from our successes and failures in day trading selected financial instruments for income.