# How To Be A Trader



## gibor365 (Apr 1, 2011)

I'm getting notifications from Marketclub.
Today got link to series of articles "How To Be A Trader "
Somebody can find it interesting

http://club.ino.com/trading/2012/02/how-to-be-a-trader-part-1/


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## bayview (Nov 6, 2011)

Thks Gib, will take a look. At the end of the day it is still experience, experience, experience plus loads of humility to succeed.


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## blin10 (Jun 27, 2011)

don't waist time... look into swing trader instead


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## gibor365 (Apr 1, 2011)

blin10 said:


> don't waist time... look into swing trader instead


What is the difference?


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## KaeJS (Sep 28, 2010)

No real difference.

A swing trader holds their positions slightly longer, however, a day trader can quickly become a swing trader when the day trader makes a mistake. 

A savvy investor is a day trader, swing trader, short term trader, and a buy and holder.


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## gibor365 (Apr 1, 2011)

If anybody want to read , here is link to ebook: "THE COMPLETE
GUIDE TO DAY TRADING
A Practical Manual
From A Professional Day Trading Coach
Markus Heitkoetter

http://www.rockwelltrading.com/files/The-Complete-Guide-To-Day-Trading.pdf


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## Daniel A. (Mar 20, 2011)

I day traded for a few years most platforms are easy to use.
I was down when I gave up on day trading it is the casino like no other.
You can have good day's and bad day's its not for the meek. Stay away from margin accounts.


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## jcgd (Oct 30, 2011)

Day traders become swing traders when they make a mistake and hold on hoping to reverse it. A day trader would take the loss and move on. 

Swing trading has more opportunities that I can pick out with my untrained eye. No idea how day traders get in and out.


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## gibor365 (Apr 1, 2011)

Received How To Be A Trader - Part 2
http://club.ino.com/blogclick/1E6EBD/how-to-be-a-trader-part-2.html


I'm a little confused... they are telling to sell if stock down 2% (stop loss) or up 3% (gain). But what if stock never reaches those limits? lke it down or up 1%. What day trader should do in this case?
- sell anyway
- hold and switch to swing trading


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## donald (Apr 18, 2011)

almost seems like being a trader is a "calling" I might be able to be a "swing trader by default but a trader.....i don't think,scratch that i know i don't have the personality.I'm fascinated by traders(esp individual retail traders with there own capital)Jessie livermore-he is/was the godfather imo.If you anybody doesn't know or heard about him read some of his books,he was godlike(thou he did commit sucide)Made over 100 mil after 29.


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## blin10 (Jun 27, 2011)

what's with these books, most of them are a total waist of time... to be a trader you need to beat the brightest and smartest guys on wall street with billions of dollars at their disposal... this is all dreaming to become a trader and make a ton of money, and you ain't going to make much with $20k account, even $100k is not enough in my opinion to really open up... it is possible (anything is possible) but the odds are terrible... go learn technicals, watch markets overtime, loose actuall money (best,fastest and expensive lesson)... and if you're new to trading you phsycologically not prepared for it, that builds over long term


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## gibor365 (Apr 1, 2011)

blin10, if I ask those question and read such books, it doesn't mean I gonna do day trading tomorrow... I read about day trading, dividend investment, technical and so on, just to get idea about different types of trading...
I any case if at some point I decide to do some day/swing trading, I'll allocate very small amount of money (like 5k), but now I'm working full-time and cannot be really dedicated to day trading... even though I can buy something cheap (imho) and try to gain several % on trading it in several days/weeks.... did it with TCK.B, G, HBU, AGNC, SU, LNV with some small amounts and some small gains.... on other hand got burned with same tacticts with TCM, ZJG, XIV....



> most of them are a total waist of time...


 can tell the same about watching movies and reading fiction books


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## Toronto.gal (Jan 8, 2010)

blin10 said:


> 1. what's with these books, most of them are a total waist of time
> 2. to be a trader you need to beat the brightest and smartest guys
> 3. this is all dreaming to become a trader and make a ton of money
> 4. you ain't going to make much with $20k account, even $100k is not enough


1. Not all books are a waste of time.

2. Not true; it takes skills & time to learn, but no need to have Einstein's brain. 

3. Not all traders are dreamers nor are they interested in making millions nor losing their shirts. Define a ton of money. If you make $100/day, that is $2K a month; if you make $100 a week, that is $400/month. 

4. Do you really believe you could not make $100 a day/month with a $20K/$100K capital? If so, you're wrong!

Have you ever traded?


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## Toronto.gal (Jan 8, 2010)

gibor said:


> - sell anyway
> - hold and switch to swing trading


Haven't read those links yet, but I probably would not agree with 1/2 of what is being recommended.

Those are good guides, but the real teacher is you once you put what you have learned to practise. Have you tried paper trading for a while? 

For me, some swing-trades become day-trades and vice-versa, depends on the volatility of the market & other factors. I have held swing-trades for several weeks and months even. Today for example, I exited a trade that was intended to have been a day-trade on Feb.7th, but I did not sell when the trade did not work out, I just waited longer to get out with a profit, not a loss.


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## Four Pillars (Apr 5, 2009)

I'm no trader, but I certainly would never tell someone it can't be done.

It's like any kind of business - start small and see how well you can do it. Success or lack-thereof is pretty easy to measure.


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## Beaver101 (Nov 14, 2011)

For the expert traders here - at what point of the trade is it most effective to use a stop-loss? For both buying and selling?


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## Lephturn (Aug 31, 2009)

gibor said:


> Received How To Be A Trader - Part 2
> http://club.ino.com/blogclick/1E6EBD/how-to-be-a-trader-part-2.html
> 
> 
> ...


No - they are saying that a good trader is focused on risk management. By 2% they mean that your maximum risk (with equities they mean your stop loss) would result in you losing a maximum of 2% of your account value. Personally I try to keep my max loss closer to 1% but that's me. When I plan a trade I'll look at how much the security would need to go down (if I'm long) to hit that maximum loss and then compare that to the average daily move in the security. You don't want the stop so tight that normal small gyrations or noise kick you out before you get a chance to hit the profit target.

In terms of "what should you do" the answer is - look at your trading plan. If you are trading you should never enter a trade without a plan. That plan includes all of the "what if" - so before you buy or sell you have already decided under what conditions you will exit the trade. That means you will sell at X price at a loss, you will sell at Y price for a profit, and you will sell at Z time if neither target is hit. If you are really a day trader then you have one simple rule - you will be out by the end of the day. If you can't live by that most basic rule you shouldn't be trading - you should stop trading and spend some time examining your trading plan, your goals, and your commitment to be a money making trader. Discipline (following your rules) is key to being successful as a trader.

That's not to say you can't do both day and swing trading if your rules and your plan permits it - I'd just be very careful to define under what circumstances you change a planned day or swing trade into the other. As long as it's not just going by your gut, you should be fine.

I've tracked my performance and over the long term I've discovered that deviating from the plan I put in place when I place a trade is a mistake. Sometimes you will win doing that and sometimes you will lose - but in the long run I find it very dangerous. Profit or loss, if I follow my plan it means I was successful, if I didn't follow my plan I failed. Going on my judgement to me is the path to the darkside!


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## gibor365 (Apr 1, 2011)

> That means you will sell at X price at a loss, you will sell at Y price for a profit, and you will sell at Z time if neither target is hit


This is exactly that I was asking.... they are talking about X and Y, but nothing about Z.... I'd assume for day trading if no X or Y are reached, sell at 3.59  
Maybe they will clarify in part 3....


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## jcgd (Oct 30, 2011)

Doesn't it just mean that you have a time limit for your trade? If the limits aren't met you exit the trade and move on after the given time.

Part your plan is the duration of the trade, or Z time.


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## gibor365 (Apr 1, 2011)

jcgd said:


> Doesn't it just mean that you have a time limit for your trade? If the limits aren't met you exit the trade and move on after the given time.
> 
> Part your plan is the duration of the trade, or Z time.


I understand, but they don't mention how to establish Z time, what are critieria?
Also I was wondering what kind of stocks ppl trading for day trading (I know what T.gal does  ).
From what I understand it should be very liquid stock with big avg volumes, but what about beta.... too high beta will frequently execute your stop loss, too low beta - you rare will reach you X and Y prices


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## Spudd (Oct 11, 2011)

The first link you provided did mention how to establish Z time. They said you should set Z as 3x the timeframe you're using for trading. If you're trading on 15-minute bars, sell after 45 minutes if you haven't either been stopped out or hit your profit target.


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## gibor365 (Apr 1, 2011)

Spudd said:


> The first link you provided did mention how to establish Z time. They said you should set Z as 3x the timeframe you're using for trading. If you're trading on 15-minute bars, sell after 45 minutes if you haven't either been stopped out or hit your profit target.


Where is it? I coudn't find  Can you quote pls?


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## KaeJS (Sep 28, 2010)

Beaver101 said:


> For the expert traders here - at what point of the trade is it most effective to use a stop-loss? For both buying and selling?


By no means am I an expert trader. I am still learning.

However, stop losses are for chumps. I've never used a stop loss in my life.

Why?

Because the market is too volatile. If you buy a stock you believe in and it tanks 2%. That's not the time to get out of the stock. That's the time to:

a) Re-evaluate. Has anything changed?

Then,

If nothing has changed, you should:

b) buy more and average down

*OR*

If something _has_ changed, you evaluate how negative the situation is.

If the situation is a "so-so" situation (such as missing estimates by a few pennies per share) then you:

c) wait a few days and buy more on the upswing once the dust has settled and the emotional sellers are finished.

*OR* 

If it's big negative news (such as dividend cut, explosion at facility):

d) sell it ASAP and short it, so long as you don't hold the short overnight.

^ This is how I would do it. But everyone is different. The above also assumes you are not on margin. I use margin all the time, however, if you're on margin, you should lean more towards selling rather than buying. There's nothing worse than paying interest on a stock that's dropping in value. You are doubling your downside/risk, while the upside potential remains unchanged.

The only time I would consider using a stop loss is in the event a stock has run up quite a bit. Example:

You buy 500 shares at $32. The stock is now trading at $37. It would be wise to place a stop at $36, as you are guaranteed a $2,000 profit. This is the opposite of what I described above. You are limiting your downside risk and your upside potential remains unchanged.


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## bayview (Nov 6, 2011)

KaeJS,

I confess im novice in trading - more head knowledge than experience. What you described is one way of trading eg to reevaluate the fundamentals of a stock after it has fallen 2%. And it works for some successfully. There are also traders who adopt the trend following strategy - a directional bet which is mainly guided by tech anaysis. 

Im sure there are more qualified traders in CMF who can share about their stop loss strategies but from what I know there are numerous popular stop loss strategies employed by professional traders aided by sophiscated trading systems. For the layman trader to adopt some of these stop loss strategies one has to adopt those that suits him/ her and refine over time. 

Cheers


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## Spudd (Oct 11, 2011)

Gibor,

I am not able to quote it as it's a PDF and I can't copy/paste the text from it... However it is on page 160-161.


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## gibor365 (Apr 1, 2011)

Spudd said:


> Gibor,
> 
> I am not able to quote it as it's a PDF and I can't copy/paste the text from it... However it is on page 160-161.


Oh, you mean this is from the pdf book... I still didn't get so far


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## Lephturn (Aug 31, 2009)

gibor said:


> I understand, but they don't mention how to establish Z time, what are critieria?
> Also I was wondering what kind of stocks ppl trading for day trading (I know what T.gal does  ).
> From what I understand it should be very liquid stock with big avg volumes, but what about beta.... too high beta will frequently execute your stop loss, too low beta - you rare will reach you X and Y prices


It depends on your rules and your trading plan. If you actually are strictly a day trader you should stick to that rule and always be out before the close. I don't think you want to wait until 3:59 though!

In terms of what to trade - the answer is whatever is moving! Many day traders will focus on the top % gainers and losers with a price in their range, good volume, and exclude certain industries like pharma and bio-tech.

Part of the rational for taking the trade will be the ATR - Average True Range over some time period such s 14 days. That's a measure of how far a security typically moves in a single time period - you can use that in combination with technical levels to evaluate a trade and see if you can come up with what you think is a high probability trade with a risk/reward ratio that meets your rules or trading plan. In some cases the target and stop suggested by your system won't fit with the ATR - especially the stop - so it may be likely you get stopped out.

These are just some examples of things I've read about or examined and in some cases built into my plan - but you need to build your own trading plan. Whatever that plan is just ensure you have one - written down - with explicit rules and that you never enter a trade without firm exit plans for all the situations you can think of.


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## gibor365 (Apr 1, 2011)

In your opinion in what range should be Average True Range (14 or 20 days) in order to trade in range -2%/ +3%?

What sites do you use to check ATR? I found at http://ww.marketvolume.com and www.barchart.com


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## Lephturn (Aug 31, 2009)

I tend to work in $ instead of % - but basically if my stop was -2% I would want the ATR 14 to be less than that.

http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p65553176315

In the "indicators" area near the bottom and if you click one of the indicator drop downs it's near the bottom of the list.

Note I'm not just going off of the current ATR 14 - I am looking at the graphed average over the past several months to get an idea of what "normal" looks like.

Looking AAPL here - let's say I was going to go short here from 546 with a target of 496. My stop may be 556 or 560 - somewhere in there. That's a stop that's $ 10 or $ 15 with an ATR right now of under $10. It's been consolidating here so I'm OK with a fairly tight stop. So the ATR looks OK. From a risk/reward ratio I'm looking at 1:5 so that works well. My time stop in this case is dependent on my plan, but let's say a week (after the iPad announcement). Now if my trade suggested a stop of $ 10 and the ATR was $20 that trade is not going to work.

Now I tend to trade with options strategies, but I'll still plan my forecast out this way. I'll use this base to plan my stop - and it may not be an actual stop loss order but it's definitely an "I get out at $ 556.48, I get out at $ 496.88, I move my stop down to $ 536 if it closes below that - then $ 10 trailing stop (using ATR to trail my stop) until I hit one of those numbers or if not I will close the trade in March 12th 2012." I'll put GTC orders in on my brokerage platform to trigger those trades, then review my positions each night - compare them to the trade plan, and adjust as necessary.

Yeah that was a long answer. 

Also - I recommend you read this: http://www.amazon.com/Come-Into-My-...=sr_1_3?s=books&ie=UTF8&qid=1330134051&sr=1-3


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## Causalien (Apr 4, 2009)

Beaver101 said:


> For the expert traders here - at what point of the trade is it most effective to use a stop-loss? For both buying and selling?


Everyone has their stop loss set differently because everyone's position size, calculated risk in every stock varies over time based on the premium to free risk money. So I can only speak of what and how I use it. This is one of them.

Take a typical 0.2 volatility blue chip stock. I use 5 tranches martingale style. Therefore, the probability of losing my shirt is (.5^5) = 3.125%. It'll mean that I guess the turning point in a swing wrong 3 out of 100 times. For Martingale, I am trying to guess a bottom of the falling knife (because it works with double or nothing principle) and historically speaking, that is about the 50% mark depending on when the last major crash is. If it's just your normal everything's hopeful inflation year, then it should be around 20%.

If I lose my shirt 3% of the time, I can somewhat mitigate that by having a stop loss comparing closing price only. The stop loss dictates ultimately how much leverage is in total. 1000 with 1% stop loss just mean that the actual capital you are risking is $10, but you are leveraging that 100 times. In martingale term, I just lost my shirt (virtually strategic sense) in a 1% move, but I preserved my capital.

So a 0.2 volatility in a blue chip stock sucks for profit, but it is very delicious for me because I have studied it for a while and I can almost predict its movements. So I lever it up to 80 times risking 20% of my capital. Putting my stop loss at 10% because of potential meltdown overshoot in volatility. With normal cash and leverage, this plan is pretty capital intensive and doesn't generate as much leverage as I need most of the time (hence the stop loss). Now, introduce options and extreme leverage and I get to adjust the strategy however I want. I have a scheme written down on how to leverage $50k and get $1million dolloar with 1% swing in the underlying stock. But I deemed it too risky to even attempt to try. This was before I understand how much of it depend on option premiums, but you get the idea.

Oh yeah, the whole thing is not suited for investing. This is a strategy used for catching the falling knife and is very risky.


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## Beaver101 (Nov 14, 2011)

*KaeJS and Causalien:* Thank you both for your insight on the use of stop-loss, much appreciated.


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## Lephturn (Aug 31, 2009)

Lephturn said:


> Now I tend to trade with options strategies, but I'll still plan my forecast out this way. I'll use this base to plan my stop - and it may not be an actual stop loss order but it's definitely an "I get out at $ 556.48, I get out at $ 496.88, I move my stop down to $ 536 if it closes below that - then $ 10 trailing stop (using ATR to trail my stop) until I hit one of those numbers or if not I will close the trade in March 12th 2012."


I should have actually put this trade on - but I didn't have the stones to short apple directly.  I'm doing OK with a couple of spreads on AAPL but I wanted to circle back and follow through on the trade I laid out here.

Based on my plan I am out of this trade at about $ 536. My stop moved down to $ 536 based on my rule and then $10 trailing stop - but it bounced around enough to kick me out on Monday around noon as it dipped to $ 525 or so and then went back up, triggering the stop.


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