Hello All -
My goal with this blog post is to give some insight into trading for those that may be just starting or have only a couple trades under their belt. I aim to be as open, honest and transparent as I can for you. Please keep in mind I have only been trading for 6 months and I am very much a noob myself (not ashamed to say it). But, I have studied my ass off, not only from Tim S but from numerous other traders as well. I have put a lot of time and effort into this because if you're going to take this seriously, time and effort is what it's going to take. Also, I am not a challenge student but I bought a yearly Tim Alerts subscription when I started.
Starting Out (Brokers):
One of the first questions most beginners ask when they see a a trader making a lot of money is, "what broker do you use!?". This is a great question. Although, in the beginning, you have NO IDEA what broker you will end up with. Some traders like SureTrader for the ability to avoid the PDT rule. Some people use SpeedTrader, others will use an Etrade or TDAmeritrade's ThinkOrSwim (what I use), Interactive Brokers etc. The point is, you won't have a clue. What one trader may use, you may try and hate. Here are a few things to keep in mind when it comes to which broker you will use (and you very well may switch, several times perhaps, as you develop)...
- Commissions: This is unavoidable. You WILL pay commissions. However, if you learn to manage your risk well enough, commissions, as Tim puts it, should never be of concern. If you're trading the best plays where you know you're going to profit (or chances are high), then who cares if your broker takes $20 in total. Just an FYI - Etrade and ThinkOrSwim have recently reduced their commission structure. They used to be $9.99 and are both now $6.95. This essentially gives you one more buy/sell - which can help to lock in profits, for the same commission price previously. $9.99 x 2 = $19.98 versus $6.95 x 3 = $20.85. Pretty darn close.
- Level 2 and Charting:
Brokers also differ in their ability to provide "real-time" data both in their level 2 and their charting. I know that DAS Pro is really known for their level 2 feed (there is a monthly charge for this) whereas ThinkOrSwim is known for it's charting. Each platform/broker is a little different in these areas. Be sure to do your research and use their demo platforms for a week. Set it up the way that works for you and paper trade on it. This is the best way to test-drive them out!
Starting to Trade:
In the beginning, you're going to lose some money. I've heard Tim and several others refer to this as paying your tuition to the market. Our goal is to not pay a lot in tuition lol. However, because you're new and are unfamiliar with patterns, managing risk and understanding the best times to trade, you're more than likely going to give some money to the market - that is fine! Losing in the beginning is normal! Look at all Tim's most successful traders (and not only Tim's but everyone for that matter), they all lose in the beginning! Take a look at their profit charts. Accept this. Understand that this time WILL pass if you're dedicated. Think of your profit chart as a U-shape breakout pattern with no resistance - the only resistance is you!
Soooo many patterns. Choosing patterns you're comfortable trading comes from research and time. What is the probability this pattern is successful? Does this pattern have a good history or bad history? Is it a short or long-biased pattern? In the beginning (especially in real-time), it's very difficult to spot patterns. But the more time and effort you put into studying patterns, the more comfortable you will be with them. It's easy to see patterns at the end of the day when the market is over - but that's not going to make you money now is it...Tim recommends being able to go long and short when starting to trade. I personally think starting out is difficult enough and everything in the beginning is against you so make it as easy as possible on yourself. Learn to go long first. Get comfortable with the most traded long patterns then diversify yourself and learn to go short as well (something I have yet to do).
Seeing the Results:
After studying all the basics, learning when to trade, learning what to trade and who to trade with and being patient (waiting for the right plays), you will begin to see some profit (at least you should!). This past week I became net positive. It's been about 6 months and I don't take days off. Even when I'm out of day trades I am still at my desk at 5:45am (AZ time) doing the same prep-work I do everyday. Today is Saturday and I decided to go hike a well known mountain here in Phoenix for the sunrise and before I went, I was watching trading videos (about 4:45am). Please note I