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Gav's trading blog - Perseverance, Consistency, Confidence

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Trade stocks before learning futures? My rant

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tradingfloor1.jpgI read some trading bloggers mention “If you can’t trade well in stocks/ETF, then don’t think about trading options or futures”. And comes to comparison why trading ETF is a better choice to trading futures or options. blah blah blah. It is really a BLAH.
Well, it sounds logical and right. However, I am giving another thought of this. I think something is missing here. OK, I have never traded Options before, so I am using Futures trading as example.

Why should I trade QQQQ first before I start trading NQ futures? It makes no sense to me. Absolutely. ETF and futures are different games, though we are trading something similar and related by nature. Yes, futures trading comes with leverage, which is always thought as a double edge sword. But, I don’t see any difference when an ignorant trader who doesn’t care/doesn’t know about risk management trades stocks or futures or even options. The result will be the same. It comes to my old saying : I don’t need to know how to play table tennis before I start learning tennis.

The key point is, when you start trading one instrument, be it stocks, futures or options, you should focus on it. Work extra hard to understand the rules of game, play it. master it , and even kiss it. If the instrument you are trading comes with leverage, then think about how to utilise it, be disciplined. Is there a real advantage if your are profitable in stocks trading and start trading futures? I don’t think so, in fact, I saw more failure than others. Maybe there is, but, I don’t see it as significant. Profitable stocks/ETF trader failed in derivatives trading, most of time is because, they are focusing on the excitement of leverage that derivatives trading brings, and forget about the increase of risk involved. The most important thing is, don’t try to jump around differrent instruments before you have put in effort and master it.

You can do a comparison of instruments when you have mastered them and traded them for a period of time.

Next time, if somebody again stops you from learning futures trading because you’ve never traded stocks, it just because he himself is a loser in futures trading. It doesn’t matter which instrument you are trading, it all on depends on one element, YOU.

ah..just another piece of random rant from me.

Dummy day trading #54 08-Feb-2007: NQ Short trade closed

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Now I am convinced I need to add in a rule to refrain myself from trading before previous’s day range is broken. I have been thinking about this over the past week, as the success rate of my system is low when establishing position within previous day’s range. I made a short trade today which got stopped out immediately. Short position was taken during the first pull back of downtrend cycle. I was expecting selling to be continued, I was obviously wrong. [Read more…] about Dummy day trading #54 08-Feb-2007: NQ Short trade closed

Dummy day trading #53 07-Feb-2007: NQ Long trade closed

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After watching NQ futures broke above yesterday’s high, I was waiting for the first pull back to get into Long position. Indeed, Long position was established around 1035am when NQ futures bounced from moving average. This trade, I applied CBL trailing stop instead of setting a fixed profit target.

One trade closed with + 2.81 R (after commission)

07 Feb 2007
07 Feb 2007

Trade summary

  • Long above narrow range candle around 1035am (In 200 Tick chart)
  • Initial stop set below recent swing low
  • Trailing stop by applying CBL technique. Position was closed when it went below CBL.
  • Time stayed in position: 13 minutes.

How is everybody’s health?

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I read a couple good postings on Trading for a living at Movethemarkets and Eyal did a follow up as well. There are couple of good points to note. However, I am not very keen in joining the conversation now, to me, when the time comes (Trading for a living), I will know.

A thread “How is everybody’s health?” in EliteTrader caught my attention. To me , this is far more important than struggling about “should I quit my day job now?”. I have wrote a post on similar topic before.
The thread started with this question

“(As a trader) How do you keep yourself FIT, Normal in Society?”

I am listing some good points mentioned in the thread.

  • Eat right.
  • Work out regularly(preferably outside)
  • Maintain good sleep habits.
  • Keep your stress in check
  • Keep life in perspective

Health is far more important than the “R” you are trying to earn. Make sure you keep yourself fit to enjoy everything that money can get for you.

Crappy day of Tradestation

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I have no idea what’s going on with my Tradestation. I have an nice short setup of NQ around 1050am. My sell order was triggered, and immediately I saw some big loss figure in Matrix screen. It hanged, and suddenly showed me losses. That was not synchronized with what I was looking at chart. Without hesistation, I closed my position. And you know what, I was profitable! What the heck. I ended with +0.5 R gain only.

What a crappy day. I planned my trade, but the software failed me. Forget it, I am going to call it a day.

Here is my setup. Ah well…. a multiple R setup. Argghhh….

[photopress:NQ200ticksMistake.jpg,full,alignleft]