Oct 072012

Did You Begin Day Trading As An Indicator Only Trader?

Did you start day trading after getting a book on technical analysis, and acquiring a charting program – possibly a free of charge one which you found on the internet – to be able to save capital? Even though reading your book you learned about trading indicators which could ‘predict’ cost movement, and what do you know, the ‘best’ indicators had been in fact included within your free of charge charting program – let the games begin.

Now that you have all of the day trading tools that are important, the book for education Along with the free charting program with those ‘best’ day trading indicators, you now have to have each day trading strategy so you can choose which ones of those ‘magic’ day trading indicators you’re supposed to use. This definitely is actually a wonderful book, besides telling you tips on how to day trade employing indicators to ‘predict’ price – it also stated which you want a trading program to day trade.

So what must this strategy be? The book told you about trend following utilizing an indicator referred to as macd, and it also told you how it was possible to pick the top or bottoms employing an indicator known as stochastic; my guess is that you picked the stochastic indicator to start your day trading – this need to be the ‘best of the best’ because this indicator was going to make certain you of entering your trades with the ‘best’ cost. Wonderful, basically remarkable how straightforward this day trading stuff seriously is. In fact, why even bother taking the trades, every single time your indicators give a signal – just call up your broker and tell him to stick $100 in your account.

My book was Technical Analysis of the Futures Markets. My charting program was TradeStation with an eSignal fm receiver; that was the one that for those who hung the antennae wires just suitable, and you put sufficient foil on the suggestions, you might even get quotes. I had sold a business enterprise just before I began trading so I did have some capital – is not that how everyone gets into trading, you either sell a business enterprise or you lose your job? My indicator was the macd as I had decided that I was going to be a ‘trend follower’ as opposed to a ‘top-bottom picker’. I also decided that I was going to be ‘extra’ clever, if one indicator was great than two indicators should be greater, so I added a 20 period moving average. My initial trade was a winner, then soon after quite a few months of extensive therapy, I was lastly able to forget the next twelve months – ahhh the memories 

Learning To Day Trading – The Learning Progression

Beginning to day trade, or learning to day trade, as an indicator trader is very typical. This is also logical when you consider – HOW are you supposed to initially learn how to trade? Trading indicators are available to anyone who has a charting program, and basically making use of line crosses, or histogram color changes, provide ‘easy’ signals to understand. Should you will also take the time to learn the arithmetic behind your indicators, as well as learning what each and every indicator is specifically intended to do, not only is this a logical way to begin, it is also a superior ‘step’ inside your learning progression – understanding the WHAT you are doing, instead of attempting to create ‘canned’ indicator only trading systems, without any regard as to WHY you’re trading this way.

This does become 1 of the ‘sticking’ points inside your learning progression, as you come to find out which you are unable to profitably trade indicators as signals only – now what? Now what – you ‘can’t’ develop your own indicators, so you begin doing google searches for day trading indicators and start off purchasing your ‘collection’ – they don’t ‘work’ either. Now what – you buy a mechanical trading system – what does hypothetical results may not be indicative of real trading or future results mean? Now what – you start off subscribing to signal services OR you commence joining the ‘latest and greatest’ chat room – am I genuinely the only person making use of the signals who is not profitable?

Now what – you never learn ways to trade.

I began trading as an indicator trader, and I did try to learn everything that I could about the various indicators, as well as trying to combine indicators that were consistent with how I wanted to trade – I just could never develop a mechanical day trading system from what was available to me. I read a couple more books that didn’t genuinely help me, so I then started looking for someone who could teach me. From what I now know about gurus -vs- teachers, I am very lucky that I got involved with a funds manager-trader who taught me a tremendous amount, but I still couldn’t get profitable, in part because there was also ‘pressure’ to learn the way to trade using real capital. As well, any discussions or thoughts about trading psychology and also the issues involved, especially to beginning traders, was non-existent.

Now what – learning but losing – I stopped trading.
Learning to trading utilizing real money, and ‘scoffing’ at trading psychology as just individual weakness, definitely was something that I now regard as misinformation. I always mention this as I now feel that this cost me as much as a year of time, and was very close to costing me my trading future, as stopped trading was VERY close to quitting trading. How can’t trading psychology be real to a beginner, when you consider that you are risking losing funds at a very fast pace as a day trader, and when you further consider which you are also doing this when you really don’t know what you are doing – this is NOT by definition being weak. And if trading psychology is real, how are you going to learn to make ‘good’ trading habits with real money whilst you’re fighting the implications?

Now what – not trading and not ready [quite] to quit – still studying and searching.

In all probability the single most important ‘thing’ that got me to a next step in learning how to trade, was the concept of a trading setup, and that a setup and a signal were not the same. This was extremely meaningful to me, as it also led to an understanding of the best way to better use trading indicators for the information that they can provide, but not to use them as trading signals – in essence I began learning about trading method where discretion could be consistently applied -vs- trading system that was mechanical and arithmetic rules.

Traders who are indicator only traders, are also what I refer to proper side only traders, that is they are always looking at the appropriate side of their charts for an indicator signal. BUT what about the left side of the chart, what about price and patterns, what about market conditions – WHAT about the relevant ‘things’ that are ‘moving’ price, rather than indicators only as an arithmetic derivative of cost, and thus, one that is dependant on the time frame which you have chosen to trade from? These ‘thoughts’, along with the concept of trade setup, became instrumental in the development of a trading method, and how I came to turning my trading around.

When I think about the steps in my learning progression – I would list them as follows:

2/95 – 6/96
indicators only
teaching service that included signals
learning to trading with real funds and trading psychology issues
stop trading

6/96 – 3/97
understanding of trading psychology issues
learning about trading setups concept
trading method -vs- trading system
trade setup – trade trigger are not the same
method development
understand the importance of the left side of the chart and what is happening ‘across’ the chart
related trading setups and how/when they triggered
indicators + pattern
indicators + pattern + cost
indicators + pattern + price + market conditions

3/97 – 11/97
able to paper trade profitably
able to real income trade profitably
able to trade for a living

Indicator Only Day Trader – Setup Including Indicators Method Day Trader

I have attempted to discuss the way I started day trading, plus the way I think many-most traders typically begin. Along with this, I have pointed various issues and problems that I had – those regarding tips on how to learn to trade, and then progressing into a profitable trader. My experiences have been both personal, as well as those of quite a few traders that I have worked with over the last 8-9 years through Tactical Trading – that a very large number of these problems are due to day trading only with indicators, the specific indicators used, along with trying to turn these indicators into a mechanical trading system. This is not to say that this can’t be done – I just couldn’t do it. However, I would strongly suggest that anyone who is in the early stages of day trading, or struggling with their day trading, consider these things that have been discussed.