Thursday, 20 November 2014

My Journey as a Trader.

Below I go thru my journey as a trader. However before I get into this....a few things which need to be said.
 In all my ramblings below, please note that I have never traded full time as a trader. During most of this time I have derived my main income from 'normal' work (IT software development, support etc). So psychologically I have always had a backup for income, i.e. after a rubbish trading week/month, I am still getting paid.

I think it it is very difficult (in fact I would say impossible) for a retail trader to start trading and generate income to live off. So you will need a primary source of income during your 'learning' phase. If you are young and starting out then I guess joining a reputable prop firm is the way to go. That way you can at least be assured that any learning you do is valid and justifiable in trading. This is not always the case with learning from books, forums, chat rooms, and for that matter "trading blogs". Even with prop firms, lots of people don't make it, so that tells you how difficult an undertaking it is.

Having said the above, why am I writing a trading blog and why I am still involved in trading ?
Well, the fact of the matter is I enjoy it and I think with time you evolve as a trader and you do improve with experience. The name of the game is to stay in the game for as long as possible while you are learning.

Currently I am trading full time with no income from a normal 'job'. I have a few other sources of income (some rentals , property, long term investments etc) which keep things ticking over. Now trading full time is going to mean different things to different people.
Having worked my butt off in IT >> on-call, extra hours etc ...we are finally in situation where house is paid off and we just have normal monthly bills to pay. This is a big difference to having to trade and to rely on your trading income to pay all of mortgage, bills, school fees and whatever else may be required. There is no need for me in my present circumstances to (for example) have to make $1000 a day to keep me afloat. If need be I may go back into 'normal' IT employment, but for the moment I have had enough of it having been doing it for over 20 years.

Anyway, here is my trading journey........

Ok, So I got interested in the stock market in 2000-2001, and dabbled in the tech boom. Got hooked and proceeded to try to learn how to trade over the next few years in my spare time when not working etc. I started this blog in around 2008 in order to get feedback and at the time there seemed to be a fair number of blogs with strategies similar to my own (traderx, 00nr7 to name a couple).

For a few years this was going well, but it was difficult to gain any sort of consistency. The larger smooth moves seemed to get harder and harder to grasp. Plus throw in some days when too busy with work and arrival of kids and it started to become less of a priority relatively to everything else. Possibly some may suggest that until I committed to it full time then it was always going to be difficult to become profitable. Maybe so, but I never really reached the confidence level to drop everything and go at it full time.

Over the next few years (2011-2013) as my trading went on, I slowly came to the realization that technical trading from charts alone was not the whole story. So began the research into what drives the markets :  the big players, the deception, the content, the order flow, supply and demand etc. Along the way (2012-2013-2014) I became a member of tradingraw where I learned about tape reading and about company fundamentals, earnings etc which drive the stock selection. Also along the road I came across the jigsaw order-flow tools which help in the reading of order-flow by constructing the data to be easier on the eye.

Having learnt some order-flow, I over-compensated and thought of it as the holy grail and thought I could jump into any stock at any time and make money if my skills were good enough. This is not the case (in my opinion)

So over the past couple of years (2013-2014) I have taken bits of education from different sources and combined them into the way I trade currently, in the following ways:

  • I still use charts as i did when i first started, but I no longer use candle patterns to trade. Instead I am more interested in areas of trading e.g. the open price, the previous day's high, the current day's low. high etc. 
  • I still try to use my original exit methods of letting the price run once I am on the right side in order to capture a big gain. Hence I am not using order flow to just judge short term movement and get out after say a 20-30c scalp. If you can capture a big gain just once a week, then it makes a big difference to your bottom line and also doesn't eat into commissions.
  • I am setting up my stocks prior to market open (i.e. stocks in news) rather than running scans on the market after the open to see what is moving etc.

It is by no means the finished article as there is always something to work on.
My two biggest problems seem to be polar opposites: discipline (jumping in too fast on occasion) and hesitation (dithering on entry to try to get extra confirmation)

Also the order-flow component takes time to learn and it involves repetitive watching of the market day after day in order to get the 'feel' for it. So this usually means recording sessions and watching the tape post market when reviewing the day etc. The jigsaw tools I have only started to use in earnest in last month or so, hence this part of my trading is still work in progress.

So in summary...this is where I am now. There is no way I am going to be a super trader (making millions a, but i would like to think I can reach a goal of being consistently profitable. By which I mean have more up months than down months, and make a decent chunk of change over the year to pay bills etc).

Any comments, questions etc away.

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