Monday, November 20, 2006

Daytrading the S&P500 Futures - 101

Daytrading or trading in general has a lot of problems if you are interested in making money....your ego, fear of losing so you can't take the trade, greed falls into play that doesn't allow you to hold on to a winner, stress of being wrong yet again, stress from watching your account slowing go in the wrong direction, thinking that someone else is making a killing while in a chat room and so on, believing that you are "just" one more filter away from paradise.

All these things will stand in your way, some sooner then others but they will and I'm sure that most reading this would agree. Trading isn't about "trading with an opinion", it's about finding a few things that can shift the odds in your favor. During my time giving workshops and speaking at Trader's Expos, I have shown the roulette wheel and talked about playing just the red and black. Of course that game is a 50/50 deal...and the casino is not greed, but 50/50 is also nothing to make money with either. Then they had the problem of risk, at the Horseshoe Casino a player was able to let it ride for 33 spins and set a new world's record. Without control on the risk side the casino would have had a new owner, plain and simple.

SO, they add two greens and stuck a small sign on the table that said...the max bet was 100 bucks or 200 bucks or whatever. The odds went from 50/50 to 53/47 and even if you could set the new record of 34....the most you would walk away with is 34 x's the limit. The bottom line is you want to develop your style of trading and be the casino instead the moron that goes there thinking they will walk away with pocket full of gold.

Trading with an opinion can also be deadly, you can trick yourself into seeing things that really are not there so you execute on your opinion. Take a look at the volume of contracts traded at the CME each day....SP, ND, YM and the ER.

Something like four and a half MILLION.....contacts. Yea that is right....4,500,000 contracts and you are trading what? A two lot, a couple times a day???? And you believe that the market gives a damn about "YOUR" opinion......GET REAL BABY!!!!!

What I have found over the past 10 years is the more education you have...the worse you will be at trading. Engineers and doctors are at the top of the list when it comes to trading because they actually believe they are smarter then the rest of the us, which is fine with me, because I need someone to handle my order flow. Now some people have given me a little grief when it comes to busting and straight talking about you being my order flow.......but it's reality.

So the first thing is park the ego, after all it's not really me against you or you against "them", you will find it's just you against yourself.

1 comment:

Anonymous said...

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