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Dear Jerry,
If I were in your situation, I would do as follows:
1. Establish a $5K account at one of the low-fee, electronic, Globex-trading
brokerages, such as PFG or IB.
2. Focus solely on ES.
3. Set a small stop. I would suggest 4 points or, better yet, 2 points.
4. Set objective overall hard limits. I would suggest the first to occur of 20
trades or $2K in loss.
5. Set a numerical goal. I would suggest making 1 or at most 2 entries per day
with the task being to make a clean, well-disciplined exit at the stop or simply
letting the trade go otherwise. If I wanted to make it a little more complex, I
might add a profit exit along the lines of "Once the trade has a paper-profit of
X points, I will adjust my stop to break-even (or perhaps a little better) and
take profit according to Rule Y (some type of profit maximization) and I will
take profit upon a market reversal such that I obtain at least Z% of the
paper-profit that the trade achieved." In my opinion, if a trade builds a
recognizable paper profit, I want to make something out of the trade (at least
35-50%) no matter what (ie, not give it all back). In other words, my task for
today is to know what I am looking for, to wait until I see it, and then to
pounce on it as if my life depended on it. I am a hungry tiger looking for my
meat for today. Today, I get "two leaps and chases" to fill my gut or I'm going
to go to sleep tonight even more spent and hungry. This is not a "game." This
is my livelihood, and I'm dead serious about it.
6. Set a thematic goal. What I read into your note is that that the thematic
goal of your trading behavior is "to make money." Babies learn how to walk by
first learning how to crawl. I think trading works the same way, by
successively mastering a series of graduated steps. My objectives would be to
forget about the money (the ultimate objective) and to look at the process: "To
maintain my emotional awareness while seeking the market conditions that meet my
entry conditions, to execute my market entry automatically without thought or
hesitation once I perceive those market conditions, to maintain my emotional
awareness and balance while in the market (ie, to stay calm and attentive and
not to get hyper, space-out, or go crazy), to execute my stop automatically
without thought or hesitation, to exit once I perceive the market has met my
profit-exit conditions, and to turn my attention thereafter to searching for my
next trade (today or tomorrow) without looking back on my last or past trades
(or questioning my rules) until the end of my limits (ie, 20 trades or $2,000 in
loss) --- in other words, no changing course in midstream. If I felt
particularly unwilling to do this, I might add a third limit, such as 5 losses
in a row. In short, my thematic goal would be, externally: "To stay afloat (ie,
to minimize my losses so that I may continue to play the game)," and internally:
"To gain awareness of myself and my emotions, attitudes, beliefs, behaviors,
etc. while playing the game (ie, while actively seeking opportunity in the
market, followed by having my money at risk in the market."
7. Upon attaining any of my limits, stop trading and re-evaluate with ferocity.
I believe that if I can truly (i) turn my energy towards learning how to crawl,
(ii) learn how to crawl, and (iii) prove it to myself objectively by
establishing a consistent, successful track record (I execute my entries
automatically, I execute my stops automatically, I execute my profit exits
automatically, I go on to my next opportunity automatically, I maintain my
account level with variations attributable only to noise, all while maintaining
myself), I can thereafter learn how to walk.
Most of the above is straight out of Mark Douglas. In my experience, he knows
of what he speaks.
My best to you in your journey,
Richard
Jerry Lamberth wrote:
> Having spent a year 'fiddling about', trying to learn about the futures
> markets from nothing and doing some testing work with Tradestation, I'd like
> to focus my work better right now.
>
> Recognising that most people lose their risk capital in the futures market,
> I want to start with a very small stake (maybe $3,000). Yes, I know it gives
> me almost no chance to survive, but I figure better to make my early
> mistakes trading very small.
>
> My question is, which market(s) should I focus on with such a small stake. I
> think I will need to set very low hard dollar stops (say, no more than
> $500), so I can't trade markets that are likely to stop me out on the day of
> trade simply because the tick value is too great. Similarly, margins will
> need to be low.
>
> Should I focus on the Midam markets (can't find continuous contract data for
> these though) or lower value CBOT etc markets (Oats maybe?).
>
> Your thoughts and recommendations would be greatly appreciated.
>
> Thanks
>
> Jerry
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