Start slow? start fast?

Nov 16th, 2011 | By Bella | Category: General Comments

Last night I had drinks and apps with two experienced traders. After some catching up we got into a discussion/argument about the best way to start your trading career. It has been written here that no one ought to trade 200 shares live until they can make money with 100 shares. You are the worst you will be as a trader so you ought to start slowly. Your loss limit should be restricted so you do not start your career in a hole. About last night…… I found either an experienced trader playing devil’s advocate or someone who just disagreed.

This experienced trader felt that it was better for the trader to trade more. He argued this is how you learn. This trader thought a larger downside for a new trader was in concert with this trading more. I must note that this trader also has never held a negative six figure mark on a trainee. I would note that this trader has never staked numerous traders who have lost a cool 100k plus learning their craft. But I do remember chatting with a visiting prop firm owner this summer who advocated letting a new trader let it rip.

When you start slowly and with a restricted downside you may encounter difficulty quickly sizing after you build your base. There is a danger that the trader will be afraid to lose money. It is possible that while they will respect risk that they will not risk enough.

I fall in the camp of starting slowly with a focus on trading skill. At SMB we built a trading simulator for trainees that allows them to practice. The simulator allows trainees to practice/trade very specific set ups. In 08 a huge advantage for new traders was their ability to trade often. This sped up their learning curve. Without the ability to sim trade I might be in agreement with this other trader.

For the new retail trader you probably have to start slow since you cannot handle a significant drawdown. At many firms if you are a new trader you must start slowly because you will not be allowed to experience a noteworthy drawdown. Risk on discretionary traders is being cut at many houses. I hear a lot of anecdotes about traders of many years having risk cut. But if you are at a deep pocketed firm that encourages high risk then this other trader has a path that can also work.

Bella
One Good Trade

Comments

Tags: prop trader, smbU, trader education, trader training, trading coach, trading mentor

http://twitter.com/ALSITRADER Igor Marinkovic

Only way to start is start small. When one starts trading he watch his P/L curve more than his chart, and when it starts diving that can be very demoralizing.

Trading should be as any other business/sport. You are not going to do most important project for your company first day after university or you are not going to go for 3-pointers in last second of the match in final play-off.
And always keep big picture in front of you. What are the few weeks or months trading small comparing with next 20 years of trading?
Andrew Ramponi

Bearing in mind the fact that we aren’t all the same, I find the idea that a beginners priority should be to trade higher volume a bit odd. You learn to walk before you learn to run.

I suspect the vast majority of lone retail traders starting out and desperate for early big wins have very short sad careers. One observation of myself was that in the first year, every time I became confident, and went exponential with my trading volume I had a huge draw down. It took 3 assaults on my equity to learn that lesson. After 2 years I still trade small volume – though trading volume like wealth is a relative concept. It is also surprising how much money can be made with relatively small volume if one has modest needs!In the last 6 months I have moved firmly onto the flat – slightly positive part of the learning curve with up as the only way on from here. As an unforeseen bonus I also find the trading process more deeply satisfying and enjoyable than I could ever have imagined in the beginning. If you start out with an experienced mentor looking over your shoulder then there are perhaps arguments to be made for pushing volume earlier. The trouble for the beginner, without a Market Wizard for an uncle, is finding a mentor you can trust when so much of the industry is smothered in proverbial smoke and mirrors. Present company most definitely excepted (!) I am sure 90% of all trading education on the market is vastly overpriced and for someone serious about making trading a vocation, virtually useless.For some perhaps the surest road to hell is the gradual one, but my tuppence worth says “not in this business”.
Mbellafiore

Thxs for sharing! Your personal quest I found most interesting
http://twitter.com/ALSITRADER Igor Marinkovic

Don’t forget:
Overconfidence is probably the biggest killer of successful retail traders.
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