Profitable Trading E-Book

Niclas Hummel

• Herausgeber: BoD - Books on Demand
• Kategorie: Fachliteratur
• Sprache: Englisch
• Veröffentlichungsjahr: 2024

Seitenzahl: 98

Beschreibung

Niclas Hummel, an experienced trader, reveals in this concise guide the realities of trading futures and cryptocurrencies. He illustrates how easily newcomers in the shark tank of financial markets can become shark bait when they operate without clear strategy, risk, and emotion management. Don't be swayed by current trends on social media into making rash decisions. While trading always carries risks, it remains one of the most established methods of wealth accumulation when approached with time-tested strategies. The book conveys how you can succeed in trading with thoughtful analysis, a well-founded trading plan, and the right actions and mental tricks. It is an essential guide for anyone looking to trade profitably in the dynamic world of global financial markets.

Leseprobe

Risk Disclaimer

Trading financial instruments such as futures, stocks, options, certificates, currencies, cryptocurrencies, and other investments involves substantial risks and may not be suitable for everyone. The trading strategies and techniques described in this book may not be suitable for every individual or situation. Past results do not guarantee future profits.

It is important to emphasize that trading in financial markets can potentially lead to losses, and you should only trade with capital you are willing to lose. You should be aware of all risks and seek independent financial advice before implementing the strategies described in the book.

The author and the publisher of this book do not assume any responsibility for any financial losses or other damages that may arise from trading or applying the information presented in the book. Each reader is responsible for their own trading decisions and should carefully consider their financial situation, risk tolerance, and investment objectives.

The content of this book is solely for educational purposes and does not constitute investment advice. It is your own responsibility to seek professional advice and carefully assess the risks before making trading decisions.

Please be aware that financial markets can be volatile, and market conditions can change rapidly. Always trade responsibly and with caution.

Before you commence trading, you should familiarize yourself with the applicable laws and regulations in your country and ensure that you possess all necessary licenses and permits.

“A man who can both be right and sit tight is uncommon.”

Jesse Livermore (1877-1940), stock trader and speculator

Table Of Contents

Risk Disclaimer

Table Of Contents

Foreword

Strategy

Selection Bias

The Market Selection

Laws and Taxes

The Expectancy

Risk-Reward Ratio

Macro Analysis

Costs

Which Timeframe?

Technical Analysis

Assembling the Puzzle Pieces

The Stoploss Distance

Trade Management

Full Automation

The Trading Plan

Risk Management

The Passive All-In Situation

Can you time the Market?

Available Capital

Value At Risk

The Compound Interest Effect

Expectation of Yourself

Risk Calculation

Account Building

Survival Measures

Correlations

Summary

Emotion Management

Anchoring Effect

The Rational Mode

Trading stress

The Risk Tolerance Factor

The Trading Demons

FOMO

The Search for the Holy Grail

Dealing with Losses

Identification

Greed & Fear as Communicative Partners

Doing nothing

Narrow Results

Really learning from Mistakes

You have to prove it to Yourself

Summary

Links

Contact

Glossary

Note: Basic trading terms and technical jargon appearing without explanation can be looked up in an alphabetically sorted glossary at the end of the book.

Foreword

The pursuit of profitable trading opportunities is of great interest to many people in today's world. Particularly, the realm of cryptocurrency trading is regarded as new and volatile.

The abundance of information about trading on social media platforms like YouTube, TikTok, and others often leads to confusion. Among this flood of information are also brokers who portray trading as particularly easy. The account opening process is quick and straightforward, aiming to generate fees from trading positions involving as many retail traders as possible. This also pleases quantitative traders, who seek to use your provided liquidity with advanced financial mathematics and technological advantages to take your money.

To avoid becoming part of the shark bait in the financial ocean, it is crucial that you engage with proven and contemporary trading methods. Otherwise, you will be exploited by professional traders and institutions.

With the buying and selling of any financial asset, you automatically become a trader who must manage risks, both financially and emotionally. In this process, three core components are essential: a solid strategy, effective risk management, and conscious emotion management. In my 12 years of experience as a trader, I have realized that each of these components is equally important. This guide will show you the considerations behind a successful trading plan, why taking inappropriate risks diminishes your chances of success, how a lack of emotion management inevitably leads to self-sabotage, and much more.

I promise you that with the practical principles and analysis methods presented here, you can swim alongside the wall street sharks. Profitable trading begins in the mind. It is time for you to take full responsibility for actively building your wealth and deeply understand the reality of the financial markets to make them work for you instead of working for them.

Niclas Hummel

Strategy

Concrete entry and exit signals are only a small part of strategic considerations. A good trading strategy must answer many questions. How can you predict the general direction of the market using statistics? How do you manage a profit and loss scenario? Other important topics include market selection, determining stoploss distances relative to holding time, and avoiding high costs. The specific insights will be written down in a final trading plan, which will be your personal sheriff for disciplined management in the wild west of financial markets.

Selection Bias

The selection bias describes an evaluation error that occurs in statistical data when the sample is not representative. The omission of relevant information when looking back at past stock prices for example leads to such a selection bias. The human brain is particularly susceptible to this bias. Overcoming this bias in looking at data is crucial in trading. This is the first important step in thinking towards a profitable trading strategy. Here are a few examples of selection bias:

An investment in Apple and Amazon after the Dotcom crash in 2001 would have made you very wealthy. However, the truth is that at that time, you could have also invested in hundreds of other tech companies that are now bankrupt.● Bitcoin has skyrocketed to astronomical heights since February 9, 2011. But would you have trusted a magical internet currency back then or foreseen that it would be the subject of extreme speculation?A trend-following strategy in stock indices worked very well from 2020 to 2024. However, there have been intervals in the last 20 years where the trend-following strategy has led to losses.When comparing copy trading providers and following a seemingly profitable strategy, you will find that past performance is not a reliable indicator of future success.

The chance that a strategy has worked particularly well in the past deceives many investors.

In my opinion, it is very important that you do not fall into the selection bias when developing a trading strategy. This only works if you look at the current market context with current trading products and macroeconomic developments. This is much more important than relying solely on past events. While the past is good for studying certain events that are likely to repeat, flexibility and the ability to respond to changing market conditions are even more important. The future is not linearly dependent on the past. This independence from the past always makes trading an unpredictable business, but that is precisely what offers the possibility that trading risks will pay off.

However, what remains in a trading strategy are logical basic principles and topics that allow for a rational and long-term profitable approach on a solid basis. These relate to:

Market selection & trading productsRisk-reward thinkingStatistical analysis methodsStoploss distanceTrade managementRisk management

The Market Selection

The selection of markets, and thus the qualitative selection of trading opportunities, is a cornerstone of profitable trading. Also, constantly scouting for new diversification opportunities is a side job as a trader. The asset class of cryptocurrencies, for example, offers numerous new markets for diversification opportunities.

You can find a wide selection of traditional markets with futures brokers and stock brokers. You can trade cryptocurrencies with centralized exchanges (CEX) and decentralized exchanges (DEX). The latter have the advantage that you have control over the private key of your crypto wallet.

The following futures markets are optimal for a diversified selection of trading opportunities:

American stockmarket

The S&P 500 Mini Future $ES reflects the American stock market. A smaller tick value is offered by the micro variant $MES. An alternative is the $NQ as a representative of American tech stocks.

For example, $ES stands for the symbol ES, which can be directly found on a trading platform or with a broker. It is an abbreviation for "Electronic Mini-Future on the S&P 500 Index".

European stockmarket

The large $FDAX, the Mini $FDXM, and Micro $FDXS represent the German DAX-40 index. Alternatively, there is the European index EuroStoxx-50 $FESX. Additionally, there are the Swiss $SMI and the British $FTSE.

Currencies

Currency futures include, for example, the $6E for the Euro against the US Dollar and the $6B for trading the British Pound. Alternatives include the Japanese Yen $6J, the Canadian Dollar $6C, as well as the Australian Dollar $6A, the New Zealand Dollar $6N, and the Swiss Franc futures contract $6S. Currencies can also be traded as CFDs for favorable conditions.

Bonds

Interest rate markets can be traded, for example, with the future $ZN, which reflects American 10-year bonds. The German bonds are represented by the Bund Future $FGBL.

Commodities

You can trade oil with $CL for Crude Oil, or with the micro-variant $MCL. $GC or $MGC represent Gold. $ZW and $XW are Wheat Futures, $ZS and $XS represent Soybeans, $ZC and $XC provide exposure in the Corn market. The Sugar Futures contract "Sugar No 11" $SB, Cocoa Future $CC, and "Coffee C" Futures $KC are traded on the ICEUS exchange in New York. Additionally, there are more variations of energy, metal, and agricultural futures.

Cryptocurrencies

Bitcoin $BTC and Ethereum $ETH can be traded as perpetual swaps on various exchanges under favorable conditions, both long and short. Altcoins like Cardano $ADA, Solana $SOL, or Binance Coin $BNB often exhibit even more volatility and can thus be traded without leverage on a DEX like Uniswap, but are also available on a CEX.

Futures are the Top Tier

To start trading, in my opinion, just one futures or certificate broker is sufficient, as this provides access to enough relatively uncorrelated markets within one account.

You don't have to deposit 100% of your available capital into the broker account for trading, as only a certain margin needs to be deposited for taking risks in the futures market or with a certificate. Often, depositing 25% of your available capital with the broker is suÓcient. If you also trade crypto or use multiple brokers, such as certificates and futures, you can easily separate your capital. This also increases security because you haven't deposited all your money in a single institution.

With more capital and skill, it makes sense for diversification opportunities to expand your horizon of trading possibilities by steadily adding more markets, such as incorporating individual stocks, cryptocurrencies, certificates, and options on commodities.

My current watchlist on TradingView, sorted by daily volume.

Every market requires specialized knowledge. Important in stock trading is understanding earnings and stock splits. You should always have these events on your radar, as they can cause significant price gaps overnight. In agricultural futures like wheat and soybeans, contract rollover every 2 months can also lead to price gaps. It's okay to start by focusing on a few markets at the beginning. However, one market alone is not enough to generate suÓcient trading ideas. A minimum of 4 different markets should always be on your watchlist.

The following list is an overview of various financial products and which markets you can trade with each product. Additionally, it shows how much capital each product class requires and which brokers offer them.

Other brokers are also fine. This is my current recommended preference.

Product

Recommend ed minimum deposit

Markets with favorable conditions

Broker

CFD

$500

Forex, Indices, Gold, Oil

IG Markets, Admiral Markets, GKE

Futures

$1,000 for Micro Futures,

Forex, Indizes, Metalle, Rohstoffe,

Interactive Brokers, Ninja Trader,

$5,000 for Mini Futures

Agricultural futures, Bonds

Tradestation

Knockout-Certificates