A word of advice to those who want to be traders.

First off, let's establish - what is a trader?  A trader is someone who will buy or short with equal willingness.  If your objective is to profit from changing prices in the financial markets, you are a trader.  If you are holding onto the concept of bitcoin and believe in its future, you are an investor.

What is a trader's objective?  Profit.  He exists purely to profit from the financial markets and earn a return on his or his investors' capital.  This said, it is a trader's duty to seek out markets in which he can confidently exude a profitable edge which is both consistent and scalable.  At this point, I need to draw the harsh reality to the fact that bitcoin, at the moment, is not a scalable market.  You cannot earn even a moderate return on sizable sums of capital ($1m +).  

Since you are a trader, it is your duty to spend most of your work and energy in markets in which you can earn a return.  This is why I prefer the "real" currency markets.  In a given day, maybe $2,000,000 trades in the bitcoin markets.  In the currency market, a single currency pair - EUR/USD - millions trade every minute.  If your objective is scalabe profit, this is the type of market you should be involved in.

You will hear many voices about technical analysis - "it works", "it's snake-oil" - these comments are just opinions.  The facts about technical analysis is that it is a tool, nothing more, nothing less.  Technical analysis can be used to generate profits in the markets if you know how to implement and use it.  Just like any other tool, if you haven't spent the time to learn how to use it, technical analysis can lead to lots of pain and blame.

I believe that technical analysis is an effective method for extracting profits from the financial markets.  I do not base this opinion on what a book, a person, or a forum says.  I base this solely on the fact that I have spent thousands of hours testing thousands of ideas across nearly every traded asset class and I have found that with dedication, persistence, and effort an edge can be created.

Here is my tangible advice on how you can learn to be a trader:

1.  Develop a system
--Learn about technical analysis until you have a conceptual framework of when to participate in market action
--When will you enter the markets?
--How much money will you risk per trade?  Is this scalable and dynamic?
--When will you exit the markets?  Both profitable exit and unprofitable exit.
--What hours of the day will you trade?

2.  Backtest the system
--You must acquire or create some method of exploring if your system worked in the past.
--My suggestion is a demo feed connected to NinjaTrader and MB Trading.  When you open a chart in NinjaTrader, you can click the arrow keys to move a candle onto and off the chart allowing you to see the price action as though it is happening live.
--Drag a chart of historical prices one candle at a time, recording your trades as though you actually were taking them in a spreadsheet.  Chart your profit and loss.  Analyze, scrutinize, and try to disprove your edge.
--I suggest you do this for 200-400 trades across as much data as you can get your hands on.

3.  Forward test the system
--Once you have confidence that your strategy worked in the past, you must ensure that it works in the future.
--Open a demo account and trade fake money for at least two months to prove that your edge still exists

4. Live trade the system
--Start with tiny amounts of money and adhere to your system perfectly.  The amount of capital at risk should be so small that if you lost it all, you wouldn't be financially disadvantaged.
--If you can continue to make profit for at least 30-50 more trades, you should be able to gradually add more and more capital to your system.


Of course this isn't easy and more than likely the majority of people won't do it.  My purpose in saying this is just to let you know that this is what it takes if you wish to have a sustainable edge in the market.

Thank you for the kind words Holliday,

Emotion really is a killer in the financial markets.  I've lost thousands to emotional decisions.  I used to trade "pink sheet" stocks - basically scam companies with share prices around $.0001/share.  I did it because I became emotionally attached to the idea and realized that if it took off, I could make millions.  At one time I owned 7,000,000 shares in a company...and I lost nearly all of my money.

A trader who was very influential to my thinking once said "successful speculation begins with objective observation".  He wrote a book called Technical Analysis Using Multiple Timeframes and it ranks in my top 3 best trading books ever written.  If anyone desires to learn to trade, this is a great place to start.  If not, the quote alone is worth thousands.

http://www.amazon.com/Technical-Analysis-Using-Multiple-Timeframes/dp/1598795805/ref=sr_1_1?ie=UTF8&qid=1327124041&sr=8-1

You know, there is absolutely nothing wrong with not trading.  If your objective is to profit and you realize that trading is not a profitable venture for you, then hey, you made a very wise trade.  I will say though that if you are looking for something to invest in, I highly, highly recommend Currensee.  I highly encourage you to look into it.  Basically you allow professional traders to manage your money and the ONLY way they get compensated is if you make money.

http://www.currensee.com/

dood

you are giving away the secrets man

 

Hehe, trading on the MACD lines is the Rich Dad, Poor Dad tactic they try to sell you at their conferences. It really is a simple concept to grasp and easy to keep a watchful eye on.

Yea money management is just as important as a strategy.  I also recommend people back-test.  Do you use any oscillators with your EMA signals?

I won't be joining this short, but I may buy a little more on the next long signal.

That's what I meant when I said this isn't going to work for long.

What are your thoughts on RSI? It seems like another simple yet popular indicator for overbought underbought

Right, until enough people do this, then when there's a crossover I watch everybody short, I put a few thousand in bitcoinica on 10:1 margin and squeeze everyone out.