The distinctions between


education (obtaining know-how)
training (exercising know-how)
trading (applying know-how)


Education

There are few education facilities.
Futures brokers and exchanges provide handbooks that describe futures contracts.
They contain contract specifications, rules, usage, mechanics of buying and selling.
With electronic trading, the terminology is becoming obsolete.
Account application forms include obligatory warnings and disclaimers. It must be hazardous.
The SFE has a short list of 4 member-brokers who provide education seminars. whereas :-
The SFE has a longer list of 36 authorized data vendors. A distinct imbalance.
There is a world of difference between knowing how the game is played, and actually playing the game.

Authoritative references

SFE education section at www.sfe.com.au/content/sfe/education/intro.htm

SFE brokers who provide education seminars at www.sfe.com.au/content/sfe/private/seminars.htm

SFE authorized data vendors at www.sfe.com.au/content/sfe/trading/contacts/datavendors.htm


Training

The hard part. The practice, practice, practice and more practice.
Where can you practice. There are not a lot of training venues available.
No gymnasiums where you can strap on the gloves, find sparring partners, get a workout.
To most, practice means developing a trading plan or system, and back testing. Offline.

intra-day training helps position trading
Middle and long distance athletes use speed work over short distances to sharpen up.
Similarly, sprinters use distance work for conditioning, and development of stamina.
Same principles apply to the thoroughbred industry. What makes financial trading any different.

Position trading is a common trading method. Take a view, open a contract, and hold on.
Anything longer than 2 days, is position trading. Medium to long term.
It is said, position trading has two advantages.
• Positions don't need constant monitoring. (really ??)
• Allowing traders to engage in normal employment.

Position trading develops a mind-set with a preference for
• putting the entire range for the day in the bag.
• not sitting in front of a screen all day.

That pre-supposes the SPI will
• open on the low, rise all day and close on the high, or
• open on the high, fall all day and close on the low

It rarely happens. Frequently it rises one day, falls the next. Taking back gains.
Position trading works, so long as, on balance
• rises are greater than falls for long positions
• rises are less than falls for short positions


do it yourself training - why
The futures market is a professional arena, for use by professionals, who are presumed to know what they are doing. Private traders will never be a significant force in the futures market in the foreseeable future. While that state of affairs exists there is little incentive to establish quality education facilities in Australia. Consequently, for new entrants, it is a "DIY" self-learning process. One SFE data vendor has an attrition rate among futures data customers of 100%.

why is this so ? - probable reasons why
Broker-in-house trading and broker-affiliated-hedge-funds comprise 85% of total daily volume. One single broker accounts for 50+% of the total daily SPI volume. Or 60% of the 85%. That one broker is not an educator or seminar provider listed in the SFE web-page. Given the vested interest in trading outcomes it is perhaps understandable that vested interests do not offer training facilities. While brokers dominate the market, it is most unlikely they will divulge their "real" trading methods at a seminar. Also unlikely hedge-funds will take on the role of educators.


Training methods


training exercise
find your level of competence
Paper trading is not rated very highly by (m)any books on trading.
You need to discover how much the market will give you easily. Your competence zone.

The following exercise will assist in finding your level of competence in reading the market.

Stage 1
Paper trade the SPI based on your techniques, using 1 lot look for 1 point profit.
Only when you have achieved 9 successful trades in a row move to stage 2.

Stage 2
Paper trade the SPI based on your techniques, using 1 lot look for 2 points profit.
Only when you have achieved 9 successful trades in a row move to stage 3.
If you make 9 losses in a row, go back to stage 1.

Stage 3
Paper trade the SPI based on your techniques, using 1 lot look for 3 points profit.
Only when you have achieved 9 successful trades in a row move to stage 4.
If you make 9 losses in a row, go back to stage 2.

Stage 4
Paper trade the SPI based on your techniques, using 2 lots look for 1 point profit.
Only when you have achieved 9 successful trades in a row move to stage 5.
If you make 9 losses in a row, go back to stage 3.

Stage 5
Paper trade the SPI based on your techniques, using 2 lots look for 2 points profit.
Only when you have achieved 9 successful trades in a row move to stage 6.
If you make 9 losses in a row, go back to stage 4.

Stage 6
Paper trade the SPI based on your techniques, using 2 lots look for 3 points profit.
Only when you have achieved 9 successful trades in a row move to stage 7.
If you make 9 losses in a row, go back to stage 5.

Stage 7
Now commence trading.


cross training - for day traders
For day-traders who day-trade stocks and shares.

For best results, one piece of advice we can give - learn futures trading, first.
Don't need real money. Find a broker with play-money accounts, and practice.

Cross training is commonly accepted in many elite sports. Highly recommended, e.g. racquet squash can be used to cross-train for any sport requiring high speed visual and physical reaction times. A squash ball travels 8 meters, at speeds of 200+ kph with any combination of speed, direction, angle, and height.

Trading futures will develop the skills to read an ever-changing, high volume, high speed market.
One trading day in futures, is equivalent to 10 days in one stock compressed into one day.
By comparison, action in a stock will then be seen in slow-time suspended animation.
You will see it coming, like a slow freight train coming round the bend, in slow motion.


the marathon
Trading can be likened to running a marathon. As anyone who has run a marathon will know, you cant step straight out and run a marathon. It requires considerable training, preparation and conditioning. You need to be able to run one kilometer before you can run 42 kilometers. If you cant run one kilometer, unlikely you can run 42 kilometers. Serious marathoners will build up to running 250 kilometers per week in training, week in week out for 6 months, culminating in speed work over the last month. That's running 1 kilometer and repeating it 250 times. Similarly the novice trader needs to understand the very short term first. Pick a time frame, i.e. the opening session from 09:49 am to 10:00 am. Focus on that one single time period. Dissect it. Examine it. Master it. Do not trade any other time period until you have mastered it. Once mastered, move to another time period, or extend the chosen session. Like the marathon you will not last the distance if you do not understand or cannot perform over the shorter distance. Repetition is a very large part of any athlete's training.

repetition - why it's important
Repetition is the mother of learning.
Quote: many have become chess masters - no one has become the master of chess - Siegbert Tarrasch.
The 4 stages to achieving mastery - from Tom Hopkins
(1) Unconscious incompetence - you don't even know you don't know what to do
(2) Conscious incompetence - you now know you don't know what to do
(3) Conscious competence - you know what to do, if only you can do it.
(4) Unconscious competence - operating subconsciously on total reflex

The way to perfect a process is to repeat it until it becomes automatic, without the need to think. It takes 21 days to make a habit.


the white line effect
If you drive a long distance at night on a highway that has centre line white markings, you will find when you arrive at your destination, and try to sleep, when you close your eyes you will still see the white lines passing in front of your eyes for quite some time. And yet you are not aware of it while it is happening. This is an example of repetition. Because it was happening constantly, repetitively, hour after hour.
extract from - The Face Changers - Thomas Perry - 1998.
She closed her eyes, consciously relaxing the muscles at each of her joints. For a time her mind struggled with the bright impressions of headlights and the reflective signs along the superhighways and white dashes between lanes shooting toward her out of the darkeness like tracer bullets. Then darkness came and she began to dream.

a parable - Miyagi - the ways of the master
Daniel, an innocent, migrates to the big city with his mother, is set upon by a group of bullies, who are students of the local martial arts school. Miyagi, the quiet, zen-like master, in the guise of an elderly unassuming Japanese gardener, steps from the shadows and single-handedly saves Daniel. Daniel asks Miyagi to teach him the ways of the master. Miyagi agrees providing Daniel does everything asked of him, without question. Agreeing, Daniel turns up at Miyagi's each morning. The first week Miyagi puts Daniel to work painting his fence. Brush up, brush down. Brush up, brush down. On completion of each coat, starts over again. The second week Daniel has to polish and wax Miyagi's collection of vintage cars. Wax on, wax off, wipe on, wipe off, wipe on, wipe off. On completion of the last car, he starts over, again. Wipe on, wipe off. End of the second week, back to the fence. Wanting instant mastery, Daniel eventually asks Miyagi when is he going to begin to teach him the ways of the master.

the above, re-cast in a trading setting, reads as follows

Daniel, a novice trader migrates to the futures market, where he is promptly cleaned out by the merciless market. Uncertain as to why, he seeks the assistance of Miyagi a quiet unassuming master trader. Miyagi puts him to work watching every trade, every tick, every sale. Every bid, ask, bid volume, ask volume, trade volume. Writing them all down. Page after page. Week after week. Reading the market. Wax on, wax off, wipe on, wipe off, brush up, brush down. Impatient for instant success, Daniel eventually asks Miyagi when is he going to begin to teach him the ways of the master.


The $5000 weekend course


A true story of two clients who went on a $5000 weekend technical analysis mechanical system course.
Both were successful small business professionals who were also friends of one another. Client A attended the $5000 technical analysis course first, found it to be excellent value and achieved great success following the course. Client B was impressed, and having not enjoyed much success, attended the next available course. Client B's subsequent trading results declined. Same course. Same methods. Same disciplines. Same educator. Client A's run of success lasted about a year. Then gave trading away after a series of large losses.

A number of issues arise out of this.
a. what works for one may not work for another.
b. systems that work today may not work tomorrow.
c. ability to identify changing conditions is absent and therefore
d. ability to adapt to changing conditions is also absent
e. demonstrates the dangers of a mechanical system
f.. a perfect example of the holy grail syndrome

Needless to say, being a weekend course, the presentations were static, not online. Doesn't work.

What will never be known is whether :-
the methodology was valid and
Client A understood it and applied it correctly, while
Client B did not understand it and applied it incorrectly
or
the methodology was invalid and
Client A misunderstood it and lucked in, while
Client B understood it and applied it correctly

Additional information