Through my relationship with Netpicks I have communicated with many traders and those who are interested in undertaking the path to being a trader. The number of people who are not equipped for the road leading to trading success is quite stunning. To be honest, that is not as stunning as those that think they are sort of entitled to a path of winning while NOT being equipped. I am at a loss to explain why many think they can crack open a chart, slap on a few indicators and make money.
I like to talk trading. I love hearing success stories and how people overcome the challenges we all face in this career. Often times I will be asked to have a conversation from someone interested in starting or have just started out. One thing I ask people who want to have trading conversations is what their goal is for the conversation….what they expect to get from it. The common reply is “just to talk” and then I ask what their trading goals are. Same type of vague answer. Those who operate a business can answer that question quite quickly.
A professional knows their goals, their weakness and their strengths. They have a direction. I believe that many don’t know where to start. What happens in this quest for knowledge is they become inundated with information. They become overloaded from all the books, forums and emails they receive about trading.
At the heart of it, trading is simple. Given that, you want your approach to this career to be simple and the less moving parts, the better. The following four points are something I jotted down a few years ago after reading one of the many trading books out there. It kept the journey neat, tidy and helped keeping the focus. The author escapes me.
1. Establish goals for your trading.
Without them you are drifting blindly through a business that has participants that are highly skilled and want your money. The goals cement you to a path and can, if followed, keep you on a track to success. What do you WANT from trading? Yes, money but what will that money give you? How will it make you feel? Money is a means to an end and it is the end result that you want to focus on. For me, it is family, freedom and being the designer of my life.
2. Whatever market(s) you are going to trade, understand them.
What makes up the market you are wanting to trade? What fundamentals drive the bias of market participants? Even if you use straight up technical analysis, knowing what “drives” the market can give you better insight so you are not trading blind. It is about having a complete package and an understanding of the product that you want to make money from.
3. Implement a trading strategy/trading rules.
It goes without saying that these rules must have an “edge”. Have your rules that specify what makes a valid trade. Ensure that money management is thoroughly understood. Your rules are what is going to assist you in being able to take a piece of the trading pie. Many times, one of the best things for a new trader is to buy into a proven trading system such as the ones offered by Netpicks. Inside these systems are trading plans that are used by the designers to make money from the market. It is a fast track into the trading world and at the same time, you can build up the required attributes that are needed to be a long term success.
4. Finally, follow the rules.
Number 4 is the challenge. The discipline is hard to keep because of one word…emotions. I have seen some underestimate the psychology aspect of trading however for the majority, that is what does people in. Heck, emotions in everyday life can do people in. The snapping at the clerk who messed up your order. Giving the finger to someone who cut you off in traffic. There is that moment between the impulse and the act where you can actually decide how to react. It is brief, but it is there. You can’t fight emotions as they are in us…they have been here since the dawn of man. You have to accept them. Once you accept them, you can find alternatives to how you handle them. In doing so, you serve your trading. You serve your trading and the goals set out in item number 1 can be a reality. Only you can decide whether or not you attain your goals.