I have really only been trading full-time for short-time now. Hence the name of the site, I don't hide anything. I started in September 2008. I was not starting my trading blindly, I had experience, my first job was a trader at a prop firm which was an awesome experience but what I was trading was low volume NYSE stocks that barely moved. Had I known, how much working at a 9-5 job sucked I would've stayed.
As I began trading with my own money and my own time, my learning curve has been great. I am successfully trading in one of the hardest markets in the last decade.
Each day I am learning that trading is really only 2 % of actually trading(i.e. finding patterns, entry exits, etc) The other 98% is pure mental and psychological.
It has been about 6 months of trading but what I've learned and rules I know follow as a beginner trader, is similar to what is taught to you the very first day you start playing a sport. It are these mental aspects of the game that make you a great athlete. I will keep it to basketball references though. Like any sport, there is are things you do pre-game, during the game and post-game, that will help you win. That same is for trading.
First let's start with the Pre-game or Pre-entering a trade: This is the easy part to learn, this is where the trader is looking at charts or the tape and deciding what to trade and how. Compare this part to when you are out in your driveway shooting or practice, this is a control environment to learn in.
1-Know your role on the court- This is the most important thing I've learned. You have to define your style and strategy. When you first start playing basketball, if your tall you're a center, if you're short your a guard. You develop a set of skills for this position.
This is the same thing for trading, if you have always been a swing trader. You have those skills, don't decide one Tuesday morning you are going to day trade. You have to develop those skills first. Similar you should trade your style, you make these trades because you are confident with your skills and you will be able to handle the trades better.
Don't take a trade because you saw it on a website or heard someone speak about it, you both have different styles, no one person has the same style or risk tolerance.
In basketball, everyone has that sweet shot on the floor they love to shoot from, just because someone hits 3pt from 30 feet out doesn't mean you can. So trade your sweet spot.
I like to trade off daily charts and play longer term moves. Around December of last year, I stopped looking at daily charts and I was looking at 5 Day 5 Min charts, trying to catch every move. I ended up churning my account and barely making money.
2-Practice your plays- Each team is different and different strategies work. Each team knows when to run a certain play to score. Princeton loves to run backdoor cuts and they are successful, but it doesn't mean this strategy would work for another team.
When it comes to trading this means: Define your edge on the trade and go with it. But don't trade if there isn't an edge.
This was one of the most important things that I learn and now follow. When you do not have an edge you are just gambling, I've lost enough money on trades to learn this. This leads to the next rule to follow.
3- Always have a game plan- You never go into a game without some strategy on how to win. Why would you do the same thing with a trade. In trading this means, always have an entry point and more importantly have an exit! Pick the best entry with your edge that you have and know when to get out of the trade. You don't have to always place a stop, but always set up an exit. It could be a stop or it could be a mental stop.
What a stop does is it prevents you from riding a loss any further then you have too. This is most important.
It's not fun to making a losing trade, but what is really horrible is taking more of a lose because you still thought you could win.
That sounds easy but once a game starts, everything changes. You are now out of the controlled environment of your gym and the coach's whistle can't stop the play. This is exactly what happens as soon you enter a trade. Once you have bought or sold that stock, you have join millions of other people who want to take your money. There are now an unlimited set of variables that can affect you and it is impossible to prepare for all of them. So just like in a basketball game you have to stick to your game plan or adjust it. This is the same thing with a trade.
Come back Tuesday and you will be able to see what I've learn to do during the game being a newbie trader.
