If I were a beginning independent trader and knew what I know now after 30 years in the markets, what would I do? A few ideas come to mind:
- I wouldn’t give up my day job quickly – I realize now more than I did as a newbie that only a fraction of traders make money, only a fraction of those continue to make money over time, and only a fraction of those are sufficiently capitalized to make a living from their trading. As I mentioned in a recent blog post, pursuing trading full time before you’ve developed a track record of success is not a dream; it’s a fantasy.
- I would undertake considerable simulated trading before trading live – When I think of all the practice hours on the basketball court working on dribbling, rebounding, passing, defending–and when I think of all the practice time in scrimmage getting plays down pat–I realize that game time is just the tip of a large learning iceberg. Trading truly is the only performance domain I know of in which a majority of participants expect to spend less time in practice than in actual live performance. No wonder so many lose money.
- I would try out many markets and time frames before settling on any one – I’m continually amazed by how traders who are mediocre performers in one market can blossom once they move to a different market. I’m also impressed by the ways traders find time frames that work for their personal needs, capturing the right blend of market involvement and freedom from the screen.
- I would find just one or two setup patterns and master those – It’s hard to imagine successfully trading multiple patterns and markets before mastering one. By working on a specific setup, a trader can then focus attention on pattern recognition, execution skills, money management, and discipline: the skills that will be of help when it comes time to extend the trading reach. It took many, many months of printing out and studying intraday charts for me to find the few patterns that I now trade.
Most of all, if I were a beginning trader and knew what I know now, I’d realize that trading is no less of a business than opening a store or a doctor’s office. It requires talents, developed skills, and a clear plan for success. It requires adequate capitalization, and it requires a firm ability to limit overhead during the early, lean years. Fantasies are exciting, but there is so much more to performance success in any discipline.