Are you a beginner? Before you start, have you got what it takes?
It is apparent that when starting out in the adventurous worlds of financial trading, that the complete novice and beginner can, within minutes of his first post on T2W, trot down the wrong road, due in no small part to the advice so readily given by enthusiastic members imparting their own beliefs and experiences. Just today a newcomer posed the question: I?m new, what trading platform should I have? Within minutes a reply was posted by a prolific poster, buy XYZ platform it?s only ££s and you can get data feed at only ££ per month!
The thread continued, try this, and try that, and I imagined this person already starting to think that if they can get a great trading platform half their battles are over. Well sadly they are already on the slippery slope to dismal failure and frustration. To commit yourself to any financial commitment in the beginning, already places you into the ?I must trade quickly to recoup my expenses? category, and these poor souls are already mentally chasing their tails.
I know what you are thinking ? ?you must invest?. Yes I agree, however where do you start? You certainly do not want to invest in ready made solutions, like expensive trading systems which promise you the earth, but deliver nothing but pain frustration and a rapidly declining bank balance.
Expensive software and an equally expensive data feed in the beginning are another ?I must have or I will fail? syndrome which is another no, no. Perhaps you should invest in Gurus who will make you rich in weeks following their tips and advice. Is the answer Fibonacci, Elliott wave, Gann,
candlesticks, pivot points, point and figure, wilder, price patterns, trends, reversals, breakouts, or is it best to toss a coin?
It?s my humble opinion that the only area a novice and a beginner needs to invest in is his or her personal computer and a very fast connection speed, ideally broadband. With Dell now selling complete desktop systems for £299, and broadband connection for around £15 per month. That?s it, maybe a couple of decent books, there are over 29,000 to choose from (so I have been told!) so that?s a minefield in itself! I?ll make a few of my choices at the end of this article for beginners.
I have been teaching beginners’ courses on spread betting and forex for a number of years now, and the backgrounds of the attendees and the levels of experiences they possess never cease to amaze me. The number of people who have parted with up to £3,000 for one day, 70 to a room seminar are to numerous to mention. Many have also parted with £5000 on particularly infamous system. Worst of all was one gentleman who had done a one-to-one session with a well known trainer which cost a staggering £7,000! And he could not even place a trade. There are major rip off merchants out there of which all newcomers should be aware.
Why did these people, the newcomers invest so heavily? Simply put they were sold the dream of easy money for little or no work, they were and probably still are ?Gullible? many of them have gone on to look for solutions when they found that these people and systems did not, and could not, deliver the profits that they hyped up and said were so easily available. Incidentally there is no such word as ?Gullible? in the English Dictionary ? honestly. Go and check it!
So for those newcomers to trading, this article is about what qualities you need to become successful as a trader, it?s not about promises or hype or even solutions. It is a series of questions you will need to ask yourself, not flippantly but seriously. You need to question your motives, your ambitions, your reasons and you need to be aware of the heavy price that trading demands on your mentality. Discipline fear and greed are subjects extensively discussed in trading circles ? Trading is one of the hardest, most difficult and complex challenges you could have chosen ? BE AWARE. For those that tell you it?s easy, the truth is very different.
For the purposes of presentation and to stop this inadvertently turning this into a book, I have chosen to use an imaginary beginner asking me some simple questions and me using questioning responses. I apologise in advance for the Somerset accent! The newcomers name is Giles and he is currently an experienced airline pilot due for retirement in some 5 years.
Giles: Hi John thanks for meeting me, I?m interested in learning all about trading, I was told you might be the chap to put me on the right track, I want to get started right away.
John B: Nice to meet you too Giles I may be able to help, however before committing myself I need you to respond to some questions I have for you and you need to be honest in your answers, not to me but to be honest with yourself. It?s not a test there are no right or wrong answers OK?
Giles: That?s fine John fire away.
John B: OK here goes???.
- Who told you about trading? Was it someone who is a trader? Were they or are they successful? Did you read about it? If so where? Who wrote it? Do you know any successful financial traders? Do they do it as a hobby or full time? If they do trade do they trade from there own resources or are they paid a salary? Were they positive or negative about trading?
- What are your reasons for wanting to trade? Is it for income, for fun as a hobby? (If it is not a serious reason forget it) Is it to build capital? How soon do you want to have this money? What is your timeframe? Do you want to be trading profitably in a few days weeks or months? What target have you set yourself? Are you serious? How much time can you commit Are you a dreamer or are you realistic?
- Do you actually know what trading is? About 95% of the UK population haven?t got a clue. The chances of you meeting anyone who trades is pretty small. If you mention trading shares to the average person in the street they will think you buy shares and sell them, have you seen my introduction video on the front of my website its free, there is also one on forex if you are interested. After you understand what basic trading is, when you tell the wife what you are doing she will think you?re a gambler! And nothing will convince her otherwise. Do you know what spread betting is? Are you interested in day or swing trading,
- Giles now you know what trading is, you must decide what are you going to trade. Is it Indices, Shares – UK or USA – commodities, forex,
CFDs covered warrants, options, futures? What do you know about them? Do you know what the differences are? What is your experience in any area? Do you own shares? Are you familiar with the jargon? Do you realise the effort it will take on your behalf just to get an idea of the basic terminology Are you aware that 90% of new traders fail? Are you willing to put the time in to do the research?
- What is your attitude to risk? Can you stand losses? How much are you prepared to put into the bank? Are you disciplined? Can you make an unemotional decision? Can you stick to rules? Have you an inquisitive mind? Do you have to know all the reasons why things happen? do you question everything?
- Are you a technophobe? Do you have to have logical reasons for everything? Do you think that if you have the right software then you will be a good trader. Do you have a positive outlook? Are you adaptable? Can you react quickly? Can you listen and learn? There are thousands of financial books on subjects such as stocks, futures and trading. Have you any idea where to start? There are thousands of websites giving advice. Have you any idea which ones provide free charts and information?
- Do you question peoples’ advice and motives when you are offered anything? Do you think that there is a trading system that works? Do you think the more expensive things are the better they are? When you are offered something FREE do you question it. Do you realise there are dozens of people offering the newcomers advice? Why? For what reason?
Well Giles before you start thinking that trading is for you, you will need to respond to these questions
Finally Giles ? have you got what it takes?. Answer these questions before you start to ensure you have some of the qualities required and are aware of the hard work involved in learning to trade.
Giles: And I thought it was easy! I think I?d better get some background before I start. You mentioned some good books. Which ones would you read if you were a complete novice?
John B: There are many, but here are three which will guide you along the right lines especially number 3 ? but that?s just my personal opinion. Others will have their own favourites, but I would invest in these before spending one penny on software. You will find out about yourself ? nobody is going to do it for you, the quicker you realise its totally within your grasp, the solutions are in your head and your attitude, then you will be taking the correct initial steps to trading consistency.
My Recommended Books :- These can be found on the T2W book list.
1. A Beginner’s Guide to Short Term Trading by Toni Turner – Savvy trader Toni Turner shows you the ins and outs and the ups and downs of short-term trading. She’ll have you buying and selling on a monthly, weekly or even daily basis so that you have the right stocks at the right time. This is a hands-on book designed to make you actively involved in every step of the trading process. Now you can take control of your portfolio and secure the financial freedom you’ve always dreamed.
In simple terms, this book explains how to:
– Swing trade and position trade for optimal profit results
– Monitor industry groups to locate the best stocks
– Achieve the ‘winning mindset’ so important to succeeding as a short-term trader
– Set up your trading business – from choosing an internet connection to an online broker
– Spot high-probability set-ups for trade
entries and exits
– Take gains from ‘sweet spots’ in up trends and downtrends
– Figure risk-reward ratios to minimize losses and maximize gains
2. Trend Following by Michael Covel – The first book to reveal the little-known strategy used by the world’s most consistently successful traders!
How did trader, John W. Henry, start out as a farmer and end up a billionaire and owner of, first the Florida Marlins and now, the Boston Red Sox? How do traders like Bill Dunn, Ed Seykota and Keith Campbell continually pull profits in the hundreds of millions from both bull and bear markets? The answer is that they are trend followers.
Trend following is the only strategy to consistently make money in the markets. Leading expert Michael Covel reveals the underground network of these little-known traders and hedge fund managers who have practiced trend following for years. He pulls back the veil on their strategies by introducing the basic concepts and techniques of trend following such as why the market price contains all the information a trader needs.
Covel rigorously reviews and analyses years of detailed performance data to prove without question that trend following strategies including how to make volatility work; how to control risk; and how to make successful trading decisions "from the gut".
Covel shows why trend following is ideal for individual traders who manage their portfolios or for the individual investor searching for a new type of investment advisor. Along the way he debunks an immense amount of misinformation/failed advice from pros who ought to know better.
3. Trading in the Zone by Mark Douglas – In Trading in the Zone, Douglas uncovers the underlying reasons for lack of consistently profitable trades and helps traders overcome the deep-rooted mental habits that cost money. Douglas takes on the myths of the market and exposes them, one by one, teaching traders to look beyond random outcomes, to understand the true realities of risk, and to be guided by and be comfortable with the ‘uncertainty principle’ that governs all stock speculation.
Trading in the Zone introduces a whole new mental dimension to getting an edge on the market. Use it to leverage the power of the ‘zone’ for unprecedented profit.