I find it interesting that there is absolutely a ton of stuff out there on how to trade, but not a lot about what process you should go through to actually learn most efficiently.
Having had the opportunity to both be the struggling upcoming trader as well as having teached/mentored some other traders, the one thing that I almost always see with people that are having a hard time becoming profitable is that they have a complete lack of structure. What I mean by that is that they havent taken the time to properly define what setups they're actually trying to take and why its logical for that setup to provide an edge. Equally important they dont keep a spreadsheet logging win rate, average win/loss and other important metrics. In other words they don't have an objective way to look at whats causing a problem in their trading and that is something that is absolute key. Not having basic things like record keeping thoroughly ingrained in your trading routine and you are also going to be much more prone to jumping endlessly from one thing to another, looking for that one special thing to fix your trading.
So the best tips I can give anyone thats still struggling to find their path is this simple process:
1) Write down what specific setup your looking for, what price characteristic have to be present to make a setup and an entry valid.
Just choose one specific setup, not two, not three but one. People have this emotional hangup that they constantly have to be in a trade. Its a natural feeling because of the way you normally make money in todays society is of course by working your 9-5 job and collecting your pay check. But trading the financial markets is not a 9 to 5 job, you dont get payed by the hour you get payed by doing your due dilligence and taking advantage of the oppertunity when it arises whether that be once a day, once a week or once a month. All you need is your one niche setup to extract money and then work on compounding that.
Something that used to bug me quite alot when I was struggling in the market was I always got told, "just take the easy ones, go for the A+ setups". If you have ever had anyone say that to you you'd probably think yes, that sounds logical and sound, but then later find yourself in the market utterly confused because you dont know if thats an A+ setup or a B- setup. My advice is just forget abour the whole grading concept but be thorough in your specification of the setup your looking to trade, and if those specifications present itself you take the trade.
2) Trade 20 of the setups youve written down.
Your goal is not to make money it is to track the result, so you take a screenshot of everyone of them, mark up where your entry and exit points were and make notes if there is something that catches your eye. I find Jing to be an excelent screen capture software, its free as well just google for it.
Your also going to make a spreadsheet that you fill in after each trade. Use these simple metrics:
Date
Time
Result
Drawdown
Max profit
Result with different trade management styles.
The last one is very important, an entry point into a trade can be pretty objectively defined and only takes a certain amount of repetition before you'll spot them easily. Trade management is the most difficult part of trading as it can be more subjective. So how do you know if you're best off taking profit at the next support/resistance level, or if a trailing stop is best or perhaps even a moving average defined trade management? You track your results.
After you've done your first 20 trades you go through the trades and the spreadsheet and see what could be done differently. Note down the new changes, update your description of the setup and repeat the process with 20 new trades. You do that continually until your trading it profitable and when you've got a spreadsheet where your profitable after 20 trades, congratulate yourself that you've found your niche setup in the market and keep doing the same thing and track the next 20 setups, that's something you never stop doing.
For the first couple of spreadsheets trading them through a good simulator is something that can be very benefitial, its as close as you'll get to actual trading and its gonna get you going much more quickly. I still use a simulator quite extensively for tracking and testing.
I deeply encourage anyone who is still not finding consistency to incorporate this simple 2step process into your trading, I think you'll be pleasantly suprised with the result. I'd love to hear how it goes.
Your going to see how benefitial it is to be able to objectively go through your trading and its also going to help on an emotinal level, in the beginning your primary goal is to track the results rather then trading to make money. Its an emotional shift that will help you if your having troubble pulling the trigger on trades and it gets you aware if your overtrading and not taking the setups you should.
This whole process is not anything new by any means and is also described in Trading in the Zone by Mark Douglas, which is a book you definitely should read if you havent done so already. The point is that its a true and tested method to get your trading act together. I hardly know any professional trader that don't have this cycle of tracking and continuosly evaluting what they're doing.
One last point about this process is that sticking to that one setup and spending all your energy on mastering that, your going to find that after a while your general price action reading ability gets greatly improved. That is simply because your learning specific distinctions about the way price moves around your setup, and from that I can guarantee that you'll get a number of different ideas on other setups to take advantage of. You then, no suprise put that setup through the same two step process and you'll be able to expand your trading from that point.
Time for a beer!
Bov
Im a full time trader trading mainly currencies but I'll get freaky with some stock indexes, metals and oil from time to time as well. I have a particular interest in as the thread title say, how traders develop, general psychology and technical trading so that's what im going to be dishing out about here from time to time when the urge hits me.
