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5 Steps to Accelerate your TRADING Journey
This is basically a post from the Future "me" to my Past "me" about advice I would give myself, when I knew nothing about trading
Building the right foundation is single most important task to make sure your house is not going to collapse 🏡. It is not much different in Trading. Mark Minervini, has been famous to say that he has mastered nothing else but the basics and nothing else. In the short letter below I will outline 5 simple things, that I wish someone told me when I started to trade. Anything you can improve from the below list?
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#1 Read the right books
For those of you who have built a house you know that the foundation is made out of cement+sand+water (aka concrete). In Trading, concrete is a metaphor for the knowledge you have to build/acquire. And as with anything in life, a poor input creates for poor output, so make sure you use time-tested strategies from people who have proved that they work (it is no coincidence that IBD is the most popular trading media and that all traders in the Market Wizards book say nearly the same thing).
I would recommend first the following 5 books in this order:
Secrets for Profiting in Bull and Bear Markets by Stan Weinstein
How I made 2 Millions Dollars in the Stock Market by Nicolas Darvas
How To Make Money In Stocks by William O'Neil
Trade Like a Stock Market Wizard by Mark Minervini
Think and Trade Like a Champion by Mark Minervini
#2 Write your trading rules
Here we start with the never-finished trading plan. You have the ingredients (the knowledge), now what do you do? This is where the trading plan comes in. It is your exam-allowed go-to cheat sheet. Write as much as you want and be detailed as you want. My advice is to Keep It Simple, Stuard (KISS).
Some trading Rule categories:
Rules for determine the overall Market Environment
Aka is it raining outside or not?
Rules for Daily, Weekly Routines
What to do, when and how?
Rules for Entries, Exits, Position Management
What do you buy, when?
Rules for Portfolio management
Risk management, Position Sizing, Portfolio exposure - How much I buy?
Rules for Journaling, Post Analysis and Education
What did I do and what did I learn?
A goodie on trading plan on the bottom of the letter👇
#3 Start trading with real money
The strength and resilience of the building foundation is very dependant on how much concrete you pour and if you follow the constructional plan. Same is with trading. Unless you start trading (aka pouring concrete) into the foundation with real money you are not getting anywhere. Emotion is a big aspect of the game and to learn to trade yo have to trade.
Pro tip: Start with a small account that is meaningful enough that it is going to sting but not big enough that it will be detrimental if you lose it all.
#4 Treat trading like a learning opportunity
One of the biggest curses of trading is to have a winner in your first ever trade. Why? Because it is very likely that you know nothing about trading and your first real trade is a fluke. Outcome ≠ Right process. Concentrate on getting the process right, the best you can. Outcomes do not justify the process.
Side-note: I love this example on the subject by Nicolas Taleb in the book Fooled by Randomness about observed and unobserved realities, which concludes that “one cannot judge a performance in any given field by the result, but by the cost of the alternative” (he was getting into an example that if you cross the street with eyes closed and survived it doesn’t really prove that it is the most efficient way of crossing the street).
#5 Master the basics
Remember that experienced traders say that they still learn and make mistake every day, even after 40 years of trading career. Trading is not a drivers’ license thing where you ‘get it and forget it’. It requires reading, learning, practicing and trading! So make sure you do it if you are passionate.
🎁 PROMO OFFER HERE: I am considering making a How to build a trading plan course, that basically takes care of Step #2. First 15 people who follow me and DM me on Twitter will get it for FREE! Estimated Delivery by Year end 2022.