I hope all is well with you.
I’m still a little groggy after celebrating my birthday over the weekend. It was the big ‘three oh’ for me so I had a few people down for the weekend, most of whom took pleasure in constantly reminding me that I was now closer to forty than twenty. You may have already passed this milestone yourself, so feel free to sympathize or join in the mocking!
I got some really nice presents from people, including a day zorbing down a hill somewhere in Dorset. One unusual present was to spend the day as a zoo keeper at Chessington Zoo! Apparently my family found an old painting from when I was a child which depicted what I wanted to be when I grew up – a zoo keeper. I’m still a huge wildlife fan (and still not grown up according to my darling sister), so am looking forward to my zoo keeping experience tremendously.
It got me thinking though…
Does anyone grow up wanting to be a trader?
It’s not really on the list of things that your career advisor will tell you about when you are about to leave school. Unless your parents worked in the city, it’s unlikely that it registered on many people’s horizons when they were young.
I can look at my route to where I am now with a wry smile. If you go down the route of becoming a pro trader in an investment bank or hedge fund, there will be a training route laid out for you, but this ‘professional’ route won’t be open for everyone, not least because of the long hours and old school network that still exists today. And once you become a trader, how best can you hone your skills?
Hone your trader skills with this advice and these resources
The road to personal/work at home trading success has for me been a meandering one with lots of dead ends with successes and set backs along the way. I’m reasonably happy with where I am now, but there still much to learn and I most probably could have cut a lot of time and money out of the development process!
I first got into trading wide-eyed with the possibilities of financial trading. I made some classic mistakes along the way though, principally because of my greed. I ignored the risks and didn’t listen to the good advice from many people because it didn’t fit with my belief that I was about to become the next George Soros.
Looking back, I can now identify three key areas of trader development.
1. Find/purchase/design/develop a trading strategy or system that gives you an edge.
2. Understand, apply and really appreciate money management and risk.
3. Commit to honing the psychological and peak performance aspects of trading.
When I first started trading 100% of my time and focus went into exploring the first part of the equation, but really that was wrong because the system is really just one third of the equation. You really need to understand risk management in trading because you could have the best system in the world, but if you are risking too much on each trade, you might have no account left to trade it with. Psychology is also vitally important, but really the best way to hone your performance skills is time at the coal face.
Finding a strategy can be frustrating, but it is made more frustrating by our drive to find the holy grail, the big one that will win big on every trade and hardly have any losses. The truth is that there is no holy grail. No system or strategy is perfect, but there are many out there that work and at the end of the day all you need is an edge.
The edge you find doesn’t even need to be huge. Dr Brett Steenbarger, the trading psychologist interviewed one trader who had a tiny edge, but he traded it so often and with such consistency that he made very good money. You might get an edge from a system that has a high strike rate, but small profit/losses, or you might get an edge from a system few winners, but when it does, it is a home run. The important thing is that you find one that suits you.
There are tons of commercially available systems, training and strategies around and I’ll try to sort the wheat from the chaff for you in these emails or in the monthly What Really Profits emails. Alternatively, you might like to have a stab at creating and testing your own system through software such as Forex Tester: http://www.forextester.com/howtobuy.html
It’s interesting to note that many successful traders have a black box type strategy that they base their trades on, but they then use discretion in determining how to use it based on market conditions. Again this might be something they purchase, or something they develop themselves, either way it is often something that suits their trading personality.
There’s a few useful posts from the ‘doc below on how to hone your trading skills:
The six keys to trading success:
The importance of identifying your learning style:
Assessing your trading stress level:
Why your well-being is important for traders:
I hope this helps accelerate your learning curve better than mine. If you want me to look into a trading system or strategy for you, or help with anything, please do get in touch. Between myself and readers like you, I’m sure I’ll be able to unearth some gems and swerve the scams.
I’m still short on the S&P500 futures from 741 and did have a downside target of 600, but we haven’t had the big plunge I was looking for and some excellent analysis from www.sentimentrader.com has made me think a short-term bounce could be in the offing. I’d previously moved my stop to just better than break even, but have now moved it to 720. So it should be a profitable trade, but I certainly have left some money on the table with the market going down as low as 667ish. That’s trading for you!
A good week for my forex trades, though due to my brain working in second gear yesterday, I completely missed what was a superb day on the GBP/USD. I haven’t seen a better trending in some time.
This week’s hot trading buttons
This week’s economic highlights include Bernanke speaking on today and the Royal Bank of New Zealand setting rates on Wednesday. Thursday brings US retail sales, while Friday sees the release of US consumer sentiment figures.
“I’d be a bum on the street with a tin cup if the markets were always efficient.” Warren Buffett