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How to learn to trade profitably

Posted on 7/07/2010
If you are new to trading there is no defined path to learn trading. All traders  in the beginning  feel lost. There are hundreds of choices you need to make and hundreds of things you need to learn before you can expect to make consistent money.  You will have to jump couple of orbits to start understanding every thing and put a proper trading approach together. Which often  takes time, patience and persistence. Most traders who attempt to trade will not survive the learning curve. In the last 5 years or so many traders started blogs and attempted to trade and you will see most have quickly folded.   

We were all beginners ...............

One of the big problem for many traders is that they underestimate the amount of effort and time required to understand market and from there to move on to building profitable method. There is a constant allure of simplistic and tactical systems promising big returns and simple ways to make money. 
On the members site , one of the first things we constantly emphasize is that it will take you time to learn to trade. I always tell people to set aside minimum 2 years or so to learn trading if they are serious about trading. As a result most of the  1000 or so members have been around for 2 or more years. 95% of the members renew their subscription because of the ongoing learning emphasis and new material being added to the site every month.. Any member who has put in effort and struggled through initial few weeks and months and once got it right has found success on their own. You can ask around and they will tell you that. Every one of the 1000 members have come through word of mouth and reference of current member. 

How a 2000 member strong community can help you....

All of us were beginner at some stage and had exactly same problems like you are facing currently.   
When you are a beginner in any field or to a new setup or new method in the beginning there is big cognitive load. Whenever we try or attempt doing something new where we do not have sufficient expertise , our short term memory gets loaded and we are unable to do the job fluently and efficiently. Short term memory can only handle less than 7 pieces of information at a time. Excessive information creates cognitive load. Repeated practice reduces such cognitive task. To master a setup you need to organize around it and practice it then the cognitive load decreases. You need strategies to reduce cognitive load during learning phase.  

One of the benefit of group learning project like the members site is social conditioning and social modelling. Seeing people similar to yourself trading in real time and sharing their success and methods can enhance your own self efficacy beliefs. Seeing 2000 other beginners similar to yourself succeed by sustained effort raises your own beliefs that you too can possess the capabilities to master comparable activities required to succeed. In the beginning you will have many questions and if  you frame your question properly several members will answer it. They also had encountered same issues when they started out. Such interaction provides you a quick learning pathway.

You can not trade if you do not have software......

One of the first thing you need to have if you want to succeed in trading is right software and right broker. I would say first get the right software in place. You cannot learn trading unless you have a scanning software and also historical data. In learning stage you need to go through history and unless you have easy access to historical data you will not be able to learn much.

Your learning's will be very fast once you get a software, you will learn more in a month than you learned in a year once you get software and set it up properly. Because the discussion here or ideas here you will be able to see for yourself, they will not be some abstract discussion.

Telechart Gold is the software I use for my style of swing trading.........

When selecting a trading software look for something which is widely used by most traders. Often I come across new traders using some exotic software not routinely used by traders. You are just complicating your learning phase by doing this. For a widely used software there are ton of resources to help you learn trading quickly. If you select some exotic niche software , good luck, you are on your own.

The most commonly used software amongst active traders are:
Trade Ideas
Trade Station

Telechart is the most commonly used software by most traders. And it is the best starting point for most new traders. Once you outgrow Telechart then you can think of other things. Amibroker is second best choice. You need a bit of programming knowledge to use Amibroker.

It will take you few weeks to months to become very good at using any software. That is typical learning curve. You can pray for miracles, but unfortunately that is the reality. So set your expectations accordingly. 

First learn how to use software and broker........

Once you get Telechart go to Worden site and in the forums there are many videos explaining how to use the software. If you spend a week going through all the video on Worden site you will get very good grasp on how to use the software. Scans for every method I use have been discussed multiple time and every week I make a post with all the past posts related to the method. I will also be putting up videos of how to setup scans from time to time.

Once you set up your software the next important thing to look at is which broker to use. If you are planning to be a swing trader or a trader that is going to do at least 20 to 25 trades in a year, look at your choice of broker. The number one broker used by most active traders in Interactive Brokers. 

Besides Interactive Brokers, there are many other good brokers around. I use Interactive Brokers, Fidelity, and TD Ameritrade.

Once you get broker take some time to learn how to place order, how to put a stop, how to close positions. How to access market data. How to use the brokers scanners. Most brokers have pretty good simulators which allow you to learn these things without risking actual dollars.

These two things, software and brokers are the first thing to get in place, if you want to trade profitably. 

It will take you 3 to 6 months or more to master simple swing trading methods......

Once you do that you will still have a learning curve of 3 to 6 month or more depending on amount of time at your disposal. Once you have the infrastructure in place, you need to understand how to use it properly. Most consistently profitable traders I know of had learning curve of 2-3 years before they became consistent. You will need lot of determination and hard work to make things work for you. If you are expecting miracles then get a prayer mat.

Once you have right infrastructure in place you need to learn the concept of swing trading. Most active traders use a variation of a basic swing trading method. The objective of swing trading is to capture meatier part of a short term trend or reversal. Swing trading methods are primarily based on momentum or mean reversion. 

I personally use a momentum based swing trading method. For each of the method traded here all the scans are done using Telechart. In some methods there are multiple steps. First a scan is done in Telechart then information is collected from other sites like Finviz, Moneycentral, IBD, or other sites.

Be aware of market situation......

You must also be aware of the market conditions when you decide to learn to trade. If you just decided to trade , your first to hundred objective should be to protect your capital. For active traders there are always opportunities in the market. Market is not going to run away from you. So if you are beginner you should first concentrate on setting things up. You can do lot of damage to your account if you start trading without ironing out all issues.

Focus on few methods......

I personally trade only  only 3-4 methods on daily basis:
Episodic Pivots
Top 25 breakouts
Swing Breakdowns (short)

If you read last few years post you will see these methods have been discussed again and again.  To me trading success is about mastering a setup. The more you trade and think about a specific setup like say the Top 25 breakouts, the more fluent you will become in trading them, you will start to understand the nuances of them. At some stage the setups would become part of you. If you master one setup you will find it easier to master other setups. 

Get the training to be a profitable trader


Timothy C. Bohen said...

Terrific post!

Is It Possible said...

Very good post for beginners....

Timothy C. Bohen said...

Not trying to argue @possible but I think this is a solid post for beginners AND advanced traders. I know a lot of experienced guys that forget a lot of these ideas.

Pradeep Bonde said...