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Good trading template will save you years

Posted on 7/16/2014

The challenge for new trader entering the market or someone struggling in the market is different from someone who has been around and successful. 

The new trader needs to find an idea that is structural in nature and is fundamental to nature of market. He or she must find a market anomaly that has historically proven to work. After that the real difficult task of actually making it work starts.

If I have to give one piece of advice to someone starting out in trading it will be to first find something that is structural in nature of the market. As a trader your  first and most task is to find some structural phenomenon to build your edge around. If that step is wrong for obvious reason no matter how much you try you will not find much success. 

But finding successful structural phenomenon alone will not ensure your success unless you can develop detailed trading method around it. While this task is easy for established trader (they can take a concept and convert to trading system relatively easy), for beginner to make that leap is challenge and requires persistence and ability to innovate.
It should exists in the market and not figment of imagination.

What are some of the structural things in the market:

1 Market moves in momentum bursts

2 Momentum stocks outperform non momentum stocks

3 longer term momentum is mean reverting

4 Surprisingly good earnings leads to rallies

5 News leads to immediate moves

6 small cap/small float outperform larger stocks

7 lower priced stocks outperform higher priced stocks

Now if you know any of these you can build your trading around it. But that is just starting point unless you have a template to convert any of the above things in to setup you will struggle.

Let us say if you know market moves in momentum burst. Fine what next. To trade something like that you need to know which stock to buy today, where to buy, how much to buy, where to put stop, where to exit and more importantly when to not trade this method then you can actually convert the structural edge.

The kind of details to trade any structural edge are important for trader development s it helps you see "how it is done in real life profitably". Ultimately you may not trade exactly like that template and will develop your own trading template.  

I was lucky to find some good templates right in first few years after I started trading and that saved e years and a bundle of money. Eventually I adopted and modified those templates to fit my personality. 

If you are motivated serious about making money in trading hunt for good trading templates. It will save you years and money.


FinchTech Blog said...

Thank you for this information and thought process
You mentioned that during your early years you found a good template.
Do you have any good templates for new traders that you can share? or is that only available in the members only site.
I am interested to digest this subject in more details

Pradeep Bonde said...

See the posts in Right hand column. They have good trading templates.