Getting started in being a successful trader

We are coming up on the 2 year anniversary of and the 1 year anniversary of our VTF subscription model.  We have seen a lot of people come and go; many have stayed.  I think the best way to describe what people have built here is a trading office; the credit goes to @stockdarts for coining it.  Everyday our members log into the VTF to share information and talk over trades on our voice chat.  If there is a question about a trade, there is usually someone who can answer or can point in the right direction.  I am always excited when someone takes the knowledge and expertise we offer here and is successful bending it / forming it into a profitable trading style of their own.

The people that come here expecting to make $100k from a $5k account the first week of trading never last.  I can always spot them when they come into the room because they are the first ones to jump on a trade.  They are always over exuberant and emotional. They don’t take the time to understand the trade, they just want the next ‘hot tip’.  These traders never last in the long term or short term.  On the other side of the coin, there are that traders log in and NEVER ask a question, or never take the time to read the tutorials on the website and/or the sign-up email; these traders also never last in the long term.

Aspiring traders seem to come to us from a wide array of backgrounds, here are some of the most common.

  • People who retire and are looking for income.
  • People who lost their job during the financial crisis and either can’t find a job or don’t want to find a job.
  • People who are looking to supplement their income/job through trading.
  • People who are looking to quit their job and make trading a full-time career.
  • People who are looking to turn $100 into $1 million because they saw an infomercial.

The hardest part of trading is that the majority of people fail to become long term or even short term profitable.  I wish I could help everyone succeed at trading.  But unfortunately, a lot of people turn to trading as a quick fix for making money.  I attribute this to the media, commercials, and social sites that glorify and sell the lifestyle of a successful trader.  There are sites that will have you trade penny stocks and give you 60 times leverage, promising huge gains with little effort.  The hard truth is that trading is a professional career and with any profession it takes time to master and gain proficiency.  If I decided to be a painter tomorrow, I could not paint a stick figure let alone a masterpiece.

It seems like every new trader is looking for the next trading system or holy grail that will make them rich with the minimal amount of work.  My background is programming and software, so trading systems development was a natural fit from a technical perspective.  I can tell you in complete honesty and from experience that there is no holy grail.  What exists are simple techniques and general practices that will guide and help you own your trading style.  Things like money management, market structure, market behaviors, and many other things are all part of the bigger trading picture.

What many successful traders find is a simple niche, or an edge.  It can be gap fills, multiple time frames, market profile, or a combination of any of the above.  I recommend reading a lot of classical trading books on various styles.  You have to explore what makes sense to you and fits your personality.  This is not to be confused with searching for a new indicator or holy grail.  ‘Searchers’ are not exploring and gaining an understanding of various trading styles, they are being plain lazy and just wanting the gain without the work.  All searchers either give up after losing all their money, or they finally figure out the problem is them not the indicators.

Every single one of the traders that I have met, including myself, underestimates the psychological aspect of trading.  We forget that the market is made up of people who are new, people who are seasoned, people who are just plain crazy, and people who are somewhere in between.  They all interact through the market and affect it in their own way.  As traders we also underestimate our emotions internally, the need to win,  dealing with a loss, ect.

So how does it all come together?  For everyone it comes at a different speed.  Some people never get around the ‘searching’ phase, they are always looking for the next best ‘mega-trader 9000 oscillator’.  They end up losing again, eventually they move on to the next ‘mega-trader 9001 histogram’.   They lose again; rinse and repeat.

What should you do to improve your chances of success?

  1. You should find a mentor.
  2. You should learn money management.
  3. You should learn to accept some degree of risk and learn how to minimize it.
  4. You should forget about indicators and concentrate on learning about the markets you want to trade.
  5. You should learn to control your emotions and make decisions based on your trading style.
  6. You should write out a plan with goals and milestones.
  7. You should follow the plan.

If you are interesting in developing a trading plan, feel free to contact for more information.

Posted in Commentary, Futures, Options, Stocks