Learning How To Trade

Occasionally I receive a request from one of our viewers asking for help in learning how to trade. Since we don’t offer that service ourselves I am very happy to refer them to real professional traders that can teach their craft. I have spent many years studying under various professional traders. Some are better teachers than others. And while I haven’t yet reached the Pro level myself, I have some advice which I hope will shorten your learning curve and smooth some of the speed bumps.

Focus

Find one professional trader that will execute live trades in front of a live audience (of ‘students’). Learn that person’s style and see if it fits your ability and skill set. If not, then try another. Don’t move on until you’ve learned whether that person’s style works for you.

See One – Be One

There is a vast ocean of so-called ‘traders’ showing people their style’s and claiming that you can make money using their techniques. If they are not willing to trade on a live chart, in a live account, in front of a live audience, they are not worth a single minute of your time.

This is precisely why I don’t teach any styles or trading techniques of my own. Because given these standards, I’m not qualified to do so. Instead I show folks how to modify their platforms to fit their own styles and techniques. And occasionally I will feature some tools and methodologies created by true professionals. And I am always careful to clearly describe who that professional is and often provide links so you can check them out.

Ask yourself… would you want to learn how to operate on a human brain from someone who has never even held a scalpel?

Commit The Resources

Fortunately, learning to trade is not going to be as complex as operating on a human brain. But you should be realistic about the time and tuition you are willing to commit to learning the craft. Are you expecting to earn a 6 figure income trading the markets? Then expect to spend the same amount of time and money as you would to earn a degree that results in a similar income level. I know, nobody want’s to hear this part. But decades of history clearly show there are very few exceptions to this rule.

The Holy Grail

Ah yes… that ever elusive goal that seems to be always just a few inches out of reach.

• Secret Moving Averages
• Special Settings For Indicators
• The Magic Time Frames
• Combining Indicators In The Perfect Formula

The list goes on and on. And don’t think you are alone, or that you have thought of something that hasn’t been tried yet. Such as a double Stochastic of a volatility adjusted RSI based on the average true range of the daily pivot levels. There is nothing new under the sun. Indicators are merely tools, guides that exist to help you see what is already plainly displayed on the chart. Their most beneficial role is to train your eyes to read the chart. Or to remind you of what your setup rules are telling you. Nobody trades an indicator, you trade the price action. An indicator merely shows you what the price action is doing.

Many of the ‘special sauce’ indicators you see are actually based on applying a standard indicator with an added twist. Indicators are great, I love them. And some of the ones created by the Pros really do have some special sauce. The math used for the histogram on the **TTM Squeeze is quite unique. And I’ve seen a lot of source code.

But Pros Use Indicators

I have studied under several professional traders meeting the qualifications listed above. A vast majority of them use standard indicators with standard settings.  Some, are able to trade with nothing more than a chart (not a single indicator). Two that I have met are able to trade even without a chart (by reading the ‘tape’).

So be careful not to put too much emphasis on the indicators.

Trade Management

Which leads us right back to the topic of the Holy Grail. If there is any single element that is most common amongst professional traders it is this. They have a thorough knowledge of how to manage the Risk/Reward ratio of their trading setup. This is a topic we can cover in greater detail in future. Suffice it to say you can make money risking dollars to make pennies ONLY if every trade is a winner (yeah, good luck with that). Most setups barely hit a 25% win rate and so those require you to risk pennies to make dollars. The problem with most traders is they are implementing a trade management strategy can can’t even make money with a 51% win rate.

** The TTM Squeeze is a proprietary indicator listed on the Thinkorswim platform under licensed studies –> John Carter.