Many tradesmen will look to the markets, as a means of continued support in their retirement.
Developing your own plan to trade the markets is like serving an apprenticeship in your former career, it takes TIME and DISCIPLINE to make a successful trader.
“Trading Plan ... wozzat” will help you take the hurdles in your stride.
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Life after racing fuel, Castrol R and customers…
You have been working in the automotive game for a while and you have a few bucks to invest in the stock market. Eventually, to get away from the dirt and grease, you think that you may even like to trade the markets as a means of supporting yourself in retirement.
You know the caper–throw a few grand at a stock today and pick up the profits tomorrow, then play golf for the rest of the week. Great stuff, isn't it. Whether you are an apprentice or you are looking at retirement in a couple of years, if you have any aspirations about trading the stock market in retirement, you had better start your training NOW.
So what steps should you take to get started on your long-term survival program?
No matter what your background has been, nothing can prepare you for these markets properly–the only way to learn it, is to do it—trade and trade some more.
Before trading, have a plan. Not important whether it was developed by you or it came from a book, so long as you have a plan. Your plan should address, which market to trade, risk/reward ratio, stop loss placement, entry and exit levels and money management techniques. To help you develop your own trading plan, you can get some hints from my eBook “Trading Plan .... wozzat?”
Expecting to “earn-while-you-learn” places unnecessary stress on a trader, unless you have deep pockets from the outset. Looking from another angle, it probably took you 5 or 6 years to learn the basics of your first trade in the automotive industry and learning to trade the markets is no different for most traders. There have been a lucky few that are born traders, but for the most part, trading is a learned process and your losses should be considered as paying your dues for the tuition. Tuition in these markets can cost thousands of dollars in market losses and many hundreds of hours study time. Serving your "apprenticeship" means trading part-time, building your plan and your confidence. Then, the money and time that you have already invested is worth it, when you finally start trading full-time.
Trading the markets for a living is the best job in the world. There's no dirt and grease, no noisy workshop and no dirty coveralls. You are the boss, but you must be self-disciplined. Usually, there's no customers to give you any “agro” and no senior management feeling threatened by your very presence. It’s a business with low overheads—phone/fax, PC, internet, data provider, charting program and a broker, that’s it! A reliable tax agent, an accountant and a solicitor may be other professionals that you will need to employ at times too. Any other gismos and attachments are your choice, but they are not really necessary to be a successful trader. You can take days off and go on holidays as you please, even take a break at the same time as your kids. Some of your fellow traders turn out to be great people. Dress is casual, even optional, on hot summer days…:) Anybody with the discipline and determination can trade. It just takes an ongoing commitment to study the markets’ behaviour, as well as your own antics. You don’t need a university degree to trade the markets. Let’s face it, this trading caper isn’t exactly rocket science and some days it is very profitable—on other days you will take a loss, but it should be a small one. Once you are comfortable with your trading plan and its execution, you just have to come to terms with a few other personal issues. Like these: DISCIPLINE, PATIENCE, STRESS, FEAR, GREED and any other issues or emotions that you may encounter on a daily basis in the trading arena.
Some traders lack confidence from the start and feel that they may never to build a tradable plan for themselves. To dispel such feelings, study the markets REGULARLY and then try to master ONE trading issue, before moving on to another subject. It should be a slow and steady process for any learner trader, starting from scratch with simple charting and timing techniques and then graduating to more complex analysis later. Trying to put too much theory into practice simultaneously, simply makes traders confused and undisciplined in their approach towards trading the markets. Likewise, too many indicators in your technical analysis will only serve to confuse you, in the early stages. You should try to develop your own approach to the markets and the process of “knowing yourself”, as a trader. More about this self-knowledge later.
Trading these markets requires commitment to study and a realization that traders are not successful overnight—just like learning your first trade. It probably took you 4-5 years to learn how to be a competent mechanic, a speccy spray painter, or a gun panel beater, etc. So too, it takes time and effort to learn the BASICS of trading successfully. Then, if you want to be a good tradesman (trader) you must keep up with the latest technology in your trade—again, this is an ongoing commitment to self-education. Not everybody has a temperament suited to trading the markets. Most traders are very emotional about their trades, especially in their early experience—this may well be the main reason for the high attrition rate amongst new traders. Overcoming, emotions can only be done by experience, that means trading, trading and more trading.
Sorry, paper trading can only teach you about the methodology of your trading system & the idiosyncrasies of the markets. To learn about yourself, you must trade for real. Paper-trade your trading plan for about ONE MONTH before entering the markets with real money. This should be ample time to expose any bugs in your trading system. Some traders paper-trade for much longer periods, but often this is just an excuse NOT TO TRADE. That may seem strange to some, but some traders find it difficult to “pull-the-trigger” to enter a trade, so they excuse themselves by inventing “research” or paper-trading.
Overcome your trading fears—just DO IT!
For most traders, the personal issues of overcoming the emotions, triggered by fear and greed whilst trading, are the greatest hurdles. Some traders become very agitated whilst trading, showing that they have little control over their emotions. This lack of self-control leads to stress in individual traders and it must be eliminated, in order to trade in a disciplined and successful way. Stress can be handled by using simple relaxation methods, that employ exercises for both sides of the brain. Very relaxing and helpful, if used BEFORE making important trading decisions. Our “self-knowledge” concerning our emotions, under trading conditions, can help us to develop ways to control our stress in trading hours. A robot would make the best trader, if we could program it with a winning mechanical method. This is because a robot would be a disciplined trader, following the trading plan to the letter, without emotions affecting the trading decisions.
Technical Analysis—Keep it Simple Stupid
Most traders try to use too many indicators in their TA, hence too many signals are generated. KEEP IT SIMPLE... for example. One momentum indicator, one overbought/oversold indicator, trend lines, volume, price and TIME. (TIME being even more important than price). Enough indicators already! Clean and SIMPLE... enough indicators to make a trading decision—that's all we need. If you know WHEN to trade, then price simply becomes a means to calculate profits or losses. OK, now you have the technical tools you need, incorporate them into your trading plan. Use them in various markets and modify them, until you are satisfied with your methodology. Once you have a SIMPLE trading plan, that you feel comfortable trading, use it and stick to your routine. If you have something that works for you, don't change it. “If it ain't broke, don't fix it.”
Likewise, on the other side of the fence…
A simple approach, fundamentally speaking, may also help some traders to overcome the condition called “information overload”. There are about six simple formulas for evaluating and COMPARING the financials statements in company reports. Unfortunately, they are not much use on companies that do not make money, such as exploration companies or other No Liability companies, etc. So then, it's back to the charts. All the information that we need to trade is in the charts anyway.
have a great day
paul yogi nipperess Astrotrader and author.
Are you trading markets or emotions?
Tuition in these markets can cost thousands of dollars in market losses and many hours of study, but learning to trade properly and profitably makes the investment worth the effort,in both time and dollar terms.
Here's a different approach to the markets and "knowing yourself".
Trading these markets requires commitment to study and a realization that traders are not successful overnight - just like learning your first trade.
Maybe it took you 4-5 years to learn as an apprentice (mechanic,carpenter,painter,etc), so too it takes time (& effort) to learn the BASICS of trading successfully. Then,if you want to be a good tradesman (trader) you must keep up with the latest technology in your trade - again, this is an ongoing commitment to self-education.
Not everybody has a temperament suited to trading the markets. Most traders are very emotional about their trades, especially in their early experience - this may well be the main reason for the high attrition rate amongst new traders.
Overcoming emotions can only be done by experience,that means trading, trading, trading…
Sorry, paper trading can only teach you about the methodology of your trading system and the idiosyncrasies of the markets - to learn about yourself, you must trade for real.
Here's a discussion on HOPE and FEAR - just two of the emotions to affect traders daily.
Hope & Fear?
Posted by 'Noone' on Sunday, 5 March 2000, at 4:31 p.m.
We all hear that hope & fear control the markets?
1. Can anyone explain one or both?
2. Can either one be seen on a chart?
3. Can either one be explained enough, to be able to write an indicator etc. to be shown on a chart, that will help in trading?
4. If it can be seen, is it too late to use, or would it be helpful to a trader?
Anyone have any ideas or explanations of Hope or Fear as far as trading?
Posted by Yogi-in-Oz on 06 March, 2000 at 18:58:06:
Not sure where you are going with this, but here goes:
HOPE is entering a market without a trading plan.
HOPE is holding a position after it has blown through your stop (if you had one).
HOPE is holding that 3-day trade for 3 months or more.
HOPE is watching a market approaching your PRICE STOP, long after your TIME STOP has expired.
FEAR of loss is not pulling the trigger, when your system posts an entry signal.
FEAR of getting out too early is not pulling the trigger, when your system posts an exit signal.
FEAR of missing a trade is being in a market before your entry signals have been confirmed.
HOPE and FEAR are two of ten emotional words that should never be part of a trader's vocabulary.“GREED, EGO, Coulda,woulda & shoulda” being another five negative trading words.
HOPE & FEAR can always be seen on the chart of any market–it's called the PRICE.
To represent traders' emotions (HOPE & FEAR being just two emotions) in an indicator, then that indicator would need to accurately reflect the variations in such emotions. This is measured by the Law of Vibration and the Law of Resonance, both of which are reflected in PRICE, so no need to write a new indicator - just use the one you have more effectively.
PRICE (a measure of traders' emotions) can easily be seen and is never too late to use, in a well-laid trading plan, which is most helpful to all traders.
Control your emotions (including HOPE & FEAR) and become a better trader.