In trading courses I ran in the past, here are a few questions I encouraged students to think about and answer. Once they answer these objectively, I help them clear it up through a back and forth email dialogue. I thought I would share them here for the benefit of our readers:
1) Why Do You Want To Trade? The obvious answer is to “make money” but the successful trader takes this a step further. Are you trying to get to a profit threshold that will allow you to leave your day job and trade from home? Are you retired and want to stop touching your savings to live so you want to trade to make up for that? Are you trying to create wealth with long term positions while still enjoying your career outside of the markets? When students answer this question properly, it is easy for me to guide them into the right markets, time frames, and strategies.
2) What Is Your Strategy? This one is key. you must have a detailed strategy, I tell students to be as specific as they can. In other words: When exactly do you buy and sell? How exactly do you handle stops and targets and so on? From my experience, the more you can make market speculating 100% rule based, the better you will do. Even though I tell students to be very detailed here, I always end up adding rules they did not consider
3) What Markets Will You Be Trading? This one is again very important as everybody is different in some way. There are 4 major asset classes and many markets within them. They all have pro’s and con’s but the beauty is that a set of markets like the Futures may be perfect for one person and the Stock markets may be appropriate for someone else. By knowing someone’s goals, life style, account size, personality, and so on, it is easy to steer them in the direction of a set of markets that helps them achieve their goals in the safest and most efficient way possible. Also, within each asset class, the markets are very different. Maybe you trade the stock market and are more conservative and looking for a slower moving market, you would be well served trading the QQQQ but if you traded GOOG and BIDU, this would not work for you at all. In futures, the person that trades the DAX futures is going to be bored trading the Five Year Note futures. The point is, there is a set of markets out there for each and every person but every set of markets is certainly not for each and every person. I help students towards customize that to their needs.
4) How Much Capital Do You Have? I meet students all the time that are trading markets that are much larger than they should be trading with their account sizes. Furthermore, some people take on too much risk and leverage. This is a recipe for disaster. Having position sizing parameters and account sizes set in stone in a trading plan helps give you the best chance with the lowest risk.
While I go over these questions with the groups in the courses, we don’t spend much time answering them in class. I have them do this work at home because EVERYBODY is very different. Each person’s goals, life styles, account sizes, personalities, and so on are very very different. Once you get your trading plan completed however and you have a successful track record of six months of solid trading results, lock that plan up and never share it with anyone. Use it to build an incredible life for you and your family. Hold on to the edge you have worked so hard to attain. Be happy to share your knowledge but that does not have to mean giving away your strategy.
The goal of this piece was to get people to start asking the right questions. These simple ideas can sometimes be clouded by all the misleading marketing that exists in the world. I encourage you to ask yourself these questions and contact us at Online Trading Academy to further your trading education.
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