I can't believe it has been 12 months exactly to the day since I deposited £1000 into my broker and placed my first ever day trade. I'd like to be able to tell you that currently my broker balance sits at around £32,000 because that was the dream when it all started, to make a simple 20 points a day and double my account every 10 weeks. Easy life. I'll be quitting my job in no time. Happy days!
Fast forward 12 months aaannnnddd - "I'll take that coffee to go with an extra shot of reality and some of that good looking humble pie please."
It's not even that I can claim the ignorance of youth because today I turned 49 so I guess it'll just have to be the ignorance itself. However, I am still trading on my original deposit, so that is in itself quite an achievement especially when you consider the battlefield like landscape of day trading that's littered with the many corpses of blown up accounts, multiple redeposits, credit card debt and YOLO trades etc etc. The fact that I am still in the game with my original money is actually something I am very proud of because I doubt that there are many that are new to trading that can say that. But the point of this article is not for me to massage my own ego, it is to show those that are thinking about beginning their own journey into the world of day trading, what in my opinion as a fellow 'noob' are the most important aspects of trading they should consider focussing on right from the start. It is what I have learned in my first year and where I now place my focus with regards to evolving as a trader. I understand that there are many, many ways to make money trading and as such it's not a one size fits all type of deal, so the way I trade may not appeal to those that wish to use indicators or sign up for courses, but in this article I am not trying to 'teach' anything, I am merely offering my opinion and my observation through experience, on what I consider are my idea of the fundamentals that every trader needs no matter their style.
Fundamental 1
Mindset. The word itself is very ambiguous as it contains so many different elements which are all equally important individually, however, the three elements that I put most emphasis on are -
Patience. An often overlooked and underestimated skill which in my opinion will always be key to making consistent profit and will separate you from the 90%. It takes many forms, from waiting for a signal, to allowing an active trade to 'breathe' instead of closing it prematurely, to not taking a single trade in a session. I have written about it first as I believe it to be the most important and I believe it to be a skill which means it can be learned for those that don't posses it naturally. I have good patience most of the time, but still fall fowl to FOMO and the emotions that it makes me feel which, in the moment, are often stronger than my patience and so overrule it and lead me to take undisciplined trades. But, I am working on this by actively reminding myself of my previous mistakes every morning before and during trading and the fact that they, and a majority of my losses, happened solely because I lost patience. I will also at times sit and watch a market move and deliberately not take a trade even if one presents itself, to simply help strengthen the foundational core of my patience. To actively feel the discomfort of not being in a winning trade and so desensitise myself to it so lessening the effect of FOMO over time.
Emotional control. Some say that emotion has no place in trading but I disagree. Emotion has its place in every facet of life and trading is no different. It is the level of control that you allow it to exert over your actions and reactions that makes the difference. For example, I am trying to stop switching to a 1 minute chart when in a trade simply because the volatility magnifies my emotion and I tend to close a trade far too early as a result. How you handle a loss and how you trade immediately after a loss or multiple losses is a very important aspect of emotional control. The ability to 'flick the switch - not my saying but that of Tom Hougaard' and be able to close a trade in one direction for a loss, but then immediately open another in the opposite direction without hesitation or fear. That is emotional control. Not reacting to FOMO when the market moves without you and you hastily enter at a completely random point just to be 'in'. That is emotional control. The ability to stay true to your strategy in the face of adversity when it appears to not be working all comes down to how you control yourself and your emotions. Trading is as many great traders have said, 90% psychological and your psychology is linked very closely with your emotions, so you can't escape emotion and you shouldn't try, instead you should embrace it and acknowledge it, because it is in this acknowledgement that you gain control.
Focus. When I trade I turn my phone off, I want no distractions at all. I also meditate for 10 minutes or so prior to trading to help me relax and to strengthen my focus so that when I trade I am in the moment completely. However, this is easier said than done. So many times I have missed a move and watched the market go without me, but then suddenly realised that I could've found an entry on a lower time frame or quickly switched to another market (I trade DAX and FTSE simultaneously), and been in a position to catch the respective move in that market before it followed the other one. Or, I see the potential for an entry and so want to focus on one particular market (DAX), but then forget to use orders in the other market (FTSE), thus freeing me to be able to focus fully on the DAX and also not miss a signal in the market I'm not actively watching (FTSE). For me focus is key. It means being present, being fully aware of every piece of information the market is giving you and being ready to act at any given time. Focus helps to maintain the other two elements as their relationship is symbiotic.
Fundamental 2
Keep it simple.
To quote Larry Pesavento, 'Markets only do one of three things. They go up, they go down, or they go sideways.'
Therefore, whilst there are a thousand and one different strategies you can employ to make money (none of which are 100% reliable), in its most basic form you really only need one strategy for each environment. So, one for trending markets, and one for rangebound markets. Remember, your goal is to make money but you don't need to make all the money, in order to be successful.
Read that last sentence again.
The sooner you realise the truth in that last sentence and embrace it (I am still trying to make it a belief as it does not come naturally), the easier trading will become. You will treat a win and a loss the exact same way. Neither will effect your emotions, they will simply be viewed as what they are, a trade and each trade is just a part of the 'process'. The same can be said of exiting a trade and then watching it carry on without you. It's an inescapable part of trading that needs to be embraced sooner rather than later so that it bears no consequence on how you feel and act. I have a poster I created myself on my wall of 'rules' which I read every morning before I begin trading. On that poster is the following -
'Once a trade has been closed, it's closed. Never have remorse. You cannot go back, so always look forward and look for the next entry and the next trade.'
Remorse is what makes you freeze and miss the next signal. You sit there watching the market move without you dreaming of what you 'could've' had and so your brain ignores the next signal the market has just generated and you miss even more. This brings us briefly back to focus and emotional control. If you're focussed and in control of your emotions you wont miss anything because when the trade was closed, it meant nothing to you. It's just a closed trade, nothing more, nothing less. Now this is much easier said than done I know because I've just said it, yet still don't do it, but as with anything in life, it's a work in progress. So long as I can see improvements in myself I am happy. Sure, a bigger balance would always be preferential also, but in the beginning your focus should be on the process. Follow this and if your strategy is good, the balance will follow.
*A note on improvements. I don't mean that once I've made a mistake I never make that same mistake ever again. What I mean is, sure, I will still make that same mistake but only less often, or when I do, I am quicker to realise and so rectify it as soon as possible. For example, FOMOing into a trade. As soon as I realise that that is what I've done, instead of watching and hoping that it pans out, as this is not technically adhering to my strategy, I will immediately close the trade, profit or loss.*
So there you have it. A guide to what I consider to be the fundamentals of trading as a beginner, from a beginner, who over the course of his first 12 months has not been profitable. So don't forget to look out for my course I'll be releasing soon, as readers of this blog will get a 50% discount and so you'll be able to pick it up for the bargain price of $2,499! *Joke*
But in seriousness, I do consider the above to be very important in my trading and how I wish to trade and the trader I wish to become and I will continue to work on them and myself as I believe they are key to my success.
Who knows, maybe next years anniversary article might just be a picture of me on my yacht...or a park bench...
Kommentare