The journey to becoming a profitable trader is a hard and long one, if you do not have the right roadmap, you will waste way too much time and capital finding the destination.
Starting out, we all think we know what we want from trading. We want to make money pressing a few buttons a couple of hours a day and maybe without noticing it we even want the excitement and recognition.
We do not have a plan of how to get to that destination or have wrong beliefs about what that place would even look and feel like.
In most things in life, we go and learn or train for years, it’s strict and completely mapped out from people that are going to teach it to us. I don’t think I have to make examples of how school works, right? You already know what you have to do for the next years ahead when you start.
Even if you don’t the school is structured to make sure that your teachers will still guide you in the right direction. Just a side note, you never thought about making money for going to school.
In trading this is not the case, it is the beauty of the job and partly why we all crave it in the beginning, “freedom”. But we are not used to having such freedom in our work.
This is one of the toughest businesses in the world, so just winging it without a plan after watching a couple videos is not an option, unless you are here to just gamble? Even if you want to do it the right way, one has no clue what it takes. You sign up to some random chat or read 2 books, and you get totally excited. “Ok I think I understand it now” you open a broker and place trades. Imagine how that would look like if a doctor would start operating a patient that fast after reading a couple books or talking to some unclassified mentor for a couple of hours. It has become so easy to open a broker and start trading that people do not realise that it’s an extremely hard job with many obstacles in the way.
Even if you realise all this, for most people, there still is only a short term plan in place.
When you start trading before you have some knowledge, a couple of things can happen that can make it hard for you later down the road.
You can blow up way too much money and get scared, you can get really lucky and make a bunch of money and that will create bad habits for examples.
If you are already trading for some time but are not profitable yet, you should still go through all these steps to clarify things for yourself and evaluate your knowledge, make a checklist and see if you actually have the right foundation!
Find the right trading education
this sounds easier than it is. If it’s too good to be true, it probably is! There are countless so-called teachers on the internet that claim to be the best and even have a bunch of members and good reviews. But don’t forget that the people writing the reviews don’t know any better. Don’t go and buy the first one you see, there is more than enough free content on the internet to start.
Don’t compare your journey too much to the one of others. You have no idea what they have gone through to get to where they are now. We see the end result of 10, 15 maybe even 20 year+ of hard work and get jealous of their results. Be inspired, but don’t be jealous. Maybe your destination is far greater!
The roadmap:
Learn the basics
Trading terms
Chart pattern basics
Bull market and bear markets
Market sectors
Read some books and watch countless hours of interviews
What kind of trader are you going to be
Investor
Swing
Day
Scalping
Your personality, capital, risk tolerance and time available will dictate what style fits you best.
What tools will you need?
Charting: Tc2000
Broker: Tradezero if you are under PDT and Cobra trading If you are above
News: Benzinga pro, Seeking alpha, Koyfin
Journal: Tradersync
Database and study: Evernote
Trading community’s: Discord
Search for a community and mentor
Find a group that trades the style you want to learn, probably a paid one, but like I said before be careful with finding the right group! The first couple you will find are probably masters at marketing, not at trading.
Once you are in a good group and starting to understand more about trading, put in the work and find people around your level to discuss ideas and review trades. If you put in enough effort and share value with the community you are in, you will maybe find a mentor eventually. It took me a couple years to understand that I had to be of value to others in order to get value from better people than me.
Technical analysis
Volume
Support and resistance
Trendlines
Indicators (one should at least know how the main ones work)
Level 2
Fundamentals
Earnings/sales
Price to earnings ratio
Price to sales ratio
Float
Fillings
Dividend
How to calculate enterprise value
How to calculate free cashflow
Analyst price rating
For some strategies this is more important than for others, but one should know the basics.
Setups and strategy
What setups are you going to use
When, how and why does this setup work
How do you find or scan for the setups
How do you enter the trade
What position size
How much risk per trade
Where do you take profit
Mastering this step is one of the most important pieces to the puzzle.
Believes and psychology
How long will it take you to make money
what monthly rate of return is realistic
How much % drawdowns are part of the strategy
Red days are part of the game and do not mean you traded bad.
Crowd behaviour
Greed, fear, anger, disgust, sadness, surprise, happiness, anxiety, depression, pride, envy and shame
If you have the wrong beliefs about trading, you won’t be able to follow even the perfect trading system.
Journaling and tracking stats
Learn to journal and track your stats, this will help with finding your strong and weak points, I use Tradersync and Evernote for this.
Journaling how you felt and what you did before a big mistake or a big win will help to create consistency.
Your mental and body
Take good care of yourself, workout, eat well and sleep well! These things will reflect in your trading! You need good discipline/habits and balance to do both! Going to the gym and having a good social life, gives you a feeling of accomplishment outside of trading! This will help you to push through the hard times when things are not working out yet.
Experience
You can’t force this one, you can prepare for it by studying history in the market. But you can’t rush experience. You need to go through at least a couple cycles in the market yourself. This takes at least 4, 5 years to go through a bull, sideways and a bear market. Only once you have gone through different markets with your trading, you will truly understand.
Make a roadmap for yourself and work on all these topics.
At some point, once you start being successful, you will realise that there is no destination and that this journey does not end! In order to stay successful, you will have to keep adapting and tweaking your trading to stay on top! There will always be new destinations we want to reach!
