Tradings stocks isn't easy. That's something that's hard to grasp for most people because is seems so incredibly easy. In one way, it is simple. You hit a button, and if you hit that button at the right time, you can make money. In fact, it takes no knowledge at all to hit a button and make money. But, can you do it consistently? That's a much bigger question.
This class is aimed at teaching people who have no prior knowledge in the market. It's good for experienced traders as well, but the first few weeks are definitely designed for those who have never put any time or thought into the stock market.
We line out a few of our main strategies in this class, but the biggest thing I try to get across is that you need to find the strategy that works for you. Everyone has a different risk tolerance. If you end up taking a trade without knowing "why" or without accepting the risk, you'll mess it up, plain and simple.
As we go through these lessons, try to perceive the "why" in each strategy. Why would a stock bounce off of this previous price? Why would a small-cap stock pop so fast over it's pre-market high? Why is a higher low and higher high a sign of a reversal in trend?
After you've learned those "whys," it's time to find the one that works best for you.
There are certain parameters you need to consider for a strategy.
Accepting the risk is the most important thing you need to focus on. I mean TRULY accepting the risk.. Not just saying that you're going to risk "this much."
If you are going to risk $15, you need to have the same mentality as ordering a meal at a sit down restaurant. You more than likely aren't going to get up and leave after ordering the food. You've accepted that you are willing to spend $15 on this burger.
My ideal timeline for a new class member:
1. Get used to the system.
Learning the ordering platform
Identifying support & resistance
2. Learn the strategies presented in the course
What strategies do we use?
Do any of these "make sense" to you?
Learn the "why" behind the strategy
3. Pick the strategy that works for your brain
We're all different. Something that comes natural to me might not come naturally to you. For instance, I need to have a set stop-loss and profit target, or at least a concrete reason for entry and exit. Some people like to trade on the "feel" of the market. This works for some, but only for those who are extremely confident, have a high risk tolerance, and can trust their intuitions.
4. Back-test, and practice
The best strategy in the world is useless if you don't trust it enough to trade it properly. I recommend back-testing the strategy to test it's value, and to test your ability to see the moves taking place.
Consider using a trading simulator. You can get a 7-day demo of DAStrader by going to F1trade.com and selecting "Try Demo." Thinkorswim also offers a great paper trading option.
I've never been the biggest fan of paper trading, but one thing is true: If you can't make money when the money is fake, your not going to make money when the money is real.
Caution: Simulated trading removes emotion from the equation. Be ready for a new batch of emotions when switching for paper to real money. The point of a simulator is to get the mechanics down, and to build confidence in your strategy.
You should be able to get the same confidence from back-testing or forward testing (watching and acting as if you are trading), but a simulator definitely won't hurt.
5. Start taking trades at low risk
As stated above, switching to actual trading is going to be different than practice. Start off with a very low risk to get used to the feeling. Seriously, start with 10 shares if you have to. Disregard the commissions if you are using a broker that charges commissions. Ask yourself, if I had 1000 shares, would I be making money?
A skill that can pay the bills for the rest of your life might not start making you money in the first week. That's okay.. Keep your long-term plan in mind. Is this a future career? How much would you spend on college? How long would it take you to acquire a skill that could pay you $300 (or more) a day forever?
Confront your fears.
What's your biggest fear as a trader? If it's losing money, then plan your share size accordingly. If it's "being wrong," consider asking where that emotion comes from. Is there something from your past that triggers that same feeling of "being wrong" anytime you mess up? Trading is difficult, but it is possible. The most profitable traders in the world lose money. The most profitable traders pick bad trades. That's all part of the plan. Once you accept that losses are inherent to trading, it will help ease your fear of getting in a trade.
If "being wrong" is a fear, pick an objective strategy that takes away the decision making, and you won't be able to blame yourself for making bad trades.
Manage your risk!
Always have a stop-out point. Know at what point you know the trade is going against you. Calculate your position size based on the amount you are willing to lose on that trade. Allow yourself the room to take some losses, and you will have an easier time taking trades.
Always ask yourself if you are making mistakes, and if there is anything you can do to do better. If a strategy makes you uncomfortable, it might not be the one for you, or you might be risking too much money. Only put an amount in your trading account that you are willing to lose. If you aren't willing to lose it, you will trade poorly, I promise.
We're always available for questions you might have about strategies. Send us an email or drop a comment in our Facebook group.
I'm truly excited to teach everyone this skill. Trading presents us all with true freedom. Use it responsibly, and it can bring you a great career.