In today’s episode, you’ll discover how to start your trading from scratch.
So listen to it right now…
Hey, hey, what’s up my friend?
In today’s episode, I want to talk about, given what I know today, how I would start my trading all over again.
So let’s say, I’m someone new to trading, how would I approach trading given what I had been through over the years?
1. Find out your trading goal
Most people would say, “Oh, the goal is to make money.” But here’s the thing, making money is not wrong, but it’s vague.
What type of money are you looking to make? Are you looking to make 10% a year? Or make a consistent income from trading every month? So there’s a difference in that.
We’re all looking to make money, but what type of returns are you looking for? Something that’s more wealth-building in nature, making 10%, 15% or 20% a year? Or something more consistent like 3% a month.
So once you’ve defined your goal, then you can find the methodology to meet your goals.
2. Define your trading methodology
So let’s say, for example, you have a full-time job, trading is not something that you want to do full-time and you want something that’s relatively less subjective, something that’s rule-based, something that could make, maybe 10%, 15% a year.
Then systematic trading is something that you want to consider. It’s rule-based, it doesn’t take up too much time because once you’ve done the initial legwork then it’s all about the execution. So you can see how the methodology fits your goal.
Or on the other hand, let’s say you want to generate a consistent income from trading, maybe you’re looking for a way to make 2%, 3% on most months, then you cannot be trading off the daily or weekly timeframe.
You’ve got to be trading off the lower timeframes, day trading, or scalping the market or whatsoever. Given the goal that you have, which is to generate a consistent income from the markets, you’ve got to be trading off the lower timeframe.
So first define your goal, then you can find the methodology to meet your goals.
3. Learn the trading methodology
There’s a lot of resources out there. And my suggestion is, don’t sign up for courses first. Instead, dabble in the free stuff like cheap or free materials like books or follow people on Twitter, studying YouTube trading videos.
Maybe you will realize, “Oh man, this is not for me.” Then you can find other methodologies that meet your goal.
So what are the things to look for when you are reading books or when you’re following traders on social media?
Focus on understanding the thought process
The key thing to look for is their thought process, regardless of what’s being shared, what’s the thought process behind them? Is it something that resonates with you? If it resonates and has logic to it then this person knows what he’s talking about.
Follow those who can support their findings with data
Also, I like to follow people who can provide data to back up their findings. This could be their backtesting data, it could be their trading journal results and stuff like that. These are the type of people that I would also want to follow.
Avoid flashy “influencers”
I would stay away from people who usually post their P&L, “Oh, look how much money I earned, $5,000 a day just by clicking the mouse.”
When you see such posts, it’s a waste of time. Just stay away from such people and “influencer” because you wouldn’t get any value out of it.
So that’s the third thing that I’ll do: study books and blogs, follow people on social media and try to get more insights into the trading methodologies.
4. Invest in courses that align with your trading methodology
Once I am pretty certain that I want to walk down this path of let’s say systems trading, I would invest in courses about systems trading, maybe I’ll invest in a course on how to develop trading systems.
Or maybe if I want to learn how to be a price action trader, I’ll invest in courses that show me the way to approach price action trading.
That would be something that you’ll have to think for yourself, whether this is a course that you want to dive deep into.
5. Develop a trading system around the trading methodology
For example, if I have chosen price action trading, then I’ll develop a trading strategy around it:
- The market conditions that I would trade
- My entry trigger
- My stop loss
- My trade management,
- My profit targets
- The markets to trade
- And etc.
Once those nailed down, I would then take the strategy and trade it in the live market since backtesting for price action trading it’s not too accurate because of certain biases that we have as humans.
So I will take this and trade in the live markets with a really small account to see how the results fair. From the results, I can even adjust the trading strategy.
On the other hand, let’s say I went down with the systems trading route, then what I’ll do is that I would develop a trading system with clearly-defined rules on how I would trade, similar to the price action one, just that the rules are now more objective, there’s no discretion.
And since I can’t code, I’ll take those rules and pass it on to a programmer to help me program or code it up, and see how those rules fair during the backtest results. If it’s good, or if it’s something that I can live with, within my expectations, I’ll trade it on a small live account.
If the results are still similar to what the backtest results show, then I’ll look slowly look to scale up that system, or, adopt different trading systems to trade together over time.
So hopefully this kind of give you the big picture on how I would start trading all over again if I were to start from scratch.
That’s it, I wish you good luck and good trading. I’ll talk to you soon.