How I Learned Not To Trade Like A Noob

So we’ve finally made it, the third and LAST installment of the 7 Reasons Why You Still Trade Like A Noob and as promised, I’m going to share my transition in thinking from an amateur to a professional trader based on Marketkronicle’s infograph. Again, I hope this helps all you noobs out there so read on to find out what I've learned about the trading business…

I’m just going to picking up where I left off last week so if you need to be brought up to speed, check out numbers one through four in PART I and numbers five through seven in PART II.


SO WHAT HAPPENED?

In 2009, we split-up and started trading remotely and that’s when I began to develop towards a professional mindset and trade like a job rather than a hobby. How did I do it? I became disciplined. I woke up early, had breakfast then went off to see how the European and Asian markets did. I read major news releases, took notes on them, and made a game plan before a single trade. In my spare time I invented systems and risk parameters that I tried to follow like a robot, from the very first trade to shutting down my PC at a certain loss threshold. In doing so, my losses began to shrink and I felt I was starting to learn the game but it was too late...our group got axed by Super Bowl XLIII!


WHAT I’VE LEARNED…

After it was all over, it turns out that is when I learned the most. I started to focus on self-awareness, the psychology of trading, and got interested in behavioral economics while digging into the flaws of TA. I went as far as going into my trading journal and auditing all of my notes armed with this new knowledge and here’s just some of what I learned…

• I developed my own risk parameters and basic trading systems with defined situations, entries, and exits. I studied just a few stocks that I would follow and knew when I was getting in and out. Of course, markets change so some flexibility was included but I had a strategy before trading started not during it.
• I learned to let the futures, morning numbers, and opening market determine my direction. If they were positive and gapped-up, I was looking for “longs” and vice versa for "shorts". Basically, I waited for clear direction and traded with the trend.
• One shouldn’t be risking more than 2-3% of their capital on any one position to ensure proper RM against consecutive losses.
• Avoid pyramiding and stick with single-order round lots (1, 2, 3, etc.). Why? One, I almost always timed this wrong! Two, when you buy an additional signficant amount of round lot pairs, like 4,2 or 5,3 [base and L1] you increase your average cost per lot and this reduces your overall profitablity. Your best best is to learn to "ride the wave" and you can pile on the size with more expereince later.
• I started to re-think of trading profits in terms of market probabilities and that I’ll be profitable by chance and not necessarily skill. Play the odds right and you’ll make money, you just need to make sure you win in the long-run.

CONCLUSION

I quickly learned that “real” trading is about RM, not making money, and I started to see the glass as always half-empty."

Well, that’s was the long and short of my trading days so far but one day I hope to bring some serious capital back to the game and prove that I can be a successful. In the mean time, I hope my experiences can help some of you monkey’s and encourage the 800lb. trading gorillas out there to shed some advice but at the very least you've been entertained!

I'm open to your thoughts, comments, and suggestions on the three articles!