Training For Trading – How to Break Down Trading Into Individual Skills:
The number of people who jump straight into the market without developing any requisite skills is astonishing. Truthfully, most people just treat it like a casino – an opportunity for thrills and excitement. But for serious traders who actually want to achieve consistent long-term success, trading does not consist of random, impulsive decisions. It’s a structured, measured, and organized venture.
I understand why this happens though. The barriers to market entry are essentially nonexistent, so almost anybody can open up a brokerage account and start placing trades – without any knowledge, skills, or experience whatsoever. On the one hand, I think it’s great that innovative platforms have been created to make trading and investing easily available for everyone. But on the other hand, the increased level of accessibility has left new market participants vulnerable as they rush in untrained and unprepared.
This incredible opportunity to be actively involved with the markets, monitor your own trades and investments, and take control of your financial future is empowering. But simply opening up a self-directed brokerage account is only one small step, and unfortunately, the typical person doesn’t take the initiative to build the appropriate foundation of knowledge and skills for durable market success. The critical phase of training and practice tends to get overlooked in favor of making impulsive decisions and following hot stock alerts.
4 Main Trading Skills to Develop in Order to Become a Better Trader:
When talking about core trading skills, I usually break them down into two main categories: 1) technical and 2) mental. Out of the four main trading skills mentioned below, three are technical and one is mental. But don’t take that as meaning the mental component isn’t nearly as important as the technical component – because that’s not true. Each component is crucial for overall success.
1. Buying & Selling Skills
Buying and selling skills involve technical analysis, fundamental analysis, or a mix of both – depending on your particular trading and/or investing style. For short-term traders, for example, technical analysis is prominently used. But for long-term investors, fundamental analysis is prominently used. With approaches that land somewhere in the middle, like position trading, both technical and fundamental analysis can bear similar weight in making trade decisions.
- Pinpointing Key Market Levels
- Reading Level 2/Depth of Market
- Understanding Various Indicators
- Evaluating Financial Reports
- Creating Detailed Trade Plans
2. Money & Risk Management Skills
Money and risk management skills relate to things like asset allocation, position sizing, stop losses, and profit targets. Having rules in these areas are important in order to protect you from the inherent uncertainties of the market. Newbies tend to ignore proper position sizing, for example, putting anywhere from 25-100% of their account values into individual trades. But doing so doesn’t provide much wiggle room for error. All it takes is one or two losing trades in a row to completely demolish your account.
- Proper Position Sizing
- Adjusting Portfolio Allocation
- Choosing Stop Losses and Profit Targets
- Reducing/Eliminating Risk of Ruin
3. Analytical Skills
Analytical skills can help you evaluate the market when trying to pinpoint an edge, but can also help refine performance of an existing edge. This is why it’s extremely beneficial to accurately track data and statistics associated with the specific setups or systems you trade. Things like price, market cap, float, volume, and time of day can all have an impact on the effectiveness of your particular system(s). After a few months of trading, for example, you might gather enough data to see that stocks under $2 rarely result in winning trades for a particular setup – so you can just stop trading those in order to increase your win rate and overall profits.
- Accurately Track Data and Statistics
- Identify Statistical Edges in the Market
- Refine Your Own Setups and Systems
- Continuously Adapt to Current Market Conditions
4. Mental Skills
Mental skills involve acquiring the proper expectations and mindset to flow with the market instead of fight it. Most people try to dump their urges and desires onto the market, but this always results in frustration and pain. A trade might fulfill your unrealistic expectations every so often by mere chance, but it won’t work out every single time. With the wrong mindset, most traders take themselves on an up-and-down rollercoaster ride of equity and emotion. But it doesn’t have to be this way. Trading can actually be a smooth and enjoyable experience instead of an afflictive and painful one. It all comes down to mindset.
- Extinguish Unrealistic Expectations
- Focus on the Process Over the Result
- Understand True Market Characteristics
- Execute Systems With Consistency and Discipline
Best Day and Swing Trader Training Programs Available Online:
The reason I like these learning programs specifically is because they highlight the training phase of becoming a successful trader. The majority of trading courses, programs, platforms, and services you see advertised online peddle false promises and absurd claims that only set people up for failure. Instead, these two services focus on legitimate training and acquiring self-sufficiency.
University Grade Trading Education By Thomas Kralow → |Read Full Review|
University Grade Trading Education is a comprehensive learning program created by Thomas Kralow. This is arguably one of the best trading programs online right now because of the complete curriculum and level of personal support. It’s much more than just a simple course because it offers interactive tasks, homework, quizzes, and exams for deeper learning. In my mind, Thomas Kralow is a trading coach that actually understands the power of practical application. Far too many traders waste years of time reading multiple books and taking various courses in order to find some magical system, when the answers they’re looking for will only come through building functional skills.
The Trading Masterclass and Advanced Traders Mindset By Chris Capre → |Read Full Review|
2ndSkies Trading is an educational platform run by a trader with over 20 years of experience, Chris Capre. He offers four main courses as part of his service, but my top two are The Trading Masterclass and Advanced Traders Mindset. What I like most about about Chris Capre is his focus on trading psychology and mindset. This is a topic that most other services shy away from even though it’s critical for the long-lasting success of students. But I guess other services would rather make a quick buck off lousy courses and stock alerts than actually helping subscribers achieve durable market success. Overall, 2ndSkies Trading is a breath of fresh air in an industry full of scams.
Conclusion – Consistent Success in the Market Requires Training in Multiple Areas:
There’s no doubt that trading is a skill-based, peak-performance endeavor. Similar to how elite athletes, musicians, pilots, and surgeons need to train in order to perform at a world-class level – so do traders. It’s interesting, however, how people don’t treat it that way.
As mentioned in the beginning, the vast majority of people jump straight into the market expecting fast and easy success. But you would never jump onto an NBA court, on stage for a performance, into an airplane cockpit, or next to the operating table without any prior education, experience, or skills, and realistically expect to perform effectively. New traders, however, take this approach all the time.
I think that one of the trickiest parts about trading is being able to mentally separate decisions from outcomes. What I mean by this is that a good decision – executing a trade flawlessly based on your statistical edge – doesn’t always result in a winning trade. And the same is true for the opposite: a bad decision – breaking your rules and trading impulsively – doesn’t always result in a losing trade. So new traders consistently undermine their long-term success in favor of short-term emotional gratification.
But consistent trading success is a marathon, not a sprint. You can’t let short-term results derail you from your long-term goals. This is a game of probabilities, not certainties. And you have to be consistent in the execution of your statistical edge in order to see favorable results over time. It’s not about any one individual trade, but rather the cumulative result of a large number of trades.
The physical aspect is “easy” (pushing buttons in a brokerage account), but there’s a lot more to long-lasting market success than that.
Written by Matt Thomas (@MattThomasTP)