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 experience and functional skills.
The Profile Trading Development Pathway By Josh Schuler → |Read Full Review|
Profile Trading Development Pathway is an immersive and methodical training program created by Josh Schuler to help developing traders acquire a deep level of market understanding. Time and time again I see hopeful traders go through trading courses expecting basic terminology/concepts and simple price patterns to make them massive, immediate profits. But what they don’t understand is how to effectively organize and interpret context (what’s going on “behind the scenes” of price movement). This is where Josh Schuler’s trading program really stands out – teaching a robust market framework with playbook trade setups that actually work. Overall, it’s 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.
Learn More in the Trading Success Framework Course
Written by Matt Thomas (@MattThomasTP)
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Hi Matt, a splendid article and website bringing out the truth about trading. I am so glad that I found your site. I am crazy about trading and I never started in the first place due to the false gurus and fake systems out there. People are there to lure your money and it’s so important to stay away from them and steer clear. Your website is helping me to just do that. I would rather read more on your website and follow your advice than trying to search online and get cheated. I am going to check the reviews given by you but I would also like to know if you have any advice for FOREX trading. I love forex because it’s open 24/5. Thank you so much.
Hi Augustine – I appreciate the kind words and I’m glad that some of my articles and reviews have been helpful.
I’ve already been through a handful of bogus, low-quality trading courses, programs, and services in the past – so I know all too well how the majority of gurus tend to operate. These days (thankfully) I know better as far as what services to avoid and what services actually do right by their subscribers and students. I’ve found that legitimate training (not only lessons, but tests, homework assignments, demo trading, and other interactive tasks to build skills as well) is what separates the strong from the weak.
In regard to Forex trading, I understand the appeal with it being open 24/5, but there are a handful of downsides to it. The first disadvantage is that there are only about 10-20 highly liquid currency pairs. Which in one respect is great – you only have to “master” a small amount of pairs. But the bigger problem might be finding opportunities for good trades on a daily basis. If your setups aren’t there, you might end up sitting on your hands for long periods of time or trying to force trades out of boredom when not much is happening. Compare this to the US stock market for example, which has hundreds if not thousands of highly liquid stocks to trade on a daily basis. The other big issue with Forex is that there’s no official volume information, so you can’t track the depth of market like you can with other markets/products. Other than basic support and resistance lines, it can be difficult to pinpoint areas of value.
I’ve never personally traded Forex so I don’t have any firsthand experiences with it (mainly stocks and options – and now I’m starting to get into futures a bit), but all of the trusted trading educators and coaches I’ve come across tend to dislike Forex for various reasons. Thomas Kralow, who offers my top recommended learning program – University Grade Trading Education – doesn’t like Forex. In addition to that, Chris Capre from 2ndSkies Trading, who offers my top recommended trading psychology course – The Advanced Traders Mindset Course – also has issues with Forex. Back when Chris first started teaching students in 2007, he was much more of a Forex trader – it was his main market. In fact, the URL of his website is 2ndSkiesForex.com. But now, Forex trades make up less than 10% of his total trades. Currently, his main focus is stocks and options. The fact that Forex is in his website’s URL, but he barely even trades it anymore as a veteran trader says a lot about the deficiencies of the Forex market.
But with this being said, it’s entirely up to you to decide what markets, times frames, and instruments you want to trade. Both mentors can help you gain the knowledge and build the skills necessary to trade Forex, but it’s not particularly recommended by them over other market options. Hope this helps. Take care!
Your article exposes a few truths about making money in the stock market. Often people bounce from one style of analysis to the next, Candlesticks then back to some other set up with Open High Low Close.
For short term trading using just one indicator is all you generally need. I know of some who just trade the MACD based upon whether it is below or above the zero line. For medium or longer term trading I prefer Point and Figure, but find it hard to do short term trades with.
I haven’t heard of Chris Capre, but I have heard of Thomas Kralow, possibly even read some of his work online or watched some of his videos on YouTube.