The Process of Becoming a Trader – Part 1 and 2 of 7

Site Administrator | March 1, 2012

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Special thanks to Greg Lee of for posting a special guest post as a series of "The Process of Becoming a Trader."   Greg will be joining us for a free event this Thursday - JOIN HERE

The Process Of Becoming A Trader  Part 1 of 7

(a/k/a....Been There, Done That, Got The T-Shirt)

It has always seemed to me that traders were at one time gentle souls who, once introduced to the markets, become fascinated by how those markets worked. Their introduction may have been precipitated by discussions with friends already involved in the markets or just simple curiosity caused by daily exposure to quotes of stocks or indexes in the press or on television. Further discussions and initial research often left them utterly mesmerized by the thought of the potential profits they saw possible in trading.

Some basic research was often the next step, usually followed by studying charts daily, learning the terminology and graphing techniques, applying simple mathematical analysis to their charts, trying to understand the foundation of those analytical tools, finding out which ones made sense and seemed to work -- and which didn't work or simply didn't make sense. Soon they began to think that there must be some Holy Grail to be found out there somewhere. Clearly others were making money at this and, all things considered, it didn't seem all that really difficult.

Immersion soon followed in an attempt to find that Holy Grail. Reading both books and internet solicitations from market gurus, viewing their various presentations hawking the one right and perfect solution they solely possess, taking advantage of the free trials and then paying to join those that appeared to make sense or had a most pleasing presentation or a large claim of success. Then bouncing from TradeStation to NinjaTrader to ThinkOrSwim, etc. Seemingly committed to trying each and every possible combination, perturbation and variation possible, often more than once.

The Process Of Becoming A Trader  Part 2 of 7

(a/k/a....Been There, Done That, Got The T-Shirt)

Inevitably this process had the ultimate result of generating what appeared to be certain constants (a methodology they believe they understood) that could be applied mechanically. From these constants they then attempted to build their own system, organized around what they had learned and based on their own personal past experiences and common sense.

Unfortunately, after initial successful paper trading, they discover that they are ever so slowly becoming poorer through actual trading as evidenced by an ever diminishing trading account. It seems these "constants" work on some days and yet not on others and they cannot understand how this could ever be happening. Their research and studies have been diligent, methodical, analytical, yet these "constants" never seem to work constantly and consistently. On some days their system works it seems to work well yet on other days they cannot understand why their systems is showing one losing trade after another. Not infrequently they try their system on other markets and find they have exactly the same results.

It then dawns on them that there must be some defect in their system, something they must have overlooked. Mechanical systems peddled by others are often bought next and tried but with no better results.

A very few and very lucky students of the markets observe and do take notice that some approaches seem to work on market up days, others work on market down days and yet others work on days when the market is flat. Generally, however, by the time they figure out what type of day the market is having (so they can adjust their approach) their earlier attempts to predict a day type have already started them off that day using the wrong approach and they end up spending the rest of that day making revenge trades to make up for the losses incurred earlier in the day. And even on those days it seems to frequently happen that just as they have changed their approach to match the new market type the market takes yet another turn.

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Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of  Article intended for educational purposes only and not meant in anyway as a solicitation to buy or sell certain securities.  Please consult your personal financial adviser before using this information for your own trading purposes.