Random Advice From One Trader to Another

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4 Trading Tips From Millionaire Traders

Successful Traders Reveal Winning Investment Tips

Each trader forges their own path, usually by absorbing the knowledge of successful traders that came before them. While no quote or trading tip will make you a successful trader on its own, insights from successful traders can tell you where you should be focusing your attention, and what you should be working on.

Here are 4 tips from millionaire and successful traders. Most of these quotes are from the Market Wizards books by Jack D. Schwager—interesting books which look at the diverse trading methods of successful traders. Worth the read.

4 Trading Tips from Millionaire Traders

If I have positions going against me, I get right out; if they are going for me, I keep them. Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: get out, because you can always get back in. – Paul Tudor Jones

Loss aversion—an unwillingness to cut a loss—is one of the most common trading problems and can deplete an account quickly. On the flip side, not giving winning trades enough room to run can also be a problem. If you win less than 50% of the time, winners have to be bigger than losers on average. Even if you win more often, strive to keep your average loss smaller than your average win.

The next three quotes align with this.

You have to learn how to lose; it is more important than learning how to win. – Mark Weinstein

Winning is as much about controlling losses as it is about racking up winning trades. If you make $1000 one trade, but lose it (or more) the next, you’re no better off. But if you can make $1000, then only lose $700, then make $1100 then lose $500, you are making progress. Trading is always two steps forward one step back; making sure the steps back don’t erase everything you have done prior is key if you want to succeed.

On the topic of controlling risk.

Whenever I enter a position, I have a predetermined stop [loss]. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop [loss], and the stop is determined on a technical basis. I always place my stop beyond some technical barrier. – Bruce Kovner

The stop-loss order is one of the simplest ways to help control risk. Under normal market conditions, it will keep your risk limited to a specific amount of capital. With the maximum risk known, you can then assess whether the profit potential of the trade is worth the risk (remember, we want winners to be bigger than losers).

I don’t think you can consistently be a winning trader if you’re banking on being right more than 50 percent of the time. You have to figure out how to make money being right only 20 to 30 percent of the time. – Bill Lipschutz

A strange statement? Recall that ideally winning trades should be bigger than losses, even if you do win 50% or more of the time. Most traders are searching for that elusive method where they never lose or can win 8 or 9 trades out of 10, amassing huge profits in a short amount of time with no risk. But successful trading takes time. There is also a risk, always, and it needs to be defined and controlled. As soon as you cap your risk, you invite the possibility of losing trades (stop loss being reached), but ironically that is more likely to make your profitable since the losses are small and controlled.

When creating a trading plan and strategies, analyze them based on worst case scenarios. Maybe you do tend to win 60% or 70% of the time (not unreasonable), but undoubtedly you will face periods where you only win 2 to 4 trades out of 10. How does your system perform then? Does it manage to keep your account steady or profitable? Or does the slower period result in big account losses? Plan for the worst case, assume you will only win 3 or 4 trades out of 10. In that way, your strategy is more robust, and during the periods where you do win 6 or 7 trades out of 10, you will be very happy indeed.

Millionaire Trading Tips – Final Word

All these traders discussed losses. Most novice traders like to think about winning or avoiding losses, but controlling risk is even more important. Anyone can make a profit simply because of random price movements. moving two steps forward. Successful traders control their risk though. When losing trades come–and they will– the trader only takes one step back, and doesn’t erase everything made prior.

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Have a trading plan, control risk and focus on creating strategies that will keep you in the profit or steady even if you only win 3 or 4 trades out of 10. Eventually, you may win more than that, but it isn’t wise to try to trade based on best-case-scenarios. Instead, plan for a worse case and your results will likely be better.

Random Reinforcement: Why Most Traders Fail

Random Reinforcement: Using arbitrary events to qualify (or disqualify) a hypothesis or idea; attributing skill or lack of skill to an outcome that is unsystematic in nature; finding support for positive or negative behaviors from outcomes that are inconsistent in nature—like the financial markets.

One of the most interesting topics in trading, and really throughout many areas of life, is random reinforcement. Random reinforcement, as it relates to harmful trading practices, occurs when a trader attributes a random outcome to skill or lack of skill. The market occasionally rewards bad habits and punishes good habits because the market is so dynamic. It is especially negative if a new trader who wins a few trades, with absolutely no plan whatsoever, attributes this success to “intuition.” Random reinforcement can also hurt veteran traders who experience a string of losses and believe they no longer possess skill. (See also: Trading Psychology and Discipline.)

Random reinforcement can create long-term bad habits that are extremely hard to break. It is equivalent to gambling addicts who keep playing because they win just enough to keep them there, but of course they are losing their money over the long run. A successful card player may also experience a significant draw down, abandon his proven strategy and in doing so give his edge back to the house. (See also: 10 Cleaning Tips to Spruce Up Your Trading.)

How Random Reinforcement Affects Us

The concept of random reinforcement is hard to grasp for some traders, but understanding it can be the difference between actually improving as a trader or simply believing we are improving when we are not. The best way to understand this to go through a few examples.

[You are more likely to avoid the issue of random reinforcement if you consistently and meticulously incorporate the proper technical tools in your analysis. To learn more, check out the Technical Analysis course on the Investopedia Academy, which includes interactive content and real-world examples that can help you along the path to profitable trading.]

Example 1: Relying on Random

John is a new trader. He has a business background, watches the news and follows the stock market, but he has not traded personally. He feels he has a good handle on what it takes to be a good trader, but so far, he has not written any of these methods down. John has opened a trading account and believes his background knowledge will make him a profitable trader. Opening his charts for the first time, John see a default stock in the trading platform, and it is rising quickly. He quickly buys 200 shares without even thinking. The stock continues to rise while he makes lunch. After lunch, he comes back and sells his shares, making himself a $100 profit after fees. John makes another trade and ends up with a similar result. He is starting to feel that he is very good at this and that he must have a “knack” for trading.

In analyzing the situation, experienced traders will notice a few things that could lead to short-lived trading career for this trader. The main problem is that several successful trades are not a valid sampling for if a trader will be profitable over the long run. John, the trader in this case, needs to make sure that he does not fall into the trap of believing that his current methods, which are still very much untested, will bring him long-term success. The danger lies in refusing proper market guidance or methods, whether self created or provided by someone else, because this initial untested method is believed to be superior based on these preliminary trades. The trader can begin to think very strongly that, if it worked once, it can work most, or all, of the time. The markets will not reward erroneous thinking over the long run but may reward random and unplanned trades some of the time. (See also: 9 Tricks of the Successful Trader.)

In the next example, we will look at random reinforcement again, but from a different angle. This example pertains more to experienced traders, or traders who are coming to the market with a written down strategy or method that is back tested or proven to be profitable in live trading. It should be noted that not all methods that were successful in the past will continue to be, as we just found out in the previous example (on a small scale). But methods that have shown success in the past are more likely to provide a chance of profitability in the future than a method that is completely untested or has never been profitable over the long run.

Example 2: Abandoning Strategy

John has now been trading in the markets for some time. He realized that approaching the market without a well thought out, written down and well researched plan was a mistake. He has overcome the problems evident in the first example and now has a solid trading plan for approaching the markets. This method has worked well over the past two years, and he has made money.

John is now facing another problem. Despite past success with this plan, his method has now led him to nine consecutive losing trades, and he is starting to worry that his plan is no longer working. John therefore changes his plan for trading, as he feels his method is no longer valid. In doing so, John ends up trading a new untested method, possibly similar to when he started trading.

The problem in this example becomes evident when John abandons his method, which has been successful, in exchange for an unproven method. This could put John right back to the beginning, even after trading successfully in the markets for a number of years. (See also: Day Trading Strategies for Beginners.)

Why did this happen? John failed to realize that, while randomness can create winning streaks using a flawed trading method, randomness can also create a string of losses with an excellent trading plan. Therefore, it is very important to make sure a trading plan is not actually going to work anymore (was the original success random?) or determine if this could simply be a run of losses based on current market conditions that will soon pass.

All traders experience losses, and there is no definitive number of losing trades in a row that will tell a trader if his or her plan is no longer working. Each strategy is different, but we can learn to deal with randomness. (For more, see: 4 Key Elements to Create a Successful Trading Plan.)

What We Can Learn

Once we realize that randomness can create strings of losses in great trading plans and strings of profits in poor trading plans (and also scenarios that fall in between these examples), how do we adjust to trade profitably over the long term?

While each trading plan is different, each trader must have a written trading plan that outlines how he or she will trade. This plan should be well researched and lay out entries, exits and money management rules. In this way, the trader will know over the long run if the plan is flawed or successful. It is also extremely important to risk a very small percentage of capital on each trade; risk levels of each trade should be covered in the trading plan under the money management section. This gives leeway to the trader, as he or she will be able to withstand a string of losses and be less likely to make a premature change in the trading plan when it is not needed. (See also: Ten Steps to Building a Winning Trading Plan.)

The Bottom Line

The markets are extremely dynamic and in constant flux. This brings in an element of randomness that can create profits for unskilled traders and losses for skilled traders, and it happens all the time. A trader must also determine when a certain string of losses or profits can be attributed their skill and when it is random.

The only way to do this while you are learning is to approach the markets with a trading plan and risk a small percentage of capital on each trade. In this way, the trader can see how a method performs over the long run, in which randomness becomes less of a factor. It is also important to remember that even the best traders and trading methods experience strings of losses, and this is not reason to abandon the strategy. However, isolating why the method is no longer working may help lessen the extent of the losses when similar adverse conditions arise again. (See also: Financial Ratios Tutorial and Investing 101 Tutorial.)

How to Break Bad Trading Habits

Success as a trader means being consistently profitable over the long term, and that requires developing a good trading plan and, most importantly, sticking to it. One of the most destructive habits a trader can have is ignoring the rules of their own trading plan about when to enter and exit a trade. Breaking this bad habit means critically examining how you view the success or failure of any single trade.

Key Takeaways

  • Success as a trader requires developing a profitable trading plan and sticking to it over time.
  • Ignoring their own trading rules is one of the most destructive habits a trader can have.
  • It is vital that a trader view the success or failure of each individual trade according to whether they followed their trading rules—not whether the trade resulted in a profit or loss.

Redefining Success and Failure in Trading

To break bad trading habits, it is vital that traders judge the success or failure of each trade on whether they stick to their trading plan—not whether the trade resulted in a profit or a loss. If you make an undisciplined trade, one not dictated by your plan, you must view that as a failed trade. You can’t reinforce poor discipline by congratulating yourself.

On the other hand, if you execute your trade according to plan but still lose money, you must view that as a successful trade because you followed your plan. Every good trading plan accounts for losing trades. If you beat yourself up over a losing trade that was made according to plan, you will be much less likely to follow that plan in the future. That will result in impulsive trading that can wipe out trading accounts over time.

Example of a Bad Trade That Makes Money

One of the most common bad habits that can lead to disaster is holding onto a money-losing trade once it moves well beyond your stop-loss level in the hopes that it will turn around—and then seeing it turn around and generate a profit. The profit itself reinforces the bad habit.

But it’s even worse if you congratulate yourself for holding on until the trade turned around. Coming out with a profit on a trade like this is almost always a result of luck. And luck always runs out, usually with disastrous results if stop-loss levels are ignored.

Using Rewards to Create Good Trading Habits

The first step to redefining success and failure on individual trades is to change your internal dialog. Traders should praise themselves when they follow their plans, whether the trade was profitable or not, and they should acknowledge failure when they don’t. They might even grant themselves some small reward for following their trading plan during a losing trade or withhold one for deviating from the plan.

Breaking your trading rules is a recipe for disaster over the long run.

Adjusting Your Trading Plan

The first step to becoming a successful trader is making sure your plan is a profitable one. Yet market conditions change over time, and a trading plan that is profitable one year may not work as well the next. So if you start losing money consistently while following your trading rules religiously, you can always go back and re-examine and adjust your trading plan.

The Bottom Line

Still, the fact remains that no trading plan will work if it’s not followed. So in the short term, you should define success and failure according to how disciplined you are. Always stick to the plan, and don’t deceive yourself into thinking you made a successful trade when you only got lucky.

Futures and Forex Trading Blog

Last week, we debuted Topstep’s first Weekly Trader Challenge. The idea was to provide a venue for our social community to share their most valuable trading advice. In prompt one we asked: what is your best tip for passing Step 1 of the Trading Combine? We received many amazing responses and thought we’d breakdown a few of them here. Thanks again to everyone who participated, and be sure to check out the Sunday Weekly Kickoff email for the latest Trader Challenge.

Trade Futures?

Trade Forex?

Best Advice for Passing Step 1 of the Trading Combine?

Carlos M.

“Play it safe, we’ve got plenty of time. Follow the rules and just play big lot sizes if you are big up for the day. If not, small size lots and patience.”

Trend Trader

“I had chosen a 50K account when I started. I didn’t really have a solid system or enough time to understand how the dynamics of the market can change so much day to day or minute to minute. I blew up that 50K so many times. Now after being funded for a 100K account, I am much more relaxed, I don’t worry about the max drawdown or max daily limit. I am in complete control. I trade the 100K with the 50K risk parameters. The best tip is to make sure your emotional and mechanical risk parameters match your trading style, your trading system, and most of all your account size. It’s a journey to find this formula, but it’s a recipes for long term success.”

Greg D.

“Know when to walk away. All of my resets occurred because I couldn’t walk away when my trades weren’t working. Coming back with a clear head is key.”

Michael Patak

“When I did the Combine before Topstep existed (when I was being evaluated at a Prop firm in Chicago). I learned to stay patient and wait for high probability setups to happen.”

M.P. jumping in on the action

Carlton H.

“Be Patient. Wait for YOUR setup. It will come, and you will make Money, but wait for it. Don’t trade just because there is random price action. “

Blair B.

“Don’t micromanage a trade once you enter. Set your stop loss and profit target and then walk away. Now it’s simply a binary event.”

Brent S.

“Know that your A+ System and your best and Safest Trades will not likely reveal themselves every single day. Recognition and Patience are key. Your intimate understanding of the morning mood of the market will give you the best edge. Evaluate your edge before you get ready to trade. What mood in Mr. Market in this morning? Expansion Day? Balancing Day? Drifting sideways Day? or Ready to Rumble and Responsive Day? What strategy will you select to match this Day? Adapt to that, and be ready to stay flexible, and take one best trade of the day.”

Eddie Horn

“With hundreds of conversations with traders from every walk of life, I have learned that Step 1 gives us the opportunity to punch the gas and see what this baby can do. What I’m saying is there aren’t many rules to hold one down and basically Step 1 is a challenge to see if you actually can profit. Tips: keep adding winners to the account, no matter how big or small. Don’t moan or complain about how small they are, take what the market gives you. Don’t second guess losing trades. Exit them and look for the next opportunity. The secret here is there is no secret, it’s just pedal to the metal and don’t forget to have some fun with it also. Don’t be reckless but by all means, keep moving forward the best you can. Up next: Step 2.”

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I Took A Couple Years Off Of Work To Swing Trade. Here’s What Happened.

This is what I thought it would feel like swing trading:

This is what it often really felt like:

[A Quick Note: I am not a licensed broker or investor. This is not advice. Stock investing is a risk: you can lose your money. Please consult a licensed stock advisor before investing.]

I s it possible to make a living swing trading? Yes, you can. The question to add is What is a good living in your book?

If your answer is $1,500-$6,000 a month part-time, then yes. It’s possible. However, it’s all dependent on a few major requirements:

  • You have capital to work with. Ideally, you should open a broker account with at least $50,000 — $150,000 in my opinion [1]. You have to buy a lot of shares to make any real money. Losing some of this initial capital is the price of learning, so keep that in mind!
  • You have patience to learn the craft. Learning the technical side of trading can take ten weeks or ten years. It all depends on your aptitude, attitude, and discipline to master the skills.
  • You have to be level-headed: that is, you’re not easily swayed by emotion. Technical trading is about spotting patterns and taking action. You can’t be influenced by the news or make emotional buys/sells. And, you must be able to mentally handle inevitable losing streaks and financial losses.
  • You have the access to technology. Many stock screeners are free, but some advanced ones you pay for really make a difference. All you need is a computer, software, and the internet to do this work.

There are a few more things you’ll need in your investment quiver, but these are the basics. Below is my experience with trading.

So What Is Swing Trading?

Swing trading is the buying and selling of stocks all within the timeframe of a few days or several weeks. It’s a lot like day trading except the timeframe. After each buy and sell cycle, your slate is clean with no carry-over. It’s the opposite of passive, low-maintenance investing. Swing trading is active short-term investing because the “buy and hold” mantra does not apply.

And the basic concept is simple. Buy low, sell high.

The trouble is figuring out what and when to trade.

I always thought that if I could have one magical power, I’d want to be able to predict the future at least a day in advance. I’d be the richest man on earth because I’d be a swing or day trader for sure!

Context

I got into stock trading because I took a year off from teaching college and high school business courses. It was like early retirement for me. I had all the time in the world to do whatever I wanted. I didn’t know if I was ever going back to education. Being frugal, I still wanted to dabble with money-making opportunities at my disposal.

Swing trading was one option, so I tried it.

As a business teacher, I already knew a lot about trading and personal finance. But that didn’t matter much because you could teach a ten-year-old how to trade.

It was really the technical aspects that I had to learn. (Withing stock trading, there is the fundamental side and the technical side. View this 2m video of you are not familiar with the difference.) I took a short course on charting, read a couple swing trading books, and then I was off to the races.

I predominantly did swing trading, not day trading. I’ve done some day trading (buy and sell in a day). However, my biggest wins have been from swing trading. I’d buy and sell a stock after holding on to it for a few days or weeks.

I got scared a few times and a little fundamentalist theory influenced my buying. In the beginning, part of my criteria was that I’d buy “long swing” (I don’t know if this is a term) stocks that were severely undervalued from a fundamentalist’s point of view. That way if I was wrong about the stock, I could hang on to it for a few months and at least break even.

This was a terrible strategy. Technical traders should never look at the longer term horizon. In fact, the company could go bankrupt in a few months and it wouldn’t matter. As long as you time your entry and exit points correctly, you’ll make money.

This was an aspect I didn’t like about technical analysis, but enjoyed about fundamental analysis. With fundamental companies, I could talk about them to other people and (maybe) predict their future growth. It was exciting to read about these companies in the news and keep up with their innovations.

With technical trading, all the knowledge you learn about a company was meaningless outside of swing trading. Patterns come and go, like companies come and go. I felt like I was filling my head with random data that wouldn’t matter a few days later.

Early Swing Trading Efforts

A t first, I did extremely well. It was late 2020 and the market was robust. As mentioned, I traded a lot of obscure stocks. I also traded a few popular stocks and made thousands on them. They include NFLX (Netflix), AMZN (Amazon), ATVI, (Activision Blizzard), and MU (Micron Technology).

I mainly worked with technology and pharmaceutical stocks. Having a narrow industry focus was a crucial lesson I learned early on.

I made a mistake of listening to the Motley Fool guys (I had a one-year subscription to their basic stock advisory service). My mistake: they are not short-hold swing traders. They are interested in growth stocks you hang on to for months or years. They suggested you buy at least 10 stocks, possibly 20.

For any new trader, I wouldn’t buy more than five different stocks at a time. In fact, three is just fine unless you have lots of time and money to work with. The reason is that you’re trying to know these stocks inside and out. It’s hard to process the reams of data on just one company. Now think about doing that with several stocks (long or short-term).

Swing traders are looking for a pattern, but a lot of criteria is put into the mix. We can talk about trade volume, standard patterns (like “cup and handle”), and stock price — but that’s for another time. Basically, you have to decide which of these patterns make the most sense for the company at hand, plus the patterns of your previous wins.

Trading is like playing a game of chess with a giant countdown timer right in front of you the whole time. It can be very stressful as you process data and make your move in real-time.

The goal is to get into a trade at the right time (at the very start of its up-trending) and get out at the right time (at the very start of its down-trending). Your profit is the difference.

So if I came in at $100 and exited at $105, I would net $5. Now multiply that by the amount of shares you bought. Say it was 100 shares — you just walked with $500. (If I exited at $95, I would lose $500!) A kid could do this.

There is a broad continuum of where the trade lands and you get better at timing as you gain experience.

If you “short sell” a company, it’s basically the same strategy in theory. Short selling is like betting against a company: you predict their stock will decline and when they do, you recoup the difference. Short-selling and options were too technical and risky for me, so I usually steered clear of those kinds of trades. As I mentioned, I’m not a pro at trading by any means. If I wanted to make money all year round and in a bear market, I’d have to get good at short trading too.

Good Data, Not More Data

W hat I learned quickly is that it’s not the amount of data you collect on a company or trade. What matters is the quality of data. You can spend days or hours just on one trade, but it makes better sense to act on a solid trading strategy augmented by high-quality data.

I lost a lot of money because I was comparing dozens of patterns for one stock in one time period. It made my head explode. Eventually, I came to my senses and focused on just a few patterns and a few companies. I set up watch lists and alert systems. I even had my trading day all planned out.

In the end, I only traded 2–4 hours a day maximum. I did this just a few days a week. I think I did alright for myself considering I was working on so many other things in my life (micro-businesses, hobbies, travel, writing, etc). In total, I traded about 15 hours a week.

I was thinking about substitute teaching at a local college or high school, but the simple math stopped me. Subs make $155-$180 a day. I was making that and more before 11 am. Ultimately, when I got consistent at this subbing just seemed like a waste of time. Some days I made more in three days than a full-time teacher would make in a whole month!

Bad Trading Moments

I ’ll never forget late August 2020. I lost over ten thousand dollars in a single day and it was unnerving. The whole financial world felt the shockwaves of this day as a massive sell-off commenced. But in a few months, things bounced back. I recouped most of the money.

Another time I’ll never forget is when VRX (Valeant Pharmaceuticals) dropped 40% in one day. It’s been puttering along ever since. I was slow to liquidate the stock I bought at $250 and that’s now worth $13 today. I lost thousands and it was painful to see the drama all around this unfold. It was like watching a home burn down. They are going to rebuild it, but it will never be the same or as great as it was. (Note to self: set a Stop Loss trigger price.)

Just recently, I was watching a diabetes medical device. This one was made in my home town and it had lots of promise (DXCM, DexCom). I bought DXCM stock right before it got FDA approval. I felt great about the buy. Then a day later Abbott Laboratories releases a similar glucose-monitoring product and DXCM tanked. And that’s part of swing trading. You can’t know everything and you’re destined to lose trades.

Less Trading

A few years into swing trading, and I can say I learned a lot. I’ve made more than I’ve lost. I’m up about 16% ROI year to date. I’ve had way better years, but that’s decent.

You can look at my 16% ROI and think, wow that’s great. But it’s not that great really. There are dozens of non-swing trade systems that completely blew my results away. Many are incredibly passive (that is, low maintenance).

Also, my ROI percentage for one year doesn’t make as much sense as my average weekly income. It was a goal to average at least $300 a day trading 3 days of the week. If I was on target, that became a decent monthly income you could live on in most places. I look at it more like that.

More importantly, I now have an odd skill set that produces results, most the time. In fact, I recently bought two Apple laptops and paid cash from two short trades I made. I hate debt and credit cards, so it was empowering to do this.

Was It All Luck Or Skill?

D eep down I think that even though I spent hundreds of hours learning to swing trade, my success was partly due to two things beyond me:

  • The bull market cycle.
  • Beginner’s luck.

I got into trading during an economic cycle that has been one of the longest bull markets in history. (BTW, it’s likely to end soon.) Granted you can make money swing trading in any kind of market, the bull was on my side for sure.

As far as beginner’s luck, I had it. I placed small investments and kept adding to what worked. Some trades would only be $1,000 worth of shares. I was experimenting with scientifically-informed decisions.

Sometimes I got lucky when I double-downed on a stock, and I can’t always say it was because I knew what I was doing. I think a lot of confirmation bias comes with winning trades.

I’ve always been a fundamentalist at heart. I’ve idolized Warren Buffett and Charlie Munger in the past. I see their trading style as 70% Value Investing and 30% Growth Investing (though that ratio is highly debatable). These billionaire investors are in it for the long hall, decades even. There is something to be said about their phenomenal success.

Then there is the analysis from one of the most celebrated investment books of all time: A Random Walk Down Wall Street . In it, the economist Burton Malkiel talks about scientifically testing the efficacy of technical trading:

Put another way, if I never did any swing trading and invested all my money into a handful of diverse Vanguard or Dimensional funds, I would have gotten 8%-14% ROI from sitting on my butt!

No learning, no headaches, no problem.

Plus, you have to factor in all the mental anguish some trades has caused me. I had many sleepless nights. This wasn’t because of the massive eye strain staring at screens did to me (though I did wear special eyeglasses for this). Losing trades really took a toll on me. Sometimes I couldn’t be level-headed. I didn’t want to jump off a ledge, but there is a lot of anxiety that comes with swing and day trading. The financial crisis of 2008 caused 5,000 suicides. Many of those people were traders.

These days, I trade less to keep my sanity. Trading doesn’t improve the world much or add value to something great: it only adds to your bottom line.

Life is more than padding your wallet.

If your personal life is starting to look like a crazy candle-stick stock chart that swings from one end to the other, what kind of life have you created? It’s just not worth it in the end.

ABC: Always Be Capitalizing

I believe what Robert Kiyosaki believes. You should always be investing, whether you’re an employee or a business owner. However, you have to invest the way that makes sense to you. It doesn’t have to be the center of your world or cause you massive mood swings.

If you have the capital and you’re interested in picking your own stocks, you could start with only investing 5%–10% of your funds. With the rest, have it professionally managed by people with Ph.D’s in economics and advanced degrees in asset management.

Teams of people who do this for a living with decades of experience are smarter than just you at this game. Let them worry about the details. Have them set up an ideal portfolio for your situation. You’ll sleep fine at night.

So what should you do with your time instead of mastering swing trading?

Find what you really want to do with your life that adds value to the world, and get to work!

NOTES

General Advice: Again, this article is my unvarnished personal story about investing. Stock trading is risky* and it’s up to you to decide what to do with your money. Before investing, speak to an accredited advisor first. Choose a fiduciary that works for a flat fee, not a commission. If you still want to swing trade, it should be no more than 5%-10% of your total investment pool. As mentioned, I have a professional manage most of my investments now. Below are a few more tools and some listed on my site.

  • Books — The excellent and only book I read on Swing Trading.
  • Stock Screener — FinViz.com (Boring, but comprehensive and free.)
  • Stock Ideas, Alerts, And Patterns — SwingTradeBot.com
  • Broker Accounts — I recommend MerrillEdge or Schwab’s High-Yield Investor Checking account. BofA’s MerrillEdge will give you lots of free trades (no fees) if you open an account with over $50,000. Otherwise, there is a fee for trades. There are tons of BofA’s everywhere. You can start a Schwab account for as little as $1,000. It conveniently connects a trading/broker account to a checking and savings account. Plus, all ATM banking fees from any bank are reimbursed. However, there are few actual physical Schwab banks so you must be okay with primarily dealing with online access. My app recommendation below does not charge any fees.
  • Schwab Magazine — The quarterly print magazine Schwab mails to you is worth its weight in gold. I’d seriously pay for it, but it’s free. It won’t help you with short-term trading, but it has great articles for long-term investors of every stripe. Contact me directly if you want a referral to a great advisor I trust.
  • More Trading Resources — I created a special page with all the rest of the trading resources I used. I include a fantastic App you can use for swing trading and/or automated long-term trading: zero trading fees or commissions! And, you can buy fractional shares. Let’s say you want to buy a big-name stock (like Amazon), but it goes for thousands of dollars you don’t have. You can invest in just a fraction of that stock with the money you do have, however small or large that is. Even $1. [click here]

*STOCKS . . . ARE NOT FDIC INSURED, ARE NOT BANK GUARANTEED, MAY LOSE VALUE.

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