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What does a novice trader need to know about trading?

Updated: Jun 7, 2020

Being a full-time trader has been the most challenging experience of my life as of today. It is one of those experiences that maintain a constant rate of difficulty, especially on the mental aspect. Below I will list three main things I believe that every novice trader must accept before embarking on this exciting and difficult journey :)

1. Do you have the necessary character qualities that can smooth your learning curve?

I can easily say that trading is not for:

  • the mentally weak & highly emotional people;

  • those that constantly whine and complain;

  • those that are after quick results and most importantly,

  • those that always like to put blame to other events rather than taking the time reviewing their own actions.

I am not saying that the above people will never become a CPT (Consistently Profitable Trader), however, their experience will most likely be tougher and more painful than the others. Markets will humble you down; you are going to learn the importance of awareness & mindfulness, preparation & execution based on that plan, and also the importance of preparing for the worst, or at least, accepting that losses are simply costs of doing business (but we will revisit this at a later post).

2. Can you sustain yourself financially while learning how to trade?

While I personally do not like making assumptions because they lead to unnecessary suffering, I will have to take a guess on your profile as a reader. You are probably someone that falls inside the following categories:

  • College student about to graduate;

  • Employed individual working 9-5 in another industry;

  • Entrepreneur or self-employed looking for other opportunities;

  • A retiree trying to kill time or feel excited again.

One question you should all have an immediate answer to is: Do you have enough money set aside to sustain yourself and your loved ones for at least 12 months? I am talking about an Emergency-Emergency fund.

Usually, traders that have a mentor follow an intensive learning program that lasts between 3 to 6 months and then they are ready to dive in with real capital. Others that are all alone, have a prolonged learning curve that varies from 12-18 months depending on the time and effort each puts into the game.

Steep vs. Gradual Learning Curve:

To wrap up the second point, trading is already emotionally draining and as such, we need all the mental ammo we can gather in order to do our best. If financial instability will add more worry to the game then we are more likely to make mistakes, fuel fear, feed greed and disregard risk management and preparation. It is important for you to also have a plan B if trading won't work out. I have seen from experience that knowing I will not be on the street, begging for money if I blow up one account, gives me more confidence to follow my strategy and trust the process.

Understand the process of learning --> Accept it --> Put in the work.

3. Are you going to be a lone-wolf or part of a pack when it comes to learning?

You are, by now, still an wolf pup trying to play the game of the big guys. The question is whether you are an wolf pup part of a pack or a loner. A few paragraphs above, I showed you the learning curve difference between 2 categories of novices (let's call Type #1: traders who will learn by themselves & Type #2: traders that will have a mentor). You need to accept since the very beginning which category you will embrace considering your own means.

If you cannot afford the assistance of a mentor, who is someone that has been on the game for a long time then you need to do your own DD (due diligence) (Type #1 trader). You must research every day on the internet, find free courses, watch videos, keep notes, trade on a demo account. There is an overwhelming amount of information out there and you need to filter out based on the market you will trade. This is what I did at my very beginnings. I was a junior undergraduate that couldn't pay extra fees on mentorship or courses online. I did it all by myself. I used to spend 10-12 hours each day in front of the charts, trying to understand the psychology of the market and trying to identify frequent patterns. It took me 18 months of research, trial & error, accounts blown, personal setbacks to see consistency each month. It finally came and it was so effortless and easy to see profits into my account. The struggle is still real but I have a few tricks on how not to worry and feel stressed while trading ;) The bottom line here is: accept the gradual learning curve when alone, it will be a bumpy road.

On the other hand, we have novice traders that can afford to pay for a course or mentorship program (Type #2). I see how quick and fast they learn and shorten the learning course by 70% only because they have a structured way of learning and they do not have to spend countless hours researching on the internet about material. Another important point here is that you will see front-hand the trading strategy of an experienced trader and tweak it according to your own needs. Such benefit is hardly possible to the ones exploring multiple free strategies online that are usually considered as void & lacking consistency.

That does not mean that Type #2 traders are going to be profitably instantly in 3 months' time. No. The challenge is the same for both types - they are both going to battle with their own selves and their own character flaws. Type #2 traders are simply shortening the amount of time it takes to learn the theory and also they already have a plan. Type #1 traders, during their long journey will learn everything the hard way. As a Type #1 trader myself, I am happy to say that I am mentally stronger than all of my students and a few other experienced traders I know. I have been through a lot and I don't ever want to experience that pain again. I simply respect the past and I have learnt from it.

To summarize, in this blog post, I discussed three important things every beginner needs to know regarding trading, of course, based on my personal experience. Key points to take home are:

  • Know your character strengths and flows;

  • Have financial security for at least 12 months & also a plan B in case trading doesn't work;

  • Decide how you will learn the game (Type #1 vs. Type #2);

  • Everything else not mentioned here represents the other side of trading (exciting, endless opportunities, freedom).

Until the next time, put in the work, be curious and be mindful!

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