It’s hard not to get excited when you hear success stories like Kyle Dennis, who went from fresh out of college and fresh into debt– later learning how to trade the stock market and becoming a multimillionaire.
Do you know what a crash diet is?
A crash diet is a way to lose weight by severely reducing calories, kind of like starving yourself. It may work initially but in the long run, it’s not sustainable. People who usually do crash diets end up putting the weight back on.
That said, some new to trading might jump in head first thinking they will have Kyle Dennis-like success on day one. However, Kyle wasn’t an overnight success. In fact, it took him years before he became a millionaire trader.
Of course, there are ways you can speed up the learning curve. Here are 7 things I wish I knew before I started trading.
1.) Be Patient
Trading involves generating ideas, knowing how to execute, manage emotions and risk. These skills are not developed overnight. While building these skills up you are also trying to figure out who you are as a trader. For example, you might be an event-driven trader, or someone who trades purely off the charts, maybe you’ll be a momentum trader or decide to fade the big move.
In order to figure these things out, you need screen time. Be ready to learn and remain patient.
2.) Learn From A Mentor
Legendary artist, Pablo Picasso, was once quoted as saying: good artists copy; great artists steal.
Sure, you can try to learn this game on your own. But be ready to pay your tuition to the school of hard knocks. Instead of wasting time and money, seek out someone who has experience and success trading the markets.
The internet has made it accessible for nearly anyone to find a stock market mentor. Getting back to Kyle Dennis, he’s not only a trader but a mentor; running a live trading chat room where he shows his trades in real-time.
The beauty is that you get to see what he is doing, find out why he is doing it and ask him questions along the way. He even shares his watchlist and alerts members on actionable ideas.
If you treat your trading the same as you would running a business, then consider working with a mentor as an investment.
Even elite athletes work with mentors and coaches to get better at their respective sports. Working with a mentor shows how serious you are at wanting to be successful.
3.) Develop A Trading Plan
Before you start throwing serious money around in the stock market make sure you know what you are doing. You should be able to clearly write down what your edge is, the style of trades you take and why you take them. Your trading plan should also outline how you approach risk management.
The markets are driven by machines and algo’s that are designed to eat your lunch. To compete you’ll need to be organized and have a solid business plan.
4.) Trading Is A Lot More Than Having A Winning Strategy
Three traders can trade the same stock with the same thesis and still come up with totally different outcomes. You see, trading is not all about having a winning strategy. Psychology and risk management all play key factors to your trading success.
I have friends who have money, but guess what?
They would never throw a dime into trading the markets because they are so risk averse and don’t have the right mindset.
When money is on the line– emotions can run deep. Successful traders embrace the fear and anxiety that comes with the occupation. However, they learn to deal with it and keep calm under those stressful moments.
5.) Study As Often As You Can
Regardless if you have a mentor or not, you’ll make mistakes as a trader. The best way for you not to repeat those mistakes is by studying your trade history and dissecting what you did right and wrong.
You should strongly consider journaling on a daily basis. Not only to keep statistics of your trading but also on your mental state.
Try to pick up on trends. Specifically, try to figure out what your strengths are and then start focusing on developing that aspect of your trading.
For example, in your mind, you might think you are a good earnings trader. However, if you keep detailed notes and statistics about your trades you may find out that your numbers are showing that you are a poor earnings trader.
Instead of focusing on earnings trades you put your attention on the type of trades that have yielded you the best results.
Let’s face it, we have to consume a lot of information day in and day out, if you are an active trader, then it’s going to be hard to remember all the trades you take throughout the course of a year.
6.) Have A Proven Strategy Before Putting Real Money At Risk
As a new trader, you’ll be doing a lot of experimenting. After all, you are trying to figure out what your identity will be and what style of trades you’ll be taking. However, that doesn’t mean you should be throwing around serious money during this learning phase.
A savvy marketer will split test an ad with a small sample size before deciding which to send out to the public. Trade small and test out ideas. Once you feel like you have a defined edge then start thinking about adding more risk capital to those trades.
7.) Be Flexible
Markets are dynamic. What works today may or may not work a year from now. You must be flexible and be willing to change if the tides start shifting.
Lastly, If you’re new to trading or know someone who is, pass this along to them if you found it helpful.
Kyle Dennis runs Kyle Dennis’ Biotech Breakouts (biotechbreakouts.com). He is an event-based trader, who prefers low-priced and small-cap biotech stocks.