Aaron here, introducing guest author; Tim Walker.
Thinking back a few years – I met Tim well before CWT ever existed. He may not be aware of this, but through his teachings and our conversations, he played a great role in showing me what was possible from trading.
Besides a brilliant commodity trader, Tim is wise, encouraging, and knows how to clearly communicate with traders. Throughout this article Tim carefully lists seven suggestions that will help you reach new levels, and what it really means to be a ‘trader’.
Once you get done reading this article, I encourage you to listen to my interview with Tim on EP 006 – it’s well worth your time!
Now, over to Tim…
In trading, as in every profession, a few men and women make it to the top. They have unusual skills and they make extraordinary profits from their endeavours. Some of them are like shooting stars and their fire burns out, while others make a lot of money and keep it. If we want to join their ranks we need to have some sort of an idea how to follow in their footsteps. So how do we do this?
The first step is to realise that trading is indeed a profession. If you wish to become an architect, doctor, lawyer or accountant, you study for several years, usually at a university. Then you gain experience working for someone else who is successful, and in this way learn the ropes. Trading, however, offers no university course. There is certainly no shortage of books and courses, but few of those teach a complete system of how to analyse and trade the markets. And there is no one else to ‘work for’ in order to learn the ins and outs of the business.
Have you ever wondered why it is so easy to open an account and start trading? Everyone who is drawn to the stock market is lured by the idea of ‘easy money’, but if that were really true, the entry requirements would be so steep that only a very few select individuals would be permitted to trade. It takes dedication and persistence to become a successful trader, and it also takes time to learn.
Be patient enough to wait for an opportunity, but then be decisive enough to strike at the right moment.
To start with, learning to trade requires you to develop not one skill, but two. Firstly, you have to be able to analyse the market. Whether you like to study company fundamentals or look at a price chart, you need to be able to sift through the available information and arrive at a view of what is going to happen next. This is the skill that all the courses and books teach.
But there is a second skill, which is perhaps even more important, but much harder to teach. You need to become a trader. What is a trader? A trader is someone who buys and sells for a profit. It doesn’t have to be stocks and commodities; it could be antiques, second-hand cars, real estate, racehorses or just about anything which can change in value over time. A trader possesses a sense of timing, of being able to know or often intuit the correct time to buy and sell. He or she also needs to be patient enough to wait for an opportunity but then to be decisive enough to strike at the right moment.
A person who is a good trader but has no analytical knowledge can probably make a bit of money in the market, or at least not lose any. But a good analyst who has no ability as a trader will almost never make any money. This is why so many people who buy course after course to build up their knowledge still can’t generate a profit. Knowledge alone does not bring profits; knowledge applied brings profits. The two skills – analysis and trading – are very different, and it wouldn’t surprise me at all if a neurologist said that they use different parts of the brain. Indeed, from reading a book called mBraining: Using your Multiple Brains to do Cool Stuff by Grant Soosalu and Marvin Oka, I gather that the two skills use different brains – one in the head and the other in the gut!
So to help those who are either just starting out or looking for ways to move their trading to another level, may I offer a few suggestions to point you along the path:
1. The most important person in your trading is you.
There are few areas of human endeavour where you are so open to the ups and downs of your own personality. So study yourself and see where your strengths and weaknesses are. Then focus firstly on your strengths and seek ways to use them.
2. Look for what works.
We have all spent so many years in school and university – and life! – being told by others what the answer is that we frequently forget to see whether the answer works or not. So if your stop keeps getting hit, study your trades and find out why. Are you placing your stop too close? Or moving it too soon? Keep fine tuning until you get an answer that works, remembering all the time that what works for you and what works for me might be very different.
3. You’ve probably heard the saying ‘there is no Holy Grail in trading’.
But another way to put it might be ‘there are many Holy Grails in trading’. In other words, there are heaps of ways to make money in the markets. It is not so much the method that is important as how it is implemented. When you find a system that you like, stick with it and adapt it where necessary to fit your personality.
4. Think outside the box.
If you are a great analyst but a lousy trader, find a friend or spouse to place your orders for you. This suggestion came from a great book called Trading Beyond the Matrix by Van Tharp. Review your trades regularly to see what you can learn from them. Almost every trade can teach you something. Sometimes you will find that you are doing better than you thought; at other times you will be horrified by the mistakes you see yourself making. Learn from both.
5. Avoid pressure where possible.
I have read of studies that show that performance decreases when a monetary incentive is attached to the successful outcome of a task. Since the primary thing you are looking for in a trade is to generate a profit, you already have a handicap before you start. If you put yourself in a situation where you need to make profitable trades to pay the bills you are at a severe disadvantage. Most people are used to a regular pay-packet from their job, but the market doesn’t operate that way. You might make a year’s income in one month, but the challenge for the next 3 months will be not to take a trade at all, because the market isn’t moving anywhere and will only take your profits back. A better way to use trading is for wealth generation, for most people.
6. Allow time to achieve the success that you desire.
In my experience working with traders, the average person takes between 5 and 10 years to become consistently successful. Traders cannot be generated from a sausage machine. Every person is different, and you have to find your own little niche in the trading world, which takes time. Don’t be hard on yourself if success doesn’t come easily or quickly; everything in life that is worth having is worth fighting for.
7. And finally, never give up!
If one person can achieve success, then so can you. I have seen people from all walks of life and very different backgrounds become successful traders. That means that you can too.
– Tim Walker