Trading is exciting! It’s an adrenaline rush at times when you see those big gains, and a huge buzz kill when you get those losing streaks, but nevertheless, exciting. Especially when you’re new.
I’ve been trading for just over two years now. I still wouldn’t call myself a “veteran” trader, but I definitely don’t qualify as a new trader anymore. I’ve been in the game long enough to know what it takes to be successful, but short enough to remember exactly how it felt placing my first trade, which was actually a condor on Boeing.
Before placing this trade, I had done the analysis, structured the trade, analyzed all possible outcomes, and went to submit my order in. My adrenaline rushed. I went back and double checked all my work, stared at the chart, and searched for any reason why it was a bad trade. Even looking back at this trade two years later, I still think it was a solid trade. I may have structured it slightly differently now based on the knowledge I’ve acquired over the last two years, but overall it was still solid. I clicked the button. My heart raced. My software jingled at me confirming my order was filled. I stared at this new position that represented my money going to work.
Now let’s fast forward to the end of this trade. Long story short, I lost… and to make matters worse, I lost both legs of this condor. I’m almost too embarrassed to admit that. But why? Simple answer is, well, that I got scared. I didn’t want for my first trade to be a loser so much, that I inevitably made it a loser. Boeing had a decent move up and threatened my bear calls so I pulled them off. Then it made an even bigger move back down, threatened my bull puts, and I pulled them off. The price had never broke major support or resistance but my fear of losing is what actually made me lose what should have been a winning trade.
It’s moments like those that you look back on and it makes you want to smack yourself upside the head for being so arrogant. Why would you place a trade if you didn’t have a management plan? Unfortunately, it took many more ignorant mistakes like this to learn what I’ve come to know now.
Trading has to be treated like a business.
Within any business, whether you own a fast food chain, fix cars, or sell clothes, you have to have a business structure. A design for how your business should run. It gives a clear outline that says who should do what, when, where, why, and how. Within a trading business structure you have a portfolio that should have specific amounts of money allocated to certain systems. Different systems could include directional swing trading, day trading, futures scalping, forex trading, and cashflow. Whether you use one system or 10, you should know how much money to allocate to each.
I particularly like directional trading on a day and swing style timeframe. I’ve probably spent more time analyzing different directional trade management techniques than I have with any other trading strategy. This made me realize directional trading was where I gravitated to and enjoyed. So I focused MONTHS of time and research backtesting and forward testing different methods of trade management.
During this time of testing, Tackle released the STEP system. I used the information that was in the STEP system to refine my trading plan to fit my personality. Now there is no more trading on a whim. I know exactly when I get into a position and when I get out. If I lose, I make a note of the setup and if I did anything wrong and if I would have done anything different.
Your business needs to have structure like this or it will fail or breakeven. You have to be able to confidently build a trade and execute it. If you can’t, then I would stick to paper trading until you’ve proven profitable or at least until you know that system inside and out. The markets are not going anywhere so don’t try to rush gains.
When you are new, you are taught many different styles of trading from directional to cashflow to volatility strategies. Focus on one at a time. Pick one and master it and move onto the next. Run that system until you can do it with your eyes closed so that you don’t get overwhelmed by trying to run multiple systems that you barely understand yet. And just because you have been taught a system and you know the rules and how to trade it, doesn’t mean you understand it yet. Only experience can help you understand it.
I’m going to refer you to a previous blog article I wrote about that topic at the end of this article.
Using something like the STEP system will give you the knowledge you need to create rules that fit you, but it is up to you to test those rules and trade them until you understand exactly what makes that system tick. I wish all of you out there the best of luck in your trading adventure. Keep on putting in the work and the markets WILL pay you for your efforts in the long run.
Keep at it team!
If you’d like to review some of the process on how I used the STEP System to backtest and develop my rules, see these blogs:
Justin started his trading journey during a 3-day workshop with Tim Justice in April of 2018. He has always been interested in the financial markets and the opportunity it potentially provides. He likes trading stocks and options. Outside the markets, he’s a husband, father of two boys, and full-time automotive technician.
Financial freedom is a journey
Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.
Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.
All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.