Many things in the trading world are opposite to how the real world operates. We tend to think that more is more, but if you are an aspiring trader trying to familiarize yourself with this new backwards world, you might notice that many of the lessons we’ve been taught throughout life just don’t translate to the markets.
One big pitfall for newer traders is not being able to focus on one trade setup at a time. I’ve never met a professional and consistent trader who hasn’t totally focused their efforts on specific setups within the markets that they know give them an advantage. They’ve found their edge, and that is what they amplify. Keep this in mind, all you new traders: consistency comes when you focus on your own setups and let the rest fall to the wayside.
When I started trading, even for the first couple of years, I never really focused on one particular setup. I was keeping decent records of these trades, but at times I was a bit “let’s try this and see if it works.” And for new traders, testing and trying things out is absolutely necessary. You have to try a bit of everything to know what you’re good at.
The goal during this period of learning is to experiment and test, but most importantly, walk away with more information and direction. With thorough data collected from these experiments, we can reveal what we are strong at and what we are weaker at. At this point, we know what market conditions, stock characteristics, time of day, technical indicators, etc., we value and what to focus on. This could take a while, but it’s most certainly worth it.
Go back through your trades and review them often. What were some of your biggest winners? What were some of your biggest losers? Notice the characteristics of both the winners and losers. Mentally, how did you feel? Try to find what is comfortable and move away from what makes you uncomfortable. This is how we find our style of trading.
Now, narrow it down. Try to find just one setup that you identify with, one in which you feel somewhat in control. Through the data, we want to find what we are really good at and simply expand upon that. When you get to this place, now you just need to master it. Know the nooks and crannies of the trade setup like the back of your hand. You need to become a pro at your specific setup and know everything about it. Write and journal on it like crazy and make video diaries on the setup as much as you can.
Hone your craft with thoroughness and focused detail. Try not to vary; as tempting as it is, do not add another setup until this one is truly mastered. You know you’ve mastered it when it becomes consistent over a decent span of time. Once it’s nailed down, then you can move on to another new setup. Think of yourself as a scientist, tinkering and experimenting. Meticulously keep records and make detailed notes on what you are doing and what you’ve experienced. If you can focus and come out the other end with your own trade setup, then you are probably ahead of most traders. As a new trader, this is your first big goal: find what you are good at and then expand upon it.
