You should have a long-term goal of where you want to eventually get to, but you also need to have short-term goals that are specific, realistic, and measurable.
Editor's note: Minyanville founder and CEO Todd Harrison will be speaking at the T3Live Active Trader Super Conference coming up on October 6 and 7 in New York City at the Marriot Marquis hotel in Times Square. The theme of the Super Conference is T3's Five Keys to Trading Success. For more information and to purchase your tickets. There are limited quantities available so be sure to reserve your spot!
Most people jump into the stock market expecting instant, grandiose results that are not realistic. Sorry to burst your bubble, but trading success is a marathon, not a sprint! For a lot of people that is hard to hear. They don't want to train, they don't want to get out of their comfort zone, they don't want to change their lifestyle in order to achieve success. They want money to be handed to them on a silver platter.
We are here to tell you the truth: There are no shortcuts. Successful trading is hard work, and any other line of thinking is a one-way ticket to failure.
Trading is a journey, and you need to treat it as such. Back to the marathon analogy for a moment. When you are training for an endurance race, you don't immediately go out the first day and run 26.2 miles, or even 10 miles. The first thing you do is build a realistic step-by-step program to build up your endurance based on your starting point. If you try to run too far, or too fast, you could injure yourself or damage your psyche.
Trading is the exact same way.
Goal-setting is extremely important in life, and especially in trading. Yes, you should have a long-term goal of where you want to eventually get to, but you also need to have short-term goals that are specific, realistic, and measurable.
In this video, I lay out what I believe to be a the four milestones, or checkpoints, that every trader should pass through before trying to take the next step. In my opinion, if you try to bypass one of these milestones, you will end up costing yourself a considerable amount of money in the long-term.
During the Super Conference, we will have several speakers who are far along the trader path explain why it is important to take incremental steps, and how they were able to reach the level they are at today.
1. Trade 100 shares until you have become consistently profitable for a three-month period.
It might get frustrating to trade small size, but during that initial phase you are training your hands, eyes, and, most importantly, your mind. Learn how to punch the keys fast and efficiently, develop a routine for watching stocks, and build good habits. During this period, you should craft a specific style of trading and be able to define your "edge." If it takes you longer than three months to get past this phase, that is OK and normal. Again, in our opinion, if you try to bypass this stage and trade bigger size before you are ready, it will cost you money.
2. Increase share size and manage multiple positions at once.
In the first stage, you want to focus on micro-managing one position at a time, learning the ins and outs of how stocks move. Once you have mastered that skill, it's time to take a step up. Don't increase your share size by 10 times immediately, take incremental steps higher. Trade 200 then 300, and when you have achieved consistently at those levels, then make the jump to maybe 500, 600. Don't ever trade more size than you are comfortable with.
In the same vein, don't go from managing one position at a time to 10. Add more positions incrementally as you get more comfortable and you get more clarity on the market. Eventually, you hope to get to a level of someone like T3's Marc Sperling who often holds 20-30 positions at any given time, but keep in mind that he has been on his trading journey for more than 15 years and has developed his skills over a period of time.3. Add more indicators and another level of sophistication to your analysis.
In the first stage of the trader path, you should be able to define your edge, but that doesn't mean you have a complete tool belt! The core of your strategy should not change; you should simply add a few indicators to sharpen that edge. A few indicators that you may consider (which are taught in our Active Trader, Momentum Trader and Swing Trading Courses) include, but are not limited to: Fibonacci retracements and extensions, volume weighted average price (VWAP), tick readings, MACD, stochastics, trading oscillators, and relative strength index (RSI).
Adding a couple of advanced indicators to your trading arsenal can be a powerful step, but it is very important not to use too many indicators. The nature of technical analysis dictates that some indicators may often contradict each other. If you try to wait for trades where seven to eight indicators line up, then you may never place a single trade! Find a few go-to indicators in which you have supreme confidence, and incorporate them into your trading strategy.
4. Add a second strategy to your arsenal and learn hedging techniques.
The journey to the fourth stage of the trader path usually takes several years, and some may never even choose to take that last step. Many traders have a go-to strategy and simply ride it until it becomes obsolete. However, if you want to take your trading to the next level and become versatile, it would be wise to have a second strategy in your back pocket.
For example, a trader may have a predominantly long strategy focused on buying dips in relatively strong stocks, but if we enter a bear market cycle or the market starts to get toppy, that trader will have a tough time making money. Going back to Marc Sperling, for example -- he tells stories of traders in the tech boom that were buy-only. When the boom went bust, those traders were left out in the cold, many going bankrupt and exiting the business as they tried to buy every dip. Marc will admit that he was caught in the same mindset, but the reason he is still in the trading business is that he eventually made the adjustment to learn how to identify strategic shorts and hedging techniques.
Marc is an example of someone far along on the trader path, but he will never tell you he has arrived at a destination. He is always working to improve, constantly searching for new indicators and new strategy tweaks that can help take him to another level.
You will hear Marc Sperling talk about his journey in depth at the T3Live Super Conference Oct 6-7 at the Marriott Marquis in NYC.
The Super Conference is T3's signature live event, and will feature lessons from nearly every member of the T3Live team, including Scott Redler, Marc Sperling, and Steve Levay, among others. In addition, we will have several appearances from prominent traders outside of T3Live that will add even more value to your weekend experience!