But if you’re an amateur who’s already experienced some training or mentoring, then by all means, please read on. I’ll start with the most rueful, head-shaking confession that’s made by professional day traders. They confide that as beginners, when they’d finished a class, they immediately traded for primary income. After spending all their savings on that pricey seminar, they were gung-ho to immediately make those bucks back.
Does that sound like you? Is that what you’re doing? If so, then I repeat: don’t stop reading!
The truth is, your biggest investment in know-how is not the training programs. It’s the losses you’re going to incur while developing into a pro. I highlighted the scary truth in “Why Some Traders Make More Mistakes.”
My goal in this chapter is not just to warn you, but to thoroughly and safely equip you. Here I show how you can minimize your post-graduate training fees -- that is, your live-trading losses.
BUILDING A FOUNDATION OF TRADING SKILLS
For starters, you need to internalize this crucial, unshakable truth: as a greenhorn, you should be trading for skill. You should be focused on skill building, not money making. Trading for income comes later. You should remember that patience is paramount. You should never try to rush the process of becoming a professional day trader. If you thoughtfully read "Truth about yourself first", you may have realized that you’re definitely not highly skilled. Face it, you have a lot of learning to do, so you need to hang back like a student and sit there and take lots of notes.
Back when I was an amateur, I wish someone had grabbed me by the scruff of my neck and forced me to understand that. Back in the day, as a greenhorn, I would return from a training program, or finish a strategy manual, feeling pumped like a boxer on steroids. I was itching to throw down with the big boys. Didn’t I possess the proprietary information that Wall Street traders commandeer? I was certain that I had just mastered the golden goose of day-trading expertise. I felt ready to make big moves, big trades.
The truth is I did have some great information. I’d been shown how to trade like a pro. The one thing I lacked, however, was applied experience. I also lacked an awareness of the deadliness of that shortcoming.
It was like I’d been watching a video on how to build beautiful houses. After the lights came back on, and I actually went to a work site and actually swung a hammer, I found that this wasn’t as easy as I’d thought. I was miserably learning what the video couldn’t teach me: that I needed not only to read blueprints and hammer, but I also had to deal with the relentless pressure of deadlines, and the deep-body stress caused by hot or cold weather.
The day trader’s hammer is his finger tips. His nails are the keys on his keyboard. Like the builder, he needs to tread carefully, especially as a beginner. Though he won’t smash his thumb or take a fall off a roof, or freeze or pass out from hot sun, he might hurt himself even worse . . . by the wallet.
It’s not all bad news. On the contrary, I have some good news. I’ve worked out a system that allows you to safely train with real money, with minimal market exposure. Before I worked out my system, I was floundering in day trader hell. My problem was that I thought I was a pro. Just because I made several trades a day with tens of thousands of dollars, I thought I had it all figured out.
After my many losses, which were also painfully hard lessons, I found myself doing more homework and research. By necessity, I was becoming more patient. But I still hadn’t yet realized my biggest misstep: I was trading to earn, not to learn.
You should only trade to earn if your profits are consistent.
You know by now mine were not.
One day I glumly just slumped there. My monitors glowered before me like unreachable, imperious gods. I’d been day trading for over 8 years. I’d been having a very hard time. I felt like a pitiful loser, and it was the closest I’d ever come to throwing in the towel. But on that day I somehow managed to perk myself up, and continue. I figured I’d just have to change things. I’d have to redo my approach.
That was my moment of conception. Up to that point I’d had some really good trades, along with the really bad ones. Over time, I’d broken even. The reasons I’d survived those five years were my start with a healthy capital base, and my absolute will to improve.
(Warning: Please note that term above, healthy capital base. If you don’t have one, or if you plan on investing more than half of your life savings, then by all means start highlighting in yellow.)
On that day I realized I should go back to the basics, back to square one, like in training. I should no longer stress myself to make money. I should focus on a method that creates consistency, and for now, just forget about earning.
Now maybe you’re thinking: That’s crazy. It’s absurdly counterproductive to not be focused on gains. Well, profit is the end goal, of course, but crawling precedes walking and walking precedes running, that’s a universal rule. So let’s get even crazier. Let’s make a crazy sign.
I admit there’s a downside to my system I will be explaining in a moment. It’s the dismally miniscule profits. You won’t make enough to call it income. It’s true that you’ll be trading with bucks, not with paper, but I’m talking about very few bucks. You’ll need to be willing to gain satisfaction from the frequency of profitable trades -- not from the dollar amounts.
But here’s the point: Even if you only make two dollars on a trade (after commissions), what’s important is that you’ll be learning how to profit consistently. You must achieve that consistency. Then, and only then, should you budget for bigger trades. My system is a careful progression. You start off paper trading. Then you graduate to real money—just a little bit of money at a time.
My system "Harmonic Consistency"
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