Wednesday, January 19, 2005

Swing Trading Education

Being a full-time swing trader is not a typical job. I trade from my home and have a commute of less than 10 seconds. I have no boss looking over my shoulder, and the actual stock market hours are less demanding than a host of other jobs. This means I also don’t have someone coaching me or teaching me the ways of the market and how to pull money out of it. Here in the central time zone, the market closes at 3pm, which leaves plenty of time to pursue other interests. But with lofty goals and a strong desire to succeed in the market, I have spent a great deal of time educating myself once the trading day is over. Books, magazines, web articles, and especially poring over my own trading results keep me learning.

I have read many books and magazines about the stock market and about trading. Because I am self-employed and therefore self-motivated, I find it necessary to always be searching for helpful information to continually improve my approach. I want something that I can connect with, something that grabs my attention in a way that may sharpen my skills, develop my method, or make me aware of new trading industry developments.

Among the books I have read, I found the most helpful to be the Market Wizards series by Jack Schwager. These books profile highly successful traders in an interview format. Learning from great traders and the market conditions that fit their approaches is a good way to improve your own results. These interview-based books help you get into the mind of a great trader, which is always a learning experience.

Another learning process is to analyze your own trading approach and the results it generates. If your method of trading is producing consistent profits, then there may be no need to tweak it. But even during times of good trading, there are ways to improve your returns. If your method is giving you mixed results, then you might want to take a closer look.

When I first started trading, I wrote down every single trade, even if it was just a scalp. My entry time and price, my exit time and price, number of shares, and gain or loss on the trade were all recorded on a simple grid sheet. Writing my trades gave me a good record of not only my trades, but the context in which the trades were placed. If losing days were a result of overtrading or pressing when I was down, the evidence was right before me.

At the end of the month, I would sit down and review the sheets and see what I could learn. Calculating my win/loss percentage, the size of my average winners and losers, and of course my profit or loss gave me good numbers to evaluate. If my win/loss ratio was unsatisfactory, then I was probably taking the wrong kinds of trades. If my average winner was not significantly larger than my average loser, then my discipline (cutting losers quickly) needed adjustment. Staying on top of these numbers can really shed light on areas that need improvement, and I would certainly consider this process to be an important part of the self-education process. I still do this in times of struggle.

Finally, stay in touch with other traders. It can be very helpful to stay aware of what trading styles are working or not working. Some of my best trading stretches were a result of knowing certain approaches were just not working. Other traders are a great resource for sharing ideas, and the cheapest way to learn is from another’s mistakes.

Trading is my job, and I realize that over time, I will likely get out of it what I put into it. I am very willing to apply myself in order to continue learning about my tendencies and the market, and I know as time goes on it will continue to pay me dividends. I have never regretted investing time in learning how to improve. Writing a
swing trading newsletter also helps to keep me on my toes.

If you want to achieve more in your trading, commit to educating yourself with current industry events, the continual evaluation of your method, and the experience of others. I think you will discover more ways to profit!

The Stock Bandit


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