Approach Your Trading Education the Smarter Way
Now that you are well aware of the shortcomings of traditional trading education, it is time to think about what you can do instead to learn trading more effectively. We are looking for methods that anyone can learn and that deliver results to the majority of people who use this different approach. It may sound too good to be true, but it is not. The real issue with traditional trading education is that it lacks an exact set of rules that is proven to be consistently profitable. There is a much better way if you are willing to ditch your old beliefs altogether.
Asking the Right Question
We are modern humans. We are not living in the dark ages, so we should use the scientific method whenever possible to get things done. As opposed to blindly trying to copy a guru’s supposedly profitable trading method, we should ask ourselves a very important question: what is making money consistently in the markets nowadays?
You read that right. It is not who, but what is doing well. It’s the automated trading robots that are really killing it in the markets today. Thus, aspiring traders are trying to mimic the wrong thing entirely.
Since they want to achieve trading success, why not learn directly from the most consistently profitable trading strategies?
It makes perfect sense. To be able to do something correctly and efficiently, especially for a task like trading, it is much easier to learn from a working example. It is similar to learning any hard science: you learn from duplicating the process of an experiment to prove that the theories in the textbooks really match reality.
In comparison, all these so-called trading methodologies out there are not working examples. They are imagined constructs created by others who assume they actually know what it takes to make trading work.
In short, it is best to start learning from one robust “atomic trading strategy” that has no human decisions involved. It has to be something that has been fully backtested over a very long period of historical data. If it has been traded live for a long time, it is even better. By studying such a trading model, one can master the implications of the model in terms of market structure and price behaviours that the model manages to capture.
What Is an Atomic Trading Strategy?
An atomic trading strategy is a simple trading strategy that has one very specific entry condition: the decision to only trade in one direction.
Those people who have been brainwashed by the gurus on discretionary trading would think that they are smarter than an atomic trading strategy and can do better by making discretionary choices while trading live. Well, I will say almost all traders learning to trade cannot do better than a working atomic trading strategy. What these people fail to realize is that such a working atomic trading strategy is in fact the distilled wisdom on certain market biases. If such strategy has been working consistently, learning from the strategy will make you a better trader.
The key is to understand the atomic trading strategy as deeply as possible. I am not talking about knowing and following the rules here. If that is what you are thinking, you should seriously slap yourself.
You need to find out the reasons why a successful atomic trading strategy works. You need to study all the historical occurrences of the trades taken by the strategy so that you actually experience what happens when you take those trades. You also want to play with the strategy by making modifications to the rules and money management criteria to see the impact of the changes to the performance of the strategy.
I bet that you will learn a thousand times more about the specific market bias exploited by that one atomic trading strategy than staring at the screens for thousands of hours watching the price movements (guessing if you have finally nailed the trading rules given by any trading guru).
More importantly, you gain all the necessary knowledge without losing a dime to the market. You avoid making all those stupid mistakes that others are making when they think that they need to change their stops or modify the rules to fit the market environment. In reality, they are just reacting to the changes in the market due to their own emotional swings triggered by the market.
In other words, you can learn to become a good discretionary trader by understanding a set of fully mechanical trading strategies that are consistently profitable over time.
Mastery Comes from Accumulation of Knowledge
Knowing in-depth one consistently profitable trading strategy will build the proper foundation for your trading career. Learning from many profitable atomic trading strategies will make you a great trader.
I have to repeat this here again, because I know many of you will jump back to your old self and all the half-baked shit that you learned from books and videos often called “trading strategies.” No. Those are not “consistently profitable trading strategies.” Those are tickets to send you to poor house.
If I have to use an analogy, those half-baked methodologies or trading strategies are the same as refined sugar in your diet. That stuff will kill you, but they sure make you feel good because you feel like you understand these methods. They make you feel like you can do it, too. They make you feel like you are in control. But I can tell you that’s the worst thing these methods are offering, because we are never in control as far as trading is concerned.
To learn to trade the smart way is not easy. You need to commit yourself to learning something completely foreign to you, namely the programming of trading strategies. It can make you feel “small” because you probably hated computer programming when you were in school. However, one must learn more in order to accomplish more. In this case, you know almost nothing in trading, so isn’t it obvious that you need to accumulate some solid knowledge first in order to make it?
If you are not approaching trading the smarter way and decide to stick with the traditional way, I understand why. But you are also warned that you are doing yourself a serious disservice, because you now know clearly what you are doing to yourself – walking down a path of self destruction.
For those of you who get it, your chance of making trading your career now looks much better.
Part of the A Smarter Way to Learn Day Trading E-Mini S&P 500 series