Trading… what an undeniably interesting beast. With several years in both scholastic and field training under my belt its easy now for me to say how important it is to have a focused trading strategy. Moreover, a focused strategy that works! In all honesty, when I was a novice trader I had no concrete idea what having a strategy meant. Like most new traders my “strategy” was listening to talking heads and taking tips, both worked out miserably. There was a time as a new trader that I literally had to look up the word for a firm definition to help me better understand what a strategy was.
I was totally lost on what a trading strategy looked like. Fortunately, I had a friend who, at the time was a trading coach and mentor in Vancouver, BC. He gave me the green light to check in with him when I had questions about trading. This man had patience, I had hundred-and-one questions about trading and his number on speed dial! Needless to say there were a lot of calls. In one of our more notable conversations about trading strategies he simply said: “Find 1 or 2 set-up’s that are simple and that work, manage your risk, and don’t forget to take profits. Focus on ONLY looking for those set-up’s. Then repeat!!” His commentary was simple yet ground shaking. Yes, these were things that I already knew, but hearing his feedback reinforced what I had already known and shortly after, my strategy started to come into focus.
In my pursuit to create a coherent strategy there were a few “must haves” that I needed to adhere to to become a trader the trader I wanted to be. As my friend strongly suggested: “Become an expert in an certain area. Specialize.” So, I did just that. I began my process in understanding who I was a person and who I wanted to be as a trader. This might sound trivial but I truly believe that if you know your personal attributes you can then apply that to your trading. What I mean is, for example, I know that I am terribly impatient and I want profits yesterday. I have ZERO interest in sitting in a position for a few weeks or months for 10-15%. Knowing that about myself assisted in shaping who I was as a trader. That simple understanding confirmed that Day Trading volatile stocks would be a good fit for me. That understanding laid the first building block in my trading. That building block was the cornerstone to building a focused strategy.
Now that I was armed with the understanding that I was going to focus on day trading I needed to figure what to day trade. All I knew at this point was that I needed to find stocks that displayed a high level of volatility. The hunt was on. Although I have yet to mention it I am a full-blown technician. Clearly as a day trader I would be using technical analysis to study chart set-ups. With that I began my search for highly volatile stocks that have not broken out yet. My primary goal was to get in front of highly explosive moves. Again, knowing that I love taking profits ASAP and that I’m not a fan holding positions over night and that I was looking for a very specific set-up I started to compile data points about my trading process all which lent themselves to me developing a proper trading strategy.
As you read this Blog about the importance of having a Trading Strategy its important to remember that as you’re reading the condensed version of my personal journey that took years, I caution you. Please note that I will never express to you that this is easy, simple or quick. I have the utmost respect for Mother Market and I know that if you come into this cash in hand with no defined strategy you’re going home broke! Don’t come down to the street with your hand out thinking the game is an ATM. You wouldn’t hunt lions and tigers using sticks and stones, would you? So why would you attempt to trade the market without a solid strategy?!