A gentleman by the name of Jeff asked “What does The Essentials of Trading entail?” in a comment onÂ a post about gold I wrote the other day on my Rhody Trader blog.Â Since this is the trading education blog and that one just my thoughts on the markets, my trading, and other stuff, it made sense that I should answer the question here rather than there. So here goes.
The History of The Essentials of Trading
I wrote The Essentials of Trading aÂ few years ago when I wasÂ partnering with a professor friend of mine on a university summer trading course. We were going into our second year teaching it and I was looking around to see if there was a good general introductory trading book. Try as I might, I couldn’t find one. All the basic books were either marketÂ or style specific (swing trading stocks, day trading, forex, etc.), or assumed a familiarity with trading that not everyone has.
I was working with college students who had a basic understanding of what the markets were about, but had pretty much zero exposure to actual trading. Believe it or not, college finance programs don’t really provide students with much that is useful for individual trading. I know. Shocker!
Since I couldn’t find the introductory book I was after, I decided to write one (The Essentials of Trading wasn’t the original title – but I can’t remember anymore what it was). It became a book about trading that didn’t focus on any one market, but rather discussed them all along the way. That’s what I needed for the college students since I couldn’t say ahead of time whether they were going to be stock traders or forex traders or futures traders, or anything else.
I thought things out in terms of a semester long type of structure and included a lot of exercises and practical application elements along the way. Some of it could even be turned into homework and/or exam type things for classroom application. It was really helpful being able to apply the stuff in the classroom as I was developing it. In particular, I found that I should rearrange the way I presented a couple of key things, causing me to shuffle them around in the book.
Taking the New Trader from Nothing to Something
The intention of the book was to take the reader from ground zero – little to no knowledge of the markets and trading – up to the point where they had a sufficient foundation to be able to take on the markets in a reasonable fashion. That meant starting with the very basics of prices andÂ transactions and position monitoring and all the stuff that anyone in the market for a few years takes for granted. Then it was on to explaining how and whyÂ prices move and the types of market analysis employed. In the middle third it really gets seriously into trading plan development, with the rest of the book essentially going into the various specific elements of one’s plan – risk management, trading system, etc.
I never intendedÂ The Essentials of Trading as a “this is how to make money in the markets” type of book, because any given book of that sort is completely useless for most of its readers. I don’t say that to imply poor book quality. What I’m saying is that those types of books attract people looking for answers to questions they aren’t even able to ask yet.
Instead I focused on helping people understand how they individually should approach trading. Once someone has that kind of foundation they are much better positioned to take the step of reading the book on swing trading stocks or day trading forex or whatever best suits them – rather than running around willy-nilly as most new traders do.
I kind of think of it like a PhD program. In order to get a doctorate the candidate must demonstrate a foundational competency in the subject matter. Then they have to do their doctoral thesis. The Essentials of Trading was meant to be that foundational competency which then allowed the reader to pursue her or his trading thesis.
From Trading Course to Trading Book to Trading Course
The book was published in April of 2006 by Wiley. Later in that year I actually kind of turned the process around. I took the book material and taught it in course format again, though online rather than in the classroom. Doing that allowed me to see what it was like in application once more. Along the way I added some supporting materials and some audio discussions with other traders to support a general desktop video presentation.
That collection of materialsÂ became The Essentials of Trading Home Study Course. It’s about 9 hours of video lecture materialÂ covering everything the book does (and more)Â and 4 hours of seperate audio discussion withÂ other traders, plus some additional video and e-book materials.
I hope that answersÂ theÂ question.