Here’s an email from a member of my mailing list which brings up a lot of the issues new traders run into as they try to sort it all out.
The thing I’ve found the hardest over the years is to find traders out there who have been and still are successful, the ones to follow. I’ve read through alot of your website and have enjoyed it very much. Knowledge builds confidence as we both know, but its obtaining the right knowledge to succeed which can take time unless you can afford a training course but even then which is the right one.
I’ve even looked at doing a Diploma which guaranteed success, too expensive, although is it when you consider that trading is a profession which so so many don’t realise. Like any other profession there’s tools of the trade which need to be learn’t. I’m sure you’d know exactly what I mean. You’re there. Its finding the tools that make you a good trader that I’ve found hard to do.
Something I’ve combined in my trading which seems to be working well for me is the Elliott Waves, Bollinger Bands, the 50MA, Momentum, ADX, Stoch, RSI and Fibonacci. I’d definitely appreciate any thoughts you’d like to pass on regarding the combination.
Let me take the last part of Steve’s email first.
Too Many Tools, Not Enough Focus
In terms of the combination of methods and indicators Steve has listed as his tools, my first impression is that it’s way too much. Some things overlap considerably. For example, Stochastics and RSI are both the same type of overbought/oversold indicator. Using both together is reduntant. Depending on how they are applied, some of the others could be overlapping as well. What I often find when I see someone using a lot of different indicators and such is that the trader is looking for confirmation – for comfort really. Unfortunately, that won’t ever come from looking at more indicators. It comes from experience and understanding your tools intimately.
On top of that, this collection of technical tools tends to suggest to me a lack of clarity about what kind of trading is the primary focus. Is Steve aiming to be mainly a trend following type of trader or aÂ range type of trader. Most of us are going to optimally operate in only one of those categories, not both.
My advice to SteveÂ at this point would be to step back and figure out which style of trading is most comfortable to him. Then, with that knowledge in hand, he can pick the tool or handful of tools which work toward that end. Once those are selected, it becomes a question of applying those methods and techniques over and over and over until they are understood inside out and backwards and forwards. I know this isn’t something many new traders want to hear because they’re after the quick fix, but it’s the reality of long-term trading success.
“Trading is a profession”
Now, getting back to some of the earlier comments in Steve’s note, he called trading a profession. I’m not going to quite agree with that only because the term “profession” to me implies earning your living from it. I make my living as a foreign exchange market analyst. That is my profession. Trading is not my profession. I’m not employed to do it, nor do I make my living doing so. It’s more of an avocation, I suppose – something beyond being a hobby.
That said, being professional in your trading is a whole other thing. That’s about how you approach trading. It’s about treating your trading like it were your profession, having the mindset of a professional rather than that of a hobbyist. This is something absolutely critical to long-term success in the markets.