Here’s a question that is often debated in trading circles, and I’m sure in other subject areas as well. It was most recently asked of me by a member of my mailing list named Peter.
Do you think it is actually possible to learn how to trade from reading books?
I’m obviously the author of an introductoryÂ trading book. That being the case, it’s pretty obvious that I do believeÂ books can be used to learn how to trade. I’ve been in numerous debates with those who do not agree with me on that point of view.
Let me be very clear, however.
My opinion is that like many things in life, the basics of trading can be learned from books,Â but actually getting to the point of being a good trader requires experience.
For example, I could write a book on volleyball (the sport I coached for many years) which gives the reader a full understanding of all the rules, the various skills employed by players, and how the game works. They would have a complete understanding of the game, including how to serve, block, spike, and all of that, but until they actually got out on the court there would be no skill development. That can only come from doing.
Likewise, in trading there are a great many elements which can be learned through reading. My book, for example, explains the mechanics of trade execution and management, how prices move, the basics of market analysis, and a bunch of other things I would call foundational level information. And of course there are all kinds of specific techniques, systems,Â methods and the like which can be had from books, courses, and otherÂ media.Â These are all subjects which can be learned and turned into knowledge. Just like the person reading the volleyball book doesn’t become a player having done so, though, having the knowledge of tradingÂ is not the same as being a trader.
Now comes the counter argument:Â If books can’t make you a trader, what’s the value of them?
To answer that question, imagine yourself having zero knowledge of, or experience,Â trading and being sat down in front of a trading screen and told to trade. Chances are you wouldn’t do very well. Sure, you might eventually figure out what those squiggly lines and numbers are, how to put in and take off trades,Â how to calculateÂ your P&L, and all that stuff. With sufficient time you may even be able toÂ develop out some good trading techniques – if you didn’t completely blow up your account early on, which would be very likely. In other words, it would take a lot of time to reach even just the point of competence, and you would no doubt make loads of mistakes along the way.
How much faster would the progression be if someone gave you even a basic introductory manualÂ that outlined the mechanics of things? It would speed things up considerably, wouldn’t it?
That’s the benefit of educational materials. By providing us the information weÂ require to reach a given point of competence, they allow us to move out the learning curve much more rapidly than experience alone can do. The better the educational resource, the fasterÂ our shift out the learning curve.Â And of course they can also provide us with knowledge we may never have developed through our own experience because we wouldn’t have gone down those paths – a specific indicator or trading pattern, for example.
In the end, however, it still comes down to experience. No book or any otherÂ developmentalÂ source can make you a goodÂ – or even aÂ better – trader. All they can do is provide you with the knowledge to do so.Â Â You have to put the knowledge to use for it to mean improved skills and trading competency. This is why I say repeatedly inÂ my educational efforts that the reader/viewer/listener needs to take what I tell them and practice, practice, practice it.