What Mistakes To Avoid As A Newbie Stock Trader
By Ashton Ellsworth on ALTCOIN MAGAZINE
I was asked: “How can I start learning about stocks and day trading? How can I develop my knowledge so that I will understand all of it?”
My first introduction to ‘the markets’ was long before I ever actually traded any stock. I used to play Eve Online about 8 years ago, and I learned how to corner the fairly developed commodity market the game had in certain sectors. If you wanted a new frigate or cruiser, you were paying me a premium or building your own because I would scoop them all up and resell them, raising the prices.
From there I got into the early bitcoin scene and like most trading even today, had no real idea what I was doing. I learned from many people who gave good and bad advice, I learned how incredibly deceptive the average person can be in finance, and most of all I let experience be the teacher of harsh lessons. I called it ‘paying tuition’ whenever I lost money, because like in school you hope to learn from mistakes, but the bill gets paid whether you learn or not.
A couple of years ago I was trading forex CFDs with ICMarkets in Australia, prior to tightening of regulations and booting out Americans below a certain wealth level. I used to trade 500:1 leverage there, which most people consider insane but it is really the only way you can hope to gamble some money out of forex in the short term with a small account balance. I say gamble there because unless you’re a bank doing a carry trade, a large multinational corp doing a currency play, or you understand what those two things are well enough to take full advantage, you’re not investing, you’re gambling.
That is where I taught myself the Ichimoku Cloud trading system, which to this day is my favorite above all else, for any chart, on any timeframe. If you’re a visual learner like me who can spot candlestick chart patterns, Ichimoku is a good thing to take a look at.
I eventually found a bit of a dead-end in trading CFDs when it came down to creating a synthetic stock options trade without knowing what options were at the time; I quickly learned that brokers know where your stop losses are and will pop them regardless of whether your trade would’ve been right, if it’s at all possible for them to do so. That’s why some assets have insane swings back and forth, Whipsaw Wednesday is a thing in stocks for that reason. Brokers are there to collect money, not to help you be a winner at trading.
Once I started studying stock options, I found that particular set of derivatives made a ton of sense to me, and spent a few months learning the ins and outs of TD Ameritrade’s ThinkOrSwim platform, which I still recommend to this day for high-quality charts, tools and information for a zero dollar cost to you. Most people looking to start trading can’t exactly afford a Bloomberg Terminal or have any real idea how to use it advantageously.
Once I came across the WallStreetBets subreddit, their degenerate gambler approach to highly leveraged stock options was right up my alley. I hung around the stock options channel in their discord for a long time, learning from more experienced people, teaching others what I already knew, especially with my unconventional approaches at times.
At this point, while I’m by no means rich, I’ve gained a wealth of knowledge in the last ~8–9 years of messing around in various areas of financial markets, and can quickly tell when someone knows what they’re talking about versus the average hyped up newbie who just found out what an altcoin is less than a year ago.
I’ve met hedge fund managers, some of them actually honest people compared to what I would say is a profession saturated by people with sociopathic tendencies.
The best way to learn to trade is to treat it like a business you want to run for yourself. Most people who start a successful business give it more attention than whatever job they worked while building it because all jobs are building a business for someone else instead of yourself.
Research is key, and discipline is a core requirement for any plan you create. If you don’t have a plan that you stick to, you will find yourself caving to pressure and making panic sell decisions, moving stop losses, and second-guessing your bet size, or even worse just ‘YOLOing’ it all on a dumb move hoping for a win.
I’ve seen countless people ‘blow up’ and never return to trading after losing enough to be shellshocked by their poor decisions. The trader’s daily battle is just as much an internal struggle against the human want for instant gratification as it is against the other players in the market.
Always do your homework, always follow a plan, and always remember a bird in the hand is worth two in the bush.
Originally published at http://quora.com.
