In a very familiar old joke, one gentleman asks another, “How do you get to Carnegie Hall?” The second gentleman responds, “Practice.” I believe the same advice applies to the person who asks how to become a successful day trader.
The simple truth of the matter is that most day trading systems (at least the good ones) are not terribly complex. For instance, my system is built on the simple premise of follow the [market] leader. It isn’t rocket science - if it was, I wouldn’t be able to follow it! Yet, all too often, my day trading students let the simplicity of the system lull them into a false sense of security.
The truth of the matter is that most things in life are simple. It’s simple to swim, drive a car, or hit the perfect golf shot. It’s only a matter of taking very simple actions and putting them together in a specific order so that you produce the desired result. Yet, very often, the ability to put these steps together requires practice and plenty of it.
Think about it. If you had the good fortune of taking a private golf lesson from Tiger Woods, would you then immediately quit your job and try out for the PGA tour? Of course not. But why not? After all, if Tiger told you everything that it took to be a PGA champion, then why can’t you just follow his advice and start raking in the big bucks yourself? It works for him. It should work for you, right? Wrong! The reason it works for Tiger Woods is because he has spent more than 20 years practicing his craft.
The same is true when you read a book or article on day trading or attend a live training. Trying to translate that knowledge into day trading profits without practice would be like trying to learn to swim by merely reading a book. It won’t work. You can get an understanding of the basic techniques from a book but in order to really learn to swim, you must get in the water and splash around a bit. Well, the same thing is true for day trading. You must get into the water (in this case, the market) and splash around some. In other words, you must practice what you learn.
Needless to say, when you first start out, you’re not going to be a master day trader. You’re going to swallow some water. For that reason, I always recommend that my students refrain from doing any live trading for at least the first 30 days after taking my course. During this time, I ask them to set their trading software to training mode and simply practice what they’ve learned. Only after they are consistently making a profit should they even consider “going live.” If you’re new to day trading, I recommend the same thing for you. Practice what you’ve learned until you can carry out the actions that will make you consistent profits.
In my experience, this is where many of my students stumble. They can’t resist the temptation of getting in the game. After all, it isn’t much fun to brag to your friends that you are $7,500 ahead on paper. Yet, it is far more fun than having to admit to your family that you are $7,500 behind in real money because you jumped headlong into the deep end of the market without first learning to stay afloat.
As I see it, if you’re going to make mistakes (and you will), it’s best to make those mistakes for free. Over the years, I’ve met many day traders who didn’t heed this advice. They were so anxious to show off their new-found skills to onlookers that they ended up exposing themselves to significant financial losses. As a result, they spent their first few years of day trading trying to recoup the losses they incurred in the first few months. Practicing the skills you are taught until you can consistently show a paper profit is the easiest way to avoid a similar fate.
“How do you get to Easy Street?” “Practice!”
Fausto Pugliese is the founder and president of Cyber Trading University, a world leader in online education and training for traders and investors in the markets. You can reach Fausto at firstname.lastname@example.org or follow him on Twitter and Facebook.
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