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Novice Daytrading — Answers (cont)

9) From what I’ve been reading, why do they say it takes at least six month’s to a year to become a successful trader, if you follow instructions and advice from those who are experienced? (I don’t believe in getting rich quick, it just seems this is a long period of time without seeing some sort of profits).

No one said you couldn’t make a profit while you are learning to trade, but trading like any profession is not learned at a weekend seminar. Many go to school for eight years (some more) before they ever begin their chosen profession.

It takes years of studying and practice to become good at a sport, or playing an instrument. People think they can learn to trade the markets without any effort or time because it looks easy.

The reason it is said to take six months (I think more like two years) to get good at trading is because it takes that long to make the mistakes, and start being disciplined enough to follow a system. That doesn’t mean it would take that long to see any profits. You might profit your first trade. You might do very well right from the get-go.

But what happens the next day when your first trade loses some money? Are you experienced enough to keep trading and not get upset emotionally? All traders hate to lose, but professionals have learned to deal with it as a part of the trading experience.

Why is trading considered so difficult, and why do most traders (95%) fail? Because they don’t follow their rules and they let their emotions rule the day, or they don’t understand why it takes so long to learn, and jump right in, make a few mistakes and then tell everyone, trading doesn’t work.

It is difficult not to get upset when you lose money — you’re in this to make money — what will your family say? How will you explain to your friends? All those thoughts run around like wild in your head until you convince yourself that you are in over your head and run for the hills.

10) What is the best way to learn trading?

The best way to learn to trade is by trading. That is why a service such as our Real-Time Signals and Mentoring program can be so valuable. We learned by trading commodities because we wanted to be able to place long and short positions. There are many rules to learn such as

1. Exit a loss immediately

2. Don’t exit winners too quickly

3. Hold tight stops (at first) and many more

Learn to deal with your psychological issues as you do along (this is the most difficult aspect of trading). Decide what methodology you want to use and study it inside and out. Read everything you can find, and read biographies of the great traders.

Mirroring someone successful is the easiest way to learn any new skill. Expect to lose money, expect to make money. Most of all, only trade money you can afford to lose.

Establish ongoing relationships with other traders that are wanting to share ideas and experiences, not slam others. No one knows (with certainty) what the market will do next, that is the challenge of trading.

We base our trading decisions on probability and acceptable risk, but as for what the market will actually do? That we do not know, until it happens. This is where the rules come in. When the market moves against us, we get out. When the market moves in our favor, we start moving our stops.

Every trader must develop over time the particularities of their own trading. Trading is a process, learn to enjoy that process and you’ll have a rewarding activity. Traders who are too focused on the outcome (the money) tend to make costly errors in judgment.

There are good resources to learn trading on-line. Many have a lot of good FREE information, in addition to any paid content they might offer. Read, explore, trade, learn. Try not to be in a hurry, there will always be another good trade right around the corner.

11) I don’t know if I’m suited to day trading. What personality type is best?

Not everyone is suited to the fast pace and high pressure world of day trading. Many investors want plenty of time to think over an idea, read reports, hear the news, talk to their friends, mull it over, get a good feeling for an idea, and then they will take action — maybe.

Day trading decisions must be swift. If a trade lines up, it is taken. The professional trader simply follows his or her rules. That is why they make it look so easy, but remember years of trading experience are usually behind long-term winning traders.

Day trading is best suited to those individuals who are not easily excited, and not quick to temper. Those who can stay cool and calm. If you have this kind of easy going temperament, day trading will be easier for you.

12) Yes, I’m playing with money I can afford to lose. I always hated that tenet of trading. Let’s face it: Can anyone really afford or relish the idea of losing money?

Nobody likes the idea of losing money, but when you add the pressure of knowing you are risking the rent money, it creates an I can’t afford to lose mentality that usually brings with it an inability to pull the trigger.

Once this begins you’ll watch the winning trades go by, and end up trading the losing traders, skipping some signals, taking some, what we call cherry picking your system.

It won’t work. Anyone who attempts to trade the S&P 500 without sufficient risk capital is walking a tightrope. Some succeed, many more fail.

This doesn’t mean there haven’t been people who have risked it all on every trade and by sheer luck have made a huge return (some have even written books), it just is not likely to create a winning trader, and certainly not long-term.

13) Are the things to buy named SPM9 and June? How do I buy them?

We are trading the S&P 500 futures contract. The current contract is the March contract, which is identified by the SPH0. SP is for S&P500 and H is for March, the 0 refers to the year, 2000. Here is a reference chart for the S&P 500 futures contract trading months: