Last week we held a great webinar with professional trader and Building a Trader member Gavin Foster. Gavin shared his pathway up the learning cuve as well as the main lessons he has learned along the way.
What follows is a summary of the most salient points.
Since we all go through approximately the same issues, I believe you will benefit from Gavin's insights.
Insight #1 - Structured Learning is Essential
"At first I was a man on a mission, any spare time I had I was on YouTube watching videos, reading trading books, searching twitter for any info I could find which would allow me to unlock the secrets of successful trading..... I was adamant I could spend very little money and find out what I needed to know using the power of the internet.....I was collecting lots of "trading trivia" and information about veteran traders and strategies, but every time when I tried to express this in the markets I would lose money" - Gavin
When people want to become doctors, they go to University and the process is both expensive and exhausting! When people want to become lawyers the process is much the same. When people want to excel in almost any arena, they seek help and are willing to pay a premium in order to receive quality education.
Not so when it comes to trading.
The world is full of people with extraordinary talent who jump into an endeavour with great passion and are capable of learning through the school of hard knocks. Some market wizards and peers that started playing the game in the 1960s/70s did just this. But they represent the exception – the survivors that make history. Most people do not have that kind of talent or time to dedicate to the markets and as such, are better off to seek guidance.
The early traders learned the ropes through a combination of experience and experimentation: they garnered much of their FX trading knowledge from IMM futures traders (who were buying strength / selling weakness and adding on further strength / adding on further weakness). They also experimented with the new concepts Welles Wilder developed in the 1970s (RSI, ADX, etc.) and created the core building blocks that many systems were originally built on. And where did the IMM traders learn how to trade? They experimented with Dow theory, Gann’s studies and stock market analysis from the early 1900s.
All these people were forced to “experiment“. And yet, every aspiring trader seems to believe that by reading books or absorbing free information on the internet will be enough to generate consistent profits in the market.
Here's the truth:
there is definitely some quality information on the web;
there are educators who do trade their own money and also want to help others;
you may never find the information that suits you personally;
by gathering bits & pieces here and there you may never formulate a proper plan;
generally speaking, there's a lack of proper information on trade management practices (which is kind of essential);
you need to "experiment" and find what suits you.
This is why I believe in Coaching. Through experience, I have learned that most traders need personal interaction with a successful trader, in order to quickly identify and remove obstacles that block consistent performance.
Many aspiring traders or breakeven traders go around in circles for years on end, gaining knowledge but never transforming that knowledge into a successful track record. My coaching process is quite simple. If you are starting from scratch, you will learn a robust rules-based discretionary trading model, master the beliefs, principles and practices of successful traders, and climb the learning curve with confidence by interacting with my team.
You will have ongoing access to my video course which takes you from Trade Idea Generation all the way to Trade Management and Trading Psychology. But the real benefit is the constant possibility to ask questions, receive answers, perform drills and get feedback.
A structured learning process and direct interaction with an experienced trader can save you time, energy, money and frustration because you go straight to the point and avoid pitfalls, dead ends and other common bad habits.
Insight #2 - Proper Help is Hard to Find
"After A LOT of research I found some traders offering courses, which were usually around the £500-£1000 mark... I would start a course, absorb all the material and then re-do the course a second time to make sure I hadn't missed anything. I would take copious amounts of notes, fill in spreadsheets and do any additional research and back testing. I would then go the market with my chest puffed out ready for battle and to make some money with my newly acquired knowledge.....But every time what I'd learned wasn't making me money, at best I was breaking even."
"I would contact my mentors for feedback and they'd be extremely difficult to reach, state the market wasn’t acting well for the system or give me a reason why I shouldn't have taken a trade that had never been mentioned before..... I didn't realize at the time, but I was approaching trading all wrong, I was searching for the holy grail, the secrets of trading that all the pros knew but the amateurs don't..... I'd realized at this point most people offering retail trader education...were unable to explain the more discretional parts of their strategies and weren't available enough to answer questions I had." - Gavin
I'll cut to the chase here. There are very very few people I would personally recommend. And remember that each mentor will possibly show you their own strategy and try to help you learn their strategy, even if it doesn't really suit you. That's where coaching is perhaps superior. But anyhow, here are some real traders with real results that are in the public domain (I'm not affiliated with them in any way):
Insight #3 - Specialize on 1 Strategy
"I formulated a number of strategies based on what I'd previously learnt and wrote a full trading plan. This was 130 pages in length and took many months to produce. It covered everything such as my beliefs, goals, strengths, weaknesses, risk management and 12 separate entry strategies, so I had all bases covered. I now truly felt like an authentic professional trader and I could smell the imminent profits just over the horizon...But I started to experience SEVERAL psychological issues when trading, too many to mention. Main ones were analysis paralysis, impatience, greed, negative self-talk, performance anxiety and a lot of fear-based issues such as FOMO, FOLM, FOBW, FOGBP." - Gavin
Again, let's cut to the chase. You cannot be a jack of all trades. You need to specialize on 1 very particular segment of market movement. Learn to capture 1 precise part of the market, before doing anything else.
If you wants to trade trends, then you first need to establish a clear way to compare trendiness and select the strongest candidates. Then, verify that this trend selection method does in fact provide a positive forward expectation: the markets tend to continue with the trend, and not reverse off the bat.
If you utilize a fundamental overlay then you need a clear method to identify the drivers and combine them with clear trends. You then need to have a way to follow the narrative and evaluate whether the market is acting in sync with the drivers or not.
You should formulate a “bread & butter” trade setup. It must be tested and studied just like the other two components. It must be logical and based on a repetitive behavioural trait.
Then you need to wrap a solid trade management vehicle around your entry. Nobody knows what will happen once the trade is initiated, but we need to have a plan that takes into consideration adverse excursion as well as favorable excursion. Knowing what to do in any case offers peace of mind.
Then you need to execute the plan from A to Z at least 30 times and take note of the results. If the process remains the same, the records will speak for themselves and you will be able to identify the areas that need work.
Insight #4 - Pressure to Draw a Salary from Trading Can Kill Your Performance
"I couldn't comprehend why before a trade I could feel so organised and confident, but as soon as I hit buy or sell I turned into a completely different person. I knew to overcome my impatience I should wait for the absolute best opportunities and allow sufficient time for price to move....Analysis Paralysis could be addressed by finding a way of only focusing on the most important themes of the day, using simple checklists, avoid twitter when trading etc. But nearly every time I was in a live trade I was sabotaging my system and breaking rules by taking profits too early, trailing stops too quickly and talking myself out of entering perfectly viable trades..... I was experiencing the familiar feelings of dejection and a lack of any consistent progress like I did before..... The stress and anxiety created by my under-performance and failure to succeed after trying for so long had now started to filter into my personal life. I had become too obsessed with achieving trading success and was putting huge amounts of pressure on myself. I was exercising less, not eating as well. I had problems sleeping. I had developed persistent back pain and sciatica due to sitting at my desk for over 12-hours a day with bad posture." - Gavin
I went through the same issues years ago, because I too left a stable day job in pursuit of trading success...so what would I say to my former self, with the knowledge and experience that I’ve gained over all these years?
Be disciplined and prove to yourself you can in fact trade profitably before leaving your day job. I honestly tell this to anyone who approaches me for coaching. I personally know some very successful people that learned how to trade while having their own businesses and work commitments, that made it happen. Where there is a will, there is a way. Two of my current coaching students are working full time jobs and yet are equally successful in the markets. They have my total respect because they are avoiding one of my main mistakes.
Be well diversified and do not depend on trading for your income. Period. What kind of diversification is possible, to people that are not born into a wealthy family? Simply, have a spouse or partner that has a steady income stream. Maintain your day job while learning how to trade. Attempt to help other people, perhaps as a freelancer on sites like UpWork, depending on your speciality. If you have the opportunity and some property, rent it out. Write a book…basically, think laterally and explore new ways to use your talents.
Do not put a time limit on the learning curve. Personally, after the first 4 months I was at a point where I seriously doubted my capacity to trade (given all the pressure I was under) and I went back to full time employment for a year. This also goes back to having diversified income streams. The better your personal situation is, the less stress and pressure you will be under.
Stay healthy and fit. I sacrificed much of my physical and mental health in order to trade. Once again, it’s not worth it. Furthermore, studies have demonstrated how the brain is more capable of absorbing and digesting new information in a safe & secure environment. Not in a stressful and pressured environment.
Gavin's Own Thoughts
Always run your own race (Appreciate where you are, where you've been and where you are going)
Keep on going, never give up. (You only fail when you stop trying. At no point have I ever considered throwing in the towel. Every single setback will mean you come back stronger than before. There is a reason that 90% of traders fail and you have to earn the right to be in the 10%)
Don't be in too much of a rush to succeed (Allow time for knowledge to stick and your subconscious mind to accept it), otherwise the pressure will massively hinder your progress
Keep things simple, less is more. (It's better to be a specialist rather than a jack of all trades. Having more information doesn’t always lead to more success)
I know these insights are helpful, so again Thank You Gavin for coming out and sharing your experience with the Building a Trader community.