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This is article six of the Getting Started Trading series. I have hopefully introduced you enough in the subject of trading and investing, that you can start to make some choices on how you would like to go about trading based on what fits you, your personality, and your lifestyle.
I could jump in right now and start explaining how I trade, but instead, I will first give you some pointers as to where I got my trading ideas and how I educate myself. I hope it will inspire you to find your way and hopefully, my future articles/lessons will help you educate yourself and give you plenty of ideas.
Table of Contents
Ideas
So what are places to look for trading ideas? And what is a trading idea? A trading idea is not a suggestion to buy stock XYZ, because someone tells you how good the company of that stock is. No, a trading idea for me is a process, a method by which you can identify and act upon trading opportunities.
The method used can be fundamental, news-based, or technical. A trading idea should define some sort of edge in the market, that will make a trader profitable as it plays out in the long run.
One place I look for ideas is in financial scientific research. Just go to scholar.google.com or www.freefullpdf.com for full free ‘scientific’ papers and search for instance “mean reversion”, “value investing” or “forex”. There are also peer review archives where scientists upload their research before officially publishing it to have their peers review their work. One of these archive sites is http://arxiv.org.
You will find references to papers that usually go beyond (my) comprehension, but that is OK. These paper (or usually their excerpts and summaries) will tell you about some market principle that has been researched.
We do not need to know all the scientific proof. As we are interested in the practical application of the principle described, we will test it ourselves to figure out if we can let the edge play out in real life. There are different ways we can test the idea. I mostly use the following process:
- Manual testing by going through charts of prices applying the principle. This is to familiarize myself with the idea and get a “feel” for it.
- Then sometimes I apply an event profiler to the idea. An event profiler takes events that trigger an action (buy, sell, exit) described in the idea. I take the events from many different securities and over many different price/time series. It will result in a plot of the average price movement before and after the event. So if the idea describes an event that should happen before prices go higher, the plot should show this nicely.
- And finally, I do a backtest; manually or automated.
Also, many blogs share great ideas. I always test all ideas. I never just trade them. I have not yet come around to trading all the ideas that I have tested, but the testing has given me a wider perspective on the markets and by testing them myself self I have incorporated the underlying principles so that they have become second nature in my trading mind. So even if you do not intend to trade the trading ideas, testing them will help you become a better trader.
One of my favorite blogs with trading strategy ideas:
Education
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| Educate yourself |
There are many ways to educate yourself. I have read many (e-) books on trading and did many (online) courses. Here are the ones I think will help you get started.
Books
- Trade your way to financial freedom
This book will let you trade the bigger picture by explaining how and why proper money management, risk-reward ratios, and knowing probability are needed to be a successful - Trading in the zone
This book will teach you some great lessons about trading psychology and mindset.
Online Courses
Trading Courses
Before you can get to exploring trading ideas effectively, you need to have a basic understanding of the trading principles/fundamentals, like:
- money management
- probability
- risk-reward ratios
- order flow
- market structure
- market types
- etc.
Below are some online resources that I recommend you look into to learn more about trading.
- Forex4Noobs
- 2ndSkies Trading
This site offers excellent courses that explain basic and more advanced trading concepts. The courses are by trader Chris Capre. I am a student in his Price Action, Ichimoku, and Advanced Trader Mindset courses. Price action trading is trading off of what the price itself communicates about the market. Even if you intend to trade more on fundamentals, news, or other technical indicators, this course is a perfect basis. The courses are not free, but the freely accessible site offers plenty of information including videos and a free beginner course to get you started. I highly recommend this site! Also, check out the Learn Forex Trading course on Udemy. - Udemy – Learn Forex Trading – Become A Professional Forex Trader by 2ndSkies Trading
- Udemy – Investing and Trading Courses
Statistics and Probability Courses
Trading is all about statistics and probability. These courses teach you the basics of statistical probability in a fun way
- Udemy – Statistics Courses
- Udemy – Probability Courses
Programming Courses
Even if you do not intend to be a programmer, I believe it is good to understand computational thinking as a trader. These courses will introduce you to a way of thinking that will help you understand how computers solve problems and how they change our world and the markets. Also knowing how to program can help you backtest strategies and automate (parts of) your trading process.
- Udemy – Python Courses
These books and courses should get you up to a level where you can understand the basic ideas in financial scientific papers and finance blogs and they will give you a good level of knowledge to start trading with a very small live account to get your feet wet.
I would not advise you to go around looking at trading forums hoping to find good trading ideas and education. You will find some good advice. But it is difficult to separate the good from the bad and it will cost you lots of time. So if trading is a hobby, fine, but I approach trading as a business and I think so should you.
And trading is like any other business. You need to invest before you can expect a decent return. I suggest you invest in a proper education. This may cost some money, but it will save you time and will prevent you from losing several accounts while trying to figure everything out yourself.
Mindset
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| Your mind is your greatest asset and your greatest enemy in trading |
This brings me to a final but very important point and that is Mindset. If you want to become successful as a trader, or anything else for that matter, you need to develop a proper mindset. The longer I trade the more I realize how important this is.
If you first get started with a very small live account, you will find out about the importance of mindset without risking too much. Even if you trade algorithms fully automated you still need to turn the algorithm on and off or make changes to it.
And whether you are losing or making money, your mind will undermine your decision-making. It is important to be aware of this and take proper countermeasures.
This is what trading psychology and mindset is all about. It is also why I believe trading with a practice account for a long time, is a waste of time because it does not teach you anything about mindset. Only if you start taking real risks, however small, your mind will start to influence your decisions and you will learn how to deal with this.
Updated: 2019