Trading Lessons I Learned the Hard Way, Part 4

08/06/2012 9:00 am EST


Ron Wagner

Principal Partner,

Ron Wagner of Revolutionary Trading discusses the lessons he learned from his early days of trading and how his trading has evolved to become profitable.

Find the previous article here. Start at the beginning here.

Now that I have discovered how incredible daytrading can be, I decided to buckle down and see if I could, in fact, become consistent in this style of trading.

Fortunately, I had already made a great number of adjustments in my swing trading plan that included a great amount of patience and discipline. It was obvious right away that many of the same skills I had developed to become a successful swing trader could be implemented trading shorter time frames.

My first plan for daytrading involved sitting on my hands and not taking a trade for the first 30 minutes of the morning after the market opened. This actually worked really well for me. My win/loss ratio was about 70/30.

Until something changed! I was sitting next to another much more experienced daytrader who took a lot of what we call gap and gos! Certain gap trading strategies can be very productive, and so I thought I would try them. After all, I was just sitting on my hands for the first 30 minutes anyway.

I started taking quick trades as the market opened, and wow, I sure got slapped around. For weeks, I couldn’t buy a winning trade! I was so angry that this other trader much younger than I, could do so well.

Although my previous success was commendable, I was not yet achieving consistency in my daytrading. I had to stop my swing trading for a while to completely focus on the intraday style of trading.

Trading from the smaller time frame charts, I found out very quickly that I had much less time to make a decision. I was determined to study how to take quick early-morning trades to capitalize on the early-morning volatility. After about six weeks, I finally got the hang of taking trades more quickly, and I fell in love with this type of trading. My win/loss ratio went back up to about 70/30.

At this point, my macro plan was to perfect my scanning capability for trading in all time frames. I quickly realized that if I became familiar with my trading universe and became really good at finding trading candidates in all time frames, I would be able to control my own destiny.

Lessons learned:

  1. Do simulation trading on a new strategy. I didn’t when learning how to day-trade and I suffered. It’s must less painful to get as much understanding as possible before putting your hard earned money on the line.

  2. We don’t need to be good at everything. We just need to be good enough at a few things to profit from trading the market in a reliable way.

  3. Don’t be in a rush to master everything at one time. Be specific in your plan to become proficient in your choice of trading style. If you rush, you may not be around long enough to benefit from your eventual success.

  4. Don’t let others influence how you trade. You are the only one that can decide what type of trading is best for you. Try different ideas, but eventually choose a style and strategy that fits your personality best.

  5. Don’t try to do too much at one time. Design a methodical plan of action so you can measure how you are progressing toward achieving your goals. I’m not talking about a financial tracking system, but rather a way to measure your progress on your time line.

Next, I will tell you what I found out about scanning and how it helped me in all of my trading.

Ron Wagner can be found at Revolutionary Trading.

Part 5

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