The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Learn to Trade Before You Need to Trade
09/16/2014 6:00 am EST
John Locke of SMB Training Blog shares the importance of not just learning “How to Trade,” but learning “How to Adapt Your Trading.”
Whenever market conditions are similar for an extended period of time it’s not that difficult to come up with a trading methodology that works remarkably well. When this happens, I’ll see two things. First is a bunch people selling advisories and setups. And second are traders who think they’ve found the Holy Grail and want to retire.
From early 2012 until a few months ago, we’ve had a low volatility market with an uptrend that just won’t quit. Basically, all you need to do is play nearly anything bullish, don’t worry about the down moves and you win. As usual in these conditions, I got multiple calls from successful traders who are considering trading for a living using their perfect system.
One of the many calls I received earlier this year was from a really nice young man named Tom who was extremely excited because he had a directional system that was doing really well. He was calling me to help him fine tune the system to work more efficiently and squeeze a little more money out of it.
I set up a free intro call to see what he had and how I could help him improve it. As I reviewed what he was doing, I found fundamental flaws in the system. This essentially means, “Yes, it’s working now but it’s not a workable system long-term.” Of course, this never goes over well when someone has two years of proof that his system works; but the facts are the facts.
I talked to him about the importance of knowing “how to trade” before leaving his job and gave some tips on how to determine the viability of a trading system. I offered to help him redesign his system or to consider learning “how to trade” using complex options strategies via the M3. Ultimately, he declined. So I wished him well and we went our separate ways.
Fast forward to last Thursday. I got a call from Tom. He decided to go out on his own and trade. Market conditions have changed. His system is taking heavy losses and he doesn’t know how to fix it. He wants to abandon the system and learn the M3.
Great, I can help with that. But there’s a problem. Trading is his only source of income. He has to make money…now. He’s asking questions like what can I expect for a return this week? I can hear the desperation in his voice and it’s killing me. I really want to help him but there’s nothing I can do.
Learning to trade even with all the right information takes time, it takes patience, it takes lots of practice and it takes having the right mindset. Learning a new system when you’re desperate simply doesn’t work no matter how good the system is.
I could have easily taught Tom how to trade six months ago when he had a positive mindset, time to learn, and didn’t need the money. But now…now it’s too late. He’ll have to find another way to make money, correct his mindset, and stabilize his finances prior to trading; otherwise he’s on the path to gambling away his savings.
This isn’t the first time I’ve seen this. The people and circumstances are different but the stories are all the same. If you’re trading for recreation, then fine. Take the advisories and trade that system for as long as it works. But if you’re considering relying on money from trading, please, learn how to trade and adapt to market conditions before its too late.
By John Locke, Contributor, SMB Training Blog
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