The Most Important Advice for Traders

01/28/2013 7:00 am EST

Focus: TOOLS

Stuart McPhee

Currency Technical Analyst and Trading Coach, OANDA Corporation

Stuart McPhee discusses the one thing that traders need to start off on the right foot in trading.

I am here with Stuart McPhee from Australia.  He came all this way to the show to talk to me and we are discussing your book.  You wrote Trading in a Nutshell.  Tell me some advice that you have for the new trader out there.

Probably it is the importance of having a plan.  I know we hear that all the time.

Alright.  Probably not enough, though.

Maybe not.  I think when people start trading, they don’t appreciate how difficult it is going to be and I am first to say trading is not easy.  It is really quite difficult.  It takes a lot of time, preparation, homework.  That is not obvious to people when they start so they don’t think about the work they need to do to develop a plan that they are going to have some confidence in.  I mean, really, how difficult can trading be.  You are just buying and selling, right?

In your mind, is this a lengthy plan or is this a small plan?  Is it a daily plan or is it a big picture plan?

No.  It could be both.  It is really just a longer-term view of the way we do things but it certainly includes all of our trading rules and a routine that we follow on a regular basis, the process we work through.

What kind of a routine do you follow on a daily basis and what markets do you find yourself looking at on that routine?

Sure, well, every week I trade Australian equity stocks, but on a regular basis it is foreign exchange, currencies, and the process is simply look at your open positions, check how they are, and then we begin the process of looking for new opportunities.  We scan our universe, whatever that may be, pairs, currency pairs, looking for opportunities.  Once we have identified clearly those opportunities that meet our criteria and our trading rules, then we can determine where is our stop loss going to be, how big is our trade going to be, and then we can execute the trade and let it take its course. 

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