How to become a trader? (Part 1)How to become a trader? (Part 1)
1. What is trading?
We all know what trading is. Almost all of us had someone around us who was trading, or maybe we heard the names of people like Warren Buffett or Elon Musk. But what we don't know is that trading is not just opening a chart and drawing a line and finally buying a stock or something. Trust me, It is more complicated than that.
In this market, for 95% of people, there will be nothing but financial loss. But those 5% are the ones who get the secret of trading. You probably won't recognize those 5%, and they won't want to introduce themselves either. But if you persevere and put in enough effort and a lot of time, and then you go through more persistence and difficulty and loss of capital and disappointment, it is possible, just possible, that you will become one of those 5%.
Come with me to find out what we should do.
2. Where do we start?
An important question will arise for all people who are new to trading. "Where to start?"
In the first few days, you will see a lot of stuff. And for sure, you will be confused like me. There are many things to learn. YouTube, books, even private training. But what do you get in the end? Well, you find a trading method and trade with it for some time. Then you start losing money. Then you go to another method and you lose again. And this cycle continues like this (this is the first hard part that I mentioned above). Later, you will learn about capital management and the psychology of trading. And by combining these three things and, of course, enough time, you will move towards becoming a trader. Therefore, becoming a trader is not something that can be achieved overnight and more importantly, it is not something that can be given to you. You have to achive it.
3. Strategy
The first place you should start is formulating a strategy. Some people think that everything boils down to strategy. So when they can't make money, they try to find a more sophisticated strategy. But this is wrong. Strategy is just the beginning. I will talk more about this later. But before that, let's talk about the components of strategy.
We can divide each strategy into 5 parts: Trend, Area of Value (AOV), Trigger, Stop loss (SL) and Target point (TP).
A. Trend: The first and most important part. Trend means the next move will be up or down. Your tool to find the trend can be your eyes, trend line and different indicators. The most important thing to learn here is that no one knows which way the price will move. All we know and get through our tools is which direction the price is "more probable". The second point is that the trend is not about the past movement, but it's representative of the next movement! So don't mix them up.
B. Area of Value (AOV): Let's assume that the price of a stock is going to increase, and in other words, it wants to find an up trend. Where will your entry area be? There are useful tools such as trend line, moving, Fibonacci, candlestick, support and resistance areas and etc. for this.
C. Trigger: You will need a confirmation to enter when the price is in the value zone. I recommend you to use multi-time frame and look for entry in lower time-frames. The tools are the same as before.
D. Stop loss: Your entire strategy depends on this component. Most people do not use the limit because they do not know how to use it. And they are also afraid of losing. The best traders also make mistakes and control their mistakes by limiting their losses. The limit of loss is your friend. Learn how to make the most of it.
E. Target point: We humans have a good tolerance in the face of difficulties. But can we stop ourselves from seeing profit? The second stage is difficulty, patience and tolerance to achieve your desired profit. At the same time, knowing that the conditions may change, and you may not even get the profit you have now.
There are more complex strategies that combine all of the above. Like Elliot, Ichimoku and etc.
The important thing about the strategy is that a super complex strategy is not necessarily better than a simple strategy. Sometimes a simple trend line can give you a profit that dozens of complicated indicators cannot give you. I am not saying that complexity is worse. In fact, the more complicated it is, the more accurate your position and understanding of the subject will be. But the problem is that our mind does not have the ability to analyze all the possibilities. That's why, don't look for a super-complicated method produced by company X. Choose the simplest method that works for you, and you can communicate with it more easily.
Each of those 5% people choose a method and become a master in it. So it doesn't matter what the method is. It is important that it is profitable. It matters how you implement it.
In the next part, I will talk about capital management and market psychology.
Good luck.
