Futures, FX, Trading Education

The Experimental Phase and The Growth Phase – Trading education

Risk reward - day trading 101

The first stage of financial freedom is recognizing that you want to be an investor. Many people look at the greats, like Warren Buffett, and wish to emulate him and his success. For those dipping their feet in the water for the first time, learning from Warren Buffett’s long-term hold value stock strategy is a great starting point. It’s important to start gaining confidence in yourself as an individual investor. The best time to invest was yesterday.

The Experimental Phase

The only way to learn is through experience. This is a concept applicable in almost every field. There continues to be a lot of value placed in Buffett’s long-term hold strategy.  Diversification is a key principle that many investors understand. Regardless of this, practice makes perfect, and there is a lot to gain from direct market interaction. Starting with an investment strategy can be an investor’s downfall. Approach the market as a blank canvas. You are less likely to have market bias, and you are more likely to soak up information that can make you a better investor. Try trading everything (small-cap,mid-cap, large-cap) if you have the stomach for it.

Don’t expect yourself to be a gifted investor and prepare yourself to make some losses. This is all part of the experiment phase. Learn from your superiors and try your own methods. Make playbooks that reflect both your good trades and your bad trades. It’s about finding your foothold in the market and developing a strategy that works for you. The only way to succeed is to fail! Once you gain confidence in yourself and you are consistent with your strategy, try sizing up. Stay calm and collected. Fine-tune your strategy and manage your risk.

The Growth Phase

Research is your best friend. Break free from the comfort zone of your strategy. If you are an intraday trader, then try swing trading. If the long-term hold is your strategy, then try short-term. There is always more to learn, and there is always a new strategy that can be incorporated into your setup.

Strategy Insights: Market Themes

How do you decide when it’s appropriate to swing?

Each trade has its own story.  Taking advantage of the theme of the market. It’s all about risk-reward and probability. When you swing trade, it’s not entirely about being right or wrong but managing your risks and rewards. In the last year, there were several themes: the marijuana theme, the COVID vaccine theme, and most recently, the blockchain/bitcoin theme. It’s all about identifying stocks that have a solid chance of moving within the prescribed theme and gaining a bit of your euphoria to capitalize on your benefits.

How do you get a sense when a sector is about to heat up?

Talk to other traders, hear new ideas, and keep yourself informed. If investors are all looking towards a certain sector or gaining a particular bias regarding a certain stock, follow their example. Information is vital to any investor. The more informed you are, the better investor you can become.

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