In this article, I will share the number one most important trading lesson anyone ever gave. What I will share is what distinguishes the 90% losing traders from the few winning ones. If you fully understand this lesson, you already know more than most other traders. So really take your time and read carefully. Don’t feel the need to skip ahead because you know better because frankly, you don’t!
The following video lesson covers the same topic as the article below. Depending on what format you prefer, you could choose to watch it:
The Secret To Trading Success
Before I reveal this secret, I want to show how a typical trader from the 90% losing traders acts, so you can avoid becoming one. Most ‘traders’ hear of trading and are blown away by the potential of it. The idea of being able to trade and make a lot of money from anywhere in the world directly from a laptop obviously is intriguing. After these ‘traders’ hear of this great thing, they want to start immediately. They sign up to the first broker they can think of which probably is one they saw in some fancy ad. Then they have all these fancy/advanced tools, charts… and they think: “What now?” They have no idea what the hell they are doing. Finally, they decide to buy more or less random stocks at random times due to some random reason. Do you know what happens next? Suprise, they lose! As stupid as this may sound, sadly a big deal of traders end up like this. Not very surprising that so many lose money then… Now tell me what differentiates these traders from ‘real’, profitable traders? They know what the hell they are doing. But how did they start before they became profitable? There is one very simple answer to this question: EDUCATION! It really is this simple. I just can’t understand how so many people can be so stubborn! Obviously, you need education. Just like in every single other aspect of life. I have another question: would you try to fly a plane with no training and no education on it? Every sane person (except pilots) would answer no to this question. So why is it different with trading? It is exactly the same. You wouldn’t understand anything in a cockpit. You would have no idea what all the buttons and levers do. The same goes for all the tools in a fairly advanced broker platform. Without any education/training, you wouldn’t have an idea what these tools do. So don’t expect to. Trying to fly a plane with no guidance, education or training will likely end in a crash. Trading with no education, guidance or training will also end in a crash. The crash won’t be as fatal as in an airplane. But the money in your account will ‘crash’ down. In most other professions you have years of education before you even start doing anything. Why should it be different in trading? If trading would be so easy, everyone would do it. No matter what you want to trade, Forex, stocks, options… you need education! Otherwise, you could go to a casino as well. There is practically no difference anymore. Please don’t be stupid and skip your education!
“If it was easy, everyone would do it!”
Do You Need Paid Education – Paid vs. Free Education
How you want to do this is entirely up to you. There is no real right and wrong here. But there are some better and worse/faster and slower ways of educating yourself. Luckily, educating yourself on trading is easier than ever before. With the help of the internet, you can literally find everything you need to become a great trader directly from a sofa. You couldn’t always have done this. Just imagine how painful it must have been to find trading education 20 or 30 years ago. You couldn’t just ‘google’ whatever your heart desires. So try to use this great opportunity. You can either get paid education or totally free education online. Often you get what you pay for meaning that free education oftentimes is less thorough than paid education. But this isn’t always the case. You can totally get good trading education for free! But beware, taking the free education pathway can be much more work and a lot harder than choosing paid education courses. Here are some pros and cons of free and paid education:
Pros of paid education:
- Often people tend to stick to things that they paid for more as they feel that something is on the line. You will thus be motivated to actually learn when you had to pay for your education.
- On average, paid education is more thorough and of higher quality. Just like I said, there are exceptions.
- As most paid educational trading courses focus on one strategy, they are easier to understand and focus on relevant things for that strategy/more coherent.
- Often very good ‘customer support’/help.
Pros of Free Education:
- It is free!
- If it is bad, you can easily find something new.
Cons of Paid Education:
- It costs money!
- If the education sucks, you would regret moving on because you already paid for it.
- Sometimes people offer trading education even though they aren’t traders themselves. They make all their money from teaching instead of anything from trading.
Cons of Free Education:
- Often free trading education isn’t as thorough and it can be hard to find good, very in-depth courses that are free.
- Requires more work.
How to Get Started with Trading – My Framework
As you can see both free and paid education have their pros and cons. I have laid out a framework of how to learn how to trade:
- Start with free sites/courses and learn all the basics. Free sites are more than enough for all the basics. It is kind of a waste to pay a lot to learn the basics as they really can be learned anywhere. Learn about: charting/technical analysis, fundamental analysis, broker terms (orders…), broker tools, available assets, basic risk management etc. All of this can easily be learned on free sites like this one. Obviously, you can also use paid education for the basics if money is no problem at all.
- The next step is choosing an asset that fits you. Options, Futures, Stocks, Penny Stocks, Forex just to name a few, all require different trading strategies and different education. You should learn some basics about all of them in step one. After doing this, you should try to pick a favorite. The next step is finding a good strategy for this asset. (You can always learn how to trade other assets later down the road)
- The trading strategy is probably one of the most important things (after you understood all the basics and have a fundamental understanding of the markets and trading). Therefore, you should really take your time and try to find a good strategy. There are strategies that promise a few percent per year and there are some that promise much more. Ideally, you would want a strategy that is quite profitable. But obviously, you should pick one that fits you. For example, a strategy that requires $100 000 to start with won’t be suitable for someone with a $5000 account. Be careful and use some logic when choosing a strategy. If someone promises you insane returns with practically no effort, it is likely a scam. Generally, if something seems to be too good to be true, it probably is. Do a lot of research on this part. When it comes to choosing a strategy, paid education could be a very good choice. You can still find a few free sites with good strategies. But generally, paid courses reveal better trading strategies. But again, be careful, read a lot of reviews and do your research.
If you compare trading to other professions, I don’t get why so many people don’t want (to pay for) education. Other professions require years of education/training and usually this education costs a lot of money. other professions: you have years of education, costs a lot as well. So why should it be different with trading? Therefore, paying a few hundred Dollars for some good education isn’t that bad.
You can also try to do everything for free. Finding an own working strategy… But this would take a lot of work and it is kind of unnecessary. Most people that try this fail. Why re-invent the wheel? You can just learn an already existent, proven strategy.
When choosing a paid teacher/trading course, it is very important to do a lot of research. Try to read as many reviews from different sources, check around what people are saying about it… Also look for transparency. More transparency is usually better. Someone promising huge gains who is showing all his trades in real time is probably a better choice than someone who promises similar returns but only shows a few trades or none at all.
If you have trouble choosing some good trading course/teachers, you could ask me in the comment section below and I will tell you my thoughts on it/him.
How Long Should You Study before Starting to Trade
There is no one correct answer to this question. It totally depends on you, your motivation and your effort. Someone studying ten hours a day could trade earlier than someone only studying 10 minutes a day. Do what is best for you. But don’t skip ahead, be thorough! Studying is fundamental and is the single most important thing.
Don’t even consider starting to trade before you actually know what you are doing. Before even signing up to a broker, you should know a working strategy that makes sense. You should know how to manage your risk and generally know all the basics. Even then it isn’t a bad idea to start with paper/virtual trading.
Take me as an example: I didn’t make a single trade until I fully knew what I was doing and had a strategy… This took me around two years meaning that I studied for around two years without even having signed up to a broker. You don’t have to be this extreme. But you can’t skip education and expect to be profitable.
Never rely on any random stock picks from newsletters or whatever. Find a strategy where you actually know what you are doing. Good trading education will make you an independent, self-sufficient trader!
Before signing up to a broker, know what you are doing and have a logical, good strategy. You should be able to understand why the strategy is profitable. Don’t just rely on a single random trading indicator like MACD, RSI or anything similar. These can help you with your trading but they shouldn’t be fundamental to your trading.
Even with a lot of education and studying, you won’t be guaranteed to be profitable right from the beginning on. It is a learning process that takes time just like everything else in life.
The more you study, the better! Never stop learning, even after you are profitable and have a working strategy. Traders should always keep studying to improve. Believe me, you will never be a perfect trader and there will always be things to improve on.
Don’t slack on your education. I can’t repeat this enough, it is the single most important factor when it comes to profitable trading!!!
If you want to know my recommendations or my opinion on some trading courses, feel free to ask in the comment section below.
Timothy Sykes (Millionaire Trader and Teacher): “Trading is the last piece of the puzzle!”
Learn More About Tim Sykes and his Education in my Tim Sykes Review.