How To Get Off To A Great Start As A Trader

  • March 29, 2004
  • Rob Hanna

The
market has nice gains on Monday on a price basis. Volume came in
higher than Friday but was still quite low.  As far as follow-through days go, I
would count today as “nice try, but no cigar.”  I’d still like to see more
follow through before getting too aggressive on the long side or abandoning my
short positions.

I was talking with a trader this weekend who recently expanded the type of
trading he does. After having achieved success with one style of trading, he
decided to take it to the next level and see if he could step up his returns
even further.  After carefully preparing for the transition and opening a new
account he began his new trading venture with high hopes.  When I asked him how
it was going, he told me that the first week or so had been more difficult than
anticipated and that he had suffered a little bit of drawdown.

This got me to thinking about my own trading career.  I thought back to all the
different accounts I opened over the years attempting to realize trading profits
in different ways. Some of those ideas and accounts flourished while others
fizzled. Yet none of them flourished from the start. None. Every time I’ve tried
something new I have suffered a drawdown before turning it into successful
venture. You’d think once in a while I would have gotten off to a decent start
just by chance. Nope. Never. Always had a hole to climb out of.

 

So what is
the point?

 

Trading is difficult. Even
successful traders have difficulty adapting to changes. As a matter of fact,
most successful traders have been forced to overcome adversity or large
drawdowns at one time or another. Jesse Livermore, Marty Schwartz, Gary Smith
(author of “How I Trade For A Living”) and just about any successful trader
you’ll ever read about. I may be wrong, but I don’t recall anyone in the
Market Wizards books saying “I just had a real knack for trading from the
very start.”

 

The successful ones are those
that have a love for it and a desire to make their living that way. They are
determined to learn from their mistakes and find a way to consistently pull
profits from the market. I read one time that there are a million ways to make
money in the stock market, but they are all very difficult to find. I think that
is true.

 

If you are new to trading, or
taking on trading in a different way than you had previously, you should not
expect to make money from the start.  While everyone’s goal when they first
start seems to be “I want to make X amount per day/week/month,” it simply
doesn’t work that way for most.  A reasonable first goal for your first few
months would be to breakeven.  Before you can make money you have to be able to
breakeven. 

 

It takes time to find your
comfort zone in any new trading venture.  I’m not the person to tell anyone how
to get off to a great start, but if you don’t risk too much initially, and are
able to stay in the game until you have a better feel for it, profits will come
eventually.  Just make sure you develop a solid trading plan that you are
personally capable of trading.  (From both a financial and psychological
standpoint.)  If you find yourself struggling at the outset, don’t sweat it. 
We’ve all been there.

 

Best of luck with your trading,

 

Rob Hanna


robhanna@rcn.com