Before Trading

I have spent the last 20 years of my life working in the mining industry in Australia. Originally I completed a trade as a diesel fitter which gave me the skills and qualifications required to repair heavy earthmoving equipment. I became heavily involved over the first ten years in the repair and design of blast hole drilling rigs. Over time this heavy work started to take it’s toll on my body and especially my back, so I began to pursue less labor intensive work. This was a natural progression to the operation of the drills and also various management roles involving a lot of design and re manufacture work. For a long time I found this work extremely stimulating and also quite challenging, but I also always ended up pulling spanners and thus doing heavy work. Around 2005 I began to think seriously about another career change so I sat down and made a list of what I wanted from my new career.

My List

• Flexible work hours.
• Not scalable, by this I mean a job where earnings are in no way relative to hours worked.
• Low set up costs.
• Something with the potential to increase earnings year after year.
• I wanted something totally new, something very challenging, and finally something that is a lot of FUN.

The only career that I could come up with was trading

So my trading career began.

I believe there are three stages of trading, or even three types of traders;

1. Stage 1-Losing trader
2. Stage 2-Break even trader
3. Stage 3-Profitable trader

Stage 1

In 2005 I began to explore the trading world with absolute vigor. It didn’t take very long for me to work out that technical analysis was the trading style that most suited my personality.
I learn’t much later that this is absolutely paramount. You have to be at ease with your trading style, because if there are any conflicts, at all, they will show through in your trading and ultimately your bottom line.
The first two years I spent looking for the holy grail trading system. I purchased a couple of systems online and also many trading e-books. As a learning trader you tend to chase the unattainable. I say this because you are looking for something that is similar to a job. By this I mean a steady income, no losing weeks and an extremely high strike rate. These things don’t gel with trading, but at the time I didn’t realize this and thus stayed in stage one for the first couple of years. During this time I managed to loose a handsome amount of money. At the time this was very difficult financially, but more importantly emotionally. Now when I look back it doesn’t bother me at all, for I feel this was the cost of an education. An education in all the ways not to make money trading.

Stage 2

It was about 2007 when I finally came to the realization that the holy grail didn’t exist and also had read a LOT of books on trading. I started to build my own personal trading method and stick with it, a bit more. It was at this stage I feel I moved into stage 2 and became a break even trader. I made money and I lost money but at the end of the month, I was no better or worse off, well nothing substantial anyway. This stage was still very difficult emotionally and at this time I started really working on the psychology side of my trading as well. This involved reading a lot of self help type books as well as trading psychology books. I intend to do reviews on what I think are the best of these books and why.

Stage 3

In 2008 I started to really get a good understanding of what was required to succeed at this game. There were a couple of key lessons I learn t that I felt really helped turn things around.

1. You must have a robust and proven trading method. This you can either test in real time and collect enough data to identify that you have an edge. This is very time consuming as you need quite a large sample of data to be able to form a realistic opinion on the method. Or secondly if you have the skills or you want to pay someone to do it for you. You could test it through computer back testing.
2. Draw down. This is inevitable, accept it. Once you have a tested system, you have a fair idea about what sort of draw down one can expect and the number of losing trades in a row the method has delivered in the past. This is not a guarantee of future returns, as anything can happen. What it does do though, is give you the confidence to keep trading your method losing trade, after losing trade and not lose faith, or start changing things as this can be very devastating to your returns and your psych.
3. Trade. The more you practice at it the better you get. You can’t beat experience. I remember just how difficult it all seemed a couple of years ago, but just through persevering and an innate tenacity not to fail, I feel it just seems a lot easier now compared to back then.

Present Time

The progression to this blog. I want to document my trading journey to financial freedom as this is my goal and I think it would be fare to say the goal of all traders. Also I want to share my experience and ideas and also learn through interaction with other traders. It is also a way of putting my Ideas out there.

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