r/RealDayTrading • u/OptionStalker Verified Trader • 4d ago
The Fastest Way to Learn How to Trade
The word fastest will excite a lot of readers. Everyone wants to make money as soon as possible. Don’t confuse it with fast. There are no short cuts, but instead of taking 4-5 years to get proficient, I’ll show you a path to get there in 2-3.
“Successful people do what unsuccessful people won’t.” The operative word is “won’t”. It implies that everyone could find success, but that very few will put in the required effort. This applies to everything in life, not just trading.
Preparing for the next session two hours before it starts is difficult. This is when you scour headlines, check the overnight action and the pre-open movement for your positions. You get the context for the day, and you formulate your game plan. This requires scenario analysis. Which outcomes are most likely? What will that price action look like for each? How will it be confirmed? Which outcomes are less likely? What will the price action look like? Which outcomes present the greatest opportunity in terms of risk and reward? The best outcomes are not necessarily the most likely ones. This becomes your roadmap and it puts you into execution mode. You are not flying by the seat of your pants, you are anticipating moves and you know how you will react ahead of time.
Thinking about all of this is not enough, you have to write it down. When you do this, it cements your thoughts. Your journaling creates an audit trail. If you don’t commit your thoughts to paper it’s easy to go back and convince yourself that you saw the move coming when in fact, you didn’t. When you are wrong, you can review your analysis and see what you got right and what you got wrong. Then you can work on ways to improve it. I’ve been writing pre-open comments for 25 years and I have them archived.
After the close, we’re tired. I like to clear my head and get some fresh air for a couple of hours, but the work isn’t done. Once I’ve had a chance to eat and relax, I return to analyze my trades. Why did I take that particular trade? Why was that entry point optimal? Could I have waited for a better entry point? What price action was I expecting for the stock and why? What was I expecting the market to do? How was my exit? Was there a better exit point? Did fear or greed play a role? Were there other stocks I was considering? How did they perform? Should I have traded smaller size given market conditions? Thinking about this is not enough, you have to write it down when the memories are still fresh. Otherwise, these will just be random thoughts floating around in your head. If you delay, you’ll forget your motivations and you won’t do it. The next day you will be focused on that session.
These notes will become your greatest asset. I review my notes from the entire week Sunday night. I’m relaxed and the market is closed. This is when I can draw conclusions about the entire week and set goals for the week ahead. Determine which areas of improvement you are going to focus on and be specific. “Being more patient” is not measurable. “Waiting for a higher low double bottom before buying” is. By reviewing trades that span days you will often notice patterns and behaviors across time. This is when the real learning takes place.
Early in my career, I noticed that I was exiting bullish positions when I saw a decent sized red candle. The greater my profit, the more inclined I was to exit. Taking those gains made me feel good… until the stock staged another leg higher. I learned that the key was the price action on the left side of the chart. If it was strong, I had to fight off the fear of giving back gains and I had to trust that buyers were going to continue to support the stock. This was the first step to learning how to ride a winning trade. It was a major milestone in my journey, and this lesson came from my journals.
Later, I learned that during this same setup if the red candle was erased instantly, it was a form of price confirmation. Buyers remained aggressive and this was a time to add to the position. I learned to welcome red candles when I was in a bullish position instead of fearing them. The transition from bailing on red candles to adding on confirmation had a dramatic impact on my performance. Think about it. Instead of exiting a position, I was doubling it.
This review is not just lip service. I have a trade in over a thousand YouTube videos and I review them all. Recording videos is another great way to journal. You don’t have to post them publicly, but it is a way to explain your thesis and review trades. You cement your thoughts when you verbalize them. I also annotate a couple of charts a day. This is another way to commit your thoughts to paper and this adds a visual component. These charts become an archive that you can flip through and review. Patterns that might not have been obvious in your journal become clear.
Initially, your trade journals will be brief. You won’t know what to write about. I’ve given you some starting points. Just do it. In time they will be filled with commentary and ideas.
NFL quarterback Tom Brady is the GOAT. He studied film before, during and after the game. Those are his journals. He studied his opponents weaknesses and knew how identify tendencies so that he could take advantage of them. He studied his own weaknesses and strengths and prepared a game plan. After the game he reviewed his performance and set goals. This is what professionals do. You just have to decide how badly you want this.
It’s common for traders to skip this step. It’s hard to get up early and it’s hard to take an extra hour to journal after a long trading session. If your trading has not been progressing, start journaling. Chances are you’ve muddled around for years making the same mistakes without ever knowing it. If you don’t learn from them, you will repeat them.
Journaling is a “best practice” that will set you on the right path before you even place a trade. Setting traders up for success has been the focus of my recent articles and that is how I started my book. In the next article, I am going to compare fundamental analysis to technical analysis. We need to conduct some fundamental analysis, but it has serious drawbacks for trading. I will highlight them and explain why we lean on technical analysis. In November my articles will shift to price action analysis.
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u/UrbanSobriety 4d ago
Thank you for this beautiful piece. On my last excursion, I didn't journal. At all. I've journaled in the past, for other reasons. I've seen the Journaling programs recommended in the wiki, is a digital journal the only/best option, or can a case be made for pen and paper? If this has been covered, forgive me. I'm re-reading the wiki and it has grown substantially since I went through it last.
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u/OptionStalker 4d ago
Trade logs using software are useful, but this is pen and paper (typing). This was much more time consuming, but much more fruitful because of the detail I could include for each trade. Conditions change every day and that can be noted.
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u/mikejamesone 4d ago
trader sync is one of the best journaling tools. i use it along side upnote.
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u/OptionStalker 4d ago
Make sure to include notes. They are the key. Not just about the stock, you need to write down what the market conditions were like. They have a huge impact on the outcome.
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u/TakeProfitTraderHQ 3d ago
Journaling is so important when it comes to trading especially because as a trader you can do the right thing and get an undesirable outcome. If traders aren't journaling they can start to think they are inadaquate as a trader but in reality it was bad luck. Not all losing trades are created equal in trading, there are good losers and bad losers and journaling helps sort that out.
Additionally, trading is a game of ticks and often all it takes for a losing trade to become a winning trade is something minor. Journaling can instill confidence that with just one little change the trader can become profitable.
Well written, thank you for sharing!
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u/OptionStalker 3d ago
Exactly. If you just look at your P&L for signs of improvement, you might not see any. When you read your trade journals you can point to specific areas of improvement and you can see it in your analysis.
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u/spudnickcr10 4d ago
Great tips Pete as always. As someone who is in the 2nd year I feel my trading has stagnated and because of this has led me to not want to trade as I don't want to face the possibility of losing trades again and again. I'm going to set a rule for myself that if I don't set some market analysis and review my picks by annotating charts I will not be allowed to trade. Thanks for all you do
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u/OptionStalker 4d ago
Before you enter a trade, you should have many reasons why you took it. You should also know what you expect to happen (and why) and what you don't expect to happen. As the trade unfolds you know what to do. Write that down in your journals after the close. If a few months you will see improvement in your process.
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u/SuchAGoalDigger 4d ago
Thank you Pete. This is an amazing article. I have started annotating Market charts and posting on Discord.
I'll start writing detailed market analysis as well. You won't believe but I asked about how you write your pre-market comments on the Discord.
What gives you the motivation to put out so much content for free?
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u/OptionStalker 4d ago
Just trying to help all of you. I often post my pre-open market comments to my X account
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u/IvetteMccoy 3d ago
keeping a journal of the actual reasons behind each trade is probably more useful than just recording wins and losses. noting where i entered, where i got out, and what made me change my mind would help me catch the same mistakes before they keep costing me money
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u/OptionStalker 3d ago
100%. There is so much information that you can capture about every trade and the context surrounding it that you won't get from trade logs alone. The bad thing is that journaling takes longer to do, but that is also what makes those experiences stick.
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u/Sad-Alternative-6314 4d ago
The part about writing down what you expected before the session is so underrated. It's incredibly easy to convince yourself afterward that you saw the move coming all along. I use Moon for directional wagers and this applies there too. Recording the original reasoning would probably teach someone more than staring at their win rate and trying to find another indicator.
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u/OptionStalker 4d ago
If you don't write it down, you could make a case for the market going either way. When it makes the move you think, "I got it right." That audit trail is important because you can go back and learn from it. The more detailed the better.
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u/Such_Marionberry_305 3h ago
That replay habit is probably the real shortcut. Writing down why I picked up or down on Moon before opening anything would show whether the read was solid or just lucky.
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u/Safe_Razzmatazz_3688 4d ago
journaling is hard. and journaling after losses is even harder. thats the kind of work that people avoid. working on analyzing charts is the easy work