The education of a trader- part 1

I started trading during what was probably the worst time a new trader could possibly start learning this craft- the summer of 1999. Knowing only that I wanted to open a brokerage account, and start learning how to make money at this, I bought a copy of the latest Motley Fools book, reading their website, and buying stocks through a newly opened Schwab account.

The problem was- I did great! By the end of the year, I was up more than 80%. This was by buying the types of stocks that the Fools said to- those great companies that you know about. So I bought Gap, Microsoft, Cisco, and Coke. Then came 2000. By this time, I was also subscribing to a tech newsletter, and bought when it said to, and never sold- why would anyone want to ever sell?

Making a long story short- I bought the dips as the newsletter said and never knew when to sell. This was in part due to my lack of understanding, but also because the analysis and newsletter writers all screamed about the tremendous buying opportunities on these "dips". "Back up the trucks!". By the time the bleeding stopped, I was down by more than 75%, and closed out the account.

After the pain had subsided, I started again, but began reading more about charts and technical analysis. I started reading IBD, and learning about CANSLIM, about swing trading, position trading, day trading, beating the DOW, mutual fund trading, on and on. Then I learned about the psychological aspect- how one trades their beliefs about the markets, about self sabotage, then about business plans, worst case contingency planning, and having multiple systems for varying market conditions.

Needless to say, my head was spinning. What I really learned was- there are many many ways to trade the markets, scads of time frames, entry methods, exit methods, and trade management methods. This freedom allows for unlimited ways of making, or losing money. I needed to develop a trading method that worked for me, and to create a set of guidelines that I could test, and then follow.

More to come....