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Spend
"Quality Time" Studying Trading and Markets
By
Jim Wyckoff
A
good percentage of my readers are futures traders who consider
themselves beginners and have traded for less than one year. Most of
these readers are very hungry for information they can digest in
order to move "up the ramp" to an experienced (and
hopefully successful) futures trader.
Most
of my readers have "day jobs" or other commitments that
don't allow them to be full-time traders. Thus, the time they do
spend studying futures markets and trading needs to be "quality
time."
I
have been fortunate in my career, because I get to spend all day
long at work studying and being involved with markets and trading
strategies. And I love it! I feel a responsibility to my valued
readers is to help you focus on the "quality" information
you need to study--because the vast majority of you do not have all
day long to be involved with the markets.
(A
quick anecdote: In the 1980s, I began my career in the futures
industry by working on the floor of the Chicago Mercantile Exchange.
Right away, I fell in love with the markets. After a few days on the
job, I went home one night and told my wife: "I'm going to
learn all I can about the markets, and then trade them--and we'll be
rich!" Well, first of all I was pretty young at the time and
was a bit optimistic (naïve??). Secondly, I soon found out that
trying to become a successful futures trader is a lot like playing
golf: When you first start out, you say, "Hey, this game is not
so difficult, and I'm doing okay." But then after you have
played the game for a while, you realize how challenging golf really
is, and how "green" you really were when you started
playing.)
So,
what can beginning futures traders do to "ramp up" as
quickly as possible, on the road to becoming a successful trader?
Below are just a few "nuggets" that I believe will help
the beginners get up to speed as soon as possible--and also may get
some veteran traders who are struggling back on the right track.
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First
of all, there is no substitute for real trading and market
experience. You can paper trade for months, but when you've got
real money on the line, it's different. Stuff just "sinks
in" to your brain and is not forgotten when you're making
or losing real money. But the good thing about experience is
that it's something everyone can accrue. Just by reading this
story, you are gaining some market-related experience, which is
part of the experience you need to become a successful trader.
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Become
familiar with the markets you plan to trade. Not only study the
markets and their supply and demand fundamentals, but also study
how the market is traded--on what exchange, the contract size,
trading hours, expiration of the contract month, delivery
notices, if applicable, etc. All of this information can be
found free on the Internet. Just go to a bigger futures exchange
website, like the CBT, CME or CEC, and there is all kinds of
information on the markets that trade on that particular
exchange. There is also other valuable information on the
markets at those sites. Again, it's all free.
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Read
some good books by successful futures traders. Not only do you
need to know the markets, you also need to know how the
successful traders trade them. Much of a trader's success comes
from his or her "trading psychology." The best place
to learn about trading psychology is from books, such as Jack
Schwager's "Market Wizard" books. The better books
also discuss money management in futures trading, which is also
very important.
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Study
a variety of trading methods--not just one trading system. I get
a lot of email from beginning traders asking about a certain
trading system that costs X amount of dollars. My advice is to
them is to take the money they would spend on a single trading
system and go to a quality seminar and listen to several of the
best traders in the world explain why they are successful.
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When
studying, don't dive into just one subject or one market and
focus solely on it. Spend your study time touching on several
topics or markets. My experience is that I absorb more of the
subject matter (and it's less boring) when I read some of it,
and then come back to it later. Also, if you get into
complicated subject matter, sometimes it's better absorbed when
it's digested in smaller pieces.
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