The Solo Trader’s Guide to Effective Trading


The basics

Ordinary workers and traders hold distinct attitudes and beliefs in the workplace. For many individuals, going to work is a chore that they dread, and Wednesday is viewed as the "hump" day, marking the halfway point until the weekend when they can finally relax and enjoy their lives. This sentiment is reflected in the famous song "Take This Job and Shove It." However, for traders, this perspective is turned on its head.

They eagerly look forward to Monday mornings, as it presents another opportunity to test their skills against the market and be rewarded for their efforts. The long holiday weekend may even be more challenging for them since trading is so engaging that time flies by without them even realizing it. There's nothing dull about mapping out a successful market strategy and implementing it. Learning to trade provides not only financial gain but also the freedom to pursue one's passions.

Many people who aspire to become traders often need assistance and may fail. The primary reason is their need for knowledge and understanding of basic trading principles. Even though there is an abundance of experts, analysts, commentators, and gurus in the trading world, more than the information provided is needed to guarantee trading success. Thus, there is a need for more comprehensive and reliable information on how to trade successfully.

However, learning to trade is only as challenging as learning any other skill, such as becoming a skilled chef, police officer, or pilot. It requires a strong foundation and an understanding of the fundamentals before one can progress. A prospective trader needs to learn the basics, such as reading charts, analyzing trends, identifying patterns, and interpreting data. Having a good understanding of these basic concepts is essential before proceeding to more advanced trading strategies.

Once the basics are mastered, a trader must learn the best strategies. There are several trading strategies, and finding the ones that work best for you is essential. This requires practice, dedication, and patience. While some concepts are easier to understand, some are more complex and require more time and effort. However, one can learn even the most challenging trading concepts with practice and determination.

Becoming a trader is not something one is born with but rather a skill learned through hard work. While some may have a natural talent for it, most must try to uncover their abilities and hone their senses to reach their full potential. Successful trading requires understanding the market, and this cannot be achieved through guesswork, following tips, or indulging personal opinions. Staying informed and keeping up with the latest trends and developments is important.

Over thirty years ago, I began developing a trading system to assist my trading business. Over time, I made this information available to aspiring traders looking for good market analysis. Many individuals have relied on my guidance over the years. However, as want-to-be traders have discovered, trading takes considerable time and effort to make a living from trading.

As a trader, it's crucial to maintain a positive attitude and not let any past mistakes affect your future trades. You need to clearly understand when to adopt a cautious approach and when to take bold and calculated risks in the market. Turning a bad trade into a profitable one is not the best strategy. For instance, the 20 February 2020 stock market crash worldwide is a reminder that missed opportunities cannot be regained. Therefore, exercising discipline and waiting for the right timing before making a new move is essential.

The market constantly presents new opportunities, but it can take time to determine when to make a move. Capturing these opportunities can feel like trying to catch running water - it's elusive and requires much effort. But if one can seize the right opportunity, it can be mighty. This is a paradox that can be confusing for novice traders. How do successful traders take risks while others only want to play it safe? What strategies work, and which ones don't? How can you become a specialist and keep winning? These are all questions that need to be answered to succeed in trading.

The question is whether one can learn to trade like a professional. For most people, however, the lessons of the professionals who trade these markets every day can be assimilated. We live in a world that presents us with unprecedented opportunities. One such opportunity is successfully playing the fastest game in town—trading. I hope this ''show me the way'' will help you on your journey.

Short-term trading is not for everyone!

The pitfalls of short-term trading are numerous, and it's important to understand the downsides. All traders lose money at some point, but managing risk is the key to success in short-term trading. Effective risk management involves identifying potential risks, setting realistic targets, and using appropriate trading strategies to minimize losses. Managing risk is at the heart of short-term trading.

This type of trading may only be suitable for several reasons, as studies have shown that credit availability from traditional broker institutions can influence short-term trading. People may engage in short-term trading to make quick money, but this practice can result in borrowing to finance margin requirements against trading financial contracts. Short-term trading may only sometimes be the best or most sustainable option for meeting financing needs.

However, short-term trading is often guided by speculative behavior, momentum trading, and focusing on short-term profits. This type of trading by short-term speculators and institutions can lead to market overreactions, resulting in increased volatility and risks. Moreover, research has shown that the interplay between short-term and long-term market participants can impact trading dynamics and outcomes.

Moreover, the nature of short-term trading can result in inefficiencies and herding behavior in the market. Short-term traders may exhibit short-sighted behavior, possibly influenced by recency bias or the desire to demonstrate activity in trading decisions. This behavior can lead to suboptimal outcomes and market inefficiencies. Furthermore, the short-term focus of specific traders may lead to a lack of consideration for long-term investment goals and strategies.

For those with experience in short-term trading, it can be compared to rock climbing; just like learning to hold onto the first foothold when climbing, learning to trade successfully is a significant accomplishment. With time, after many attempts, you can eventually reach the top and marvel at the view, wondering how you got there. You need to follow specific rules to succeed in this type of trading activity. All the typical clichés are valid, such as managing risk, exercising discipline, and distinguishing between fear and greed, as other intangible qualities separate the winners from the losers.

You must keep trying!

While there is a tendency to blame a host of villains for one's difficulties in the market, the real struggle at the bottom comes down to you against yourself. As in life, unless you are willing to take responsibility for what happens to you, you set yourself up to become a perpetual victim. In the market, what you do—and don't do—matters. The problem is that the lessons you learn in the market often prove to be so expensive.

My introduction to trading is most paired with the experience of most readers of this guide. However, my keep on trying was not a conventional one. I ventured to become a floor trader with the help of my friend Steve. He was already a seasoned trader at the S&P 500 trading desk of the Chicago Mercantile Exchange (CME) when he offered to teach and prepare me to become a floor trader. I remember feeling excited and overwhelmed at the thought of trading in the pit. Steve spent countless hours teaching me the ins and outs of the trading business. He taught me how to read locals, analyze other traders' trading patterns, and make quick decisions. Looking back, I am grateful for Steve's guidance and mentorship.

At the time, I had little appreciation for what lay ahead. I began to gain confidence in how to win in the futures market. There were definitive dos and don'ts that you had to follow to remain solvent, and nevertheless, I was on my way. Once again, all the clichés were true. You had to manage risk and exercise discipline. And take reasonable risks—all while walking a fine line between fear and greed. Despite one's tendency to try to romanticize the life of a high-stakes pit trader, there was nothing romantic about it. It was all hard work ahead for me.

I was almost living my long-held fantasy, ready to take the plunge. However, just as I was about to take the final leap, my mentor said, "If you can manage to break even after six months, you can earn a lot of money." Although it wasn't the advice I hoped for, it seemed reasonable.

I thought I would be on my way if I'd survived a few months, day in and day out, ups and downs, and were to be solvent. So, after brainstorming this future adventure and realizing that pit trading was a battle—it is like going to war, hand-to-hand combat—it took everything you had to give—and more—to put mildly, I decided that after the Vietnam War experience, this was not for me.

Consequently, I decided to become a floor trader off the floor. By doing so, I could still experience the rush of adrenaline that comes with the profession and fight to come out on top, even if I'm not physically present on the trading floor. This lifestyle allowed me to enjoy a better quality of life.

Embrace the risk!

I'd been paying my initiation dues in the futures market in the early years. Like many traders, I have made various unwise decisions and learned to overcome them, albeit with some difficulty. Despite being knocked down multiple times, I have persevered and come to terms with the inherent risks in this line of work. Fear, combined with greed, is one of the primary motivating factors I have encountered, and I have struggled to avoid making mistakes due to this emotion. Nonetheless, I have learned to navigate these challenges and stay afloat.

Examining these mistakes proved an eye-opener. How many times had I given up in the market due to fear? I was simply afraid. Rather than lose money out of fear, I reasoned I might as well embrace the risk—go for the door prize. At least, then I would know that I'd given my best. Wasn't a sense of fearlessness a hallmark of winning trades? What were the qualities that enabled you to win? l had hit upon a trading benchmark: Embrace the risk. For most of us, short-term trading is hard work requiring you to master a learning curve. The objective is to accelerate the process. Trading is an activity that involves a harmonious blend of creativity and analytical insight.

Acquiring knowledge of the mechanics of trading is one thing, but successfully executing trades is another. To mitigate potential trading risks, consider engaging in paper trading to simulate the experience without risking actual capital. Paper trading involves recording and analyzing trades to track results, allowing a more thorough understanding of the trading process. By adopting this method, traders can gain valuable insights and improve their trading strategies before engaging in live trading activities.

Conversely, even a modest investment will heighten one's senses and emotions in a manner that paper trading cannot emulate. The number of contracts also determines the degree of this commitment and is likely to impact the investor's ability to reason and execute trades effectively. It is important to note that the level of investment should be approached with prudence and caution, as it can affect one's ability to make sound decisions and manage risk effectively.

There is no substitute for the real thing—real dollars-in-the-market money. You can try to simulate trading, but you will have to plunge into actual trading sooner or later. The challenge is to make this transition as painless as possible.

During the early 1980s, when I commenced trading, only a few publications were available on the futures market. However, the number of books devoted to this domain has increased remarkably. Similar to numerous readers of this guide, I was determined but had modest capital to work with. Upon reaching my trading desk in the morning, I promptly realized that despite any cordiality extended by traders at large before the market opens, one must rely entirely on one's capabilities once the bell rings. The trading world operates under a sink-or-swim mentality, where survival is paramount.

In time, I began to earn a modest living, trading futures off the floor. By taking note of my mistakes and making efforts to correct them, I learned to take reasonable risks. I studied what the winning trades did and tried to emulate this scenario behavior the next day. Frankly, what the winners often did was beyond my emotional capabilities initially. But, in time, I realized I had only two options: Trade like an amateur and lose or learn to trade like a professional and win. I was determined to succeed, which led to the discovery of the Trade Selector System.

The players

When companies or individuals who deal with a physical commodity or financial instruments enter futures as a form of protection, it's called "hedging." Well into the second half of the 19th century, hedgers were allowed to trade on the futures markets. They were let in for a fundamental reason—to provide liquidity. Let's see what this means.

If only producers and users of commodities could trade through the exchanges, there wouldn't be enough contracts on the market at any one time to keep everything moving—and the hedgers would still be at risk. What if, now, the farmer wanted to enter a futures contract for his corn, there didn't happen to be a buyer available? Or what if a manufacturer needed to find a seller when there wasn't one around? They'd both be tied up.

Or what if one of them was in a contract and had to get out quickly? The manufacturer may have decided to move his production base and would be out of commission when delivery was due. Or perhaps the farmer needed his crop to feed a herd of livestock he bought.

Suppose farmers and manufacturers are to have the protection of futures contracts and the freedom to run their businesses with flexibility. In that case, they must get in and out of contracts quickly. And that means the markets must be liquid; there have to be many contracts being bought and sold all the time. So, who's doing all that buying and selling?

Arbitragers: Arbitragers play a crucial role in ensuring the efficient functioning of futures markets. They capitalize on price differentials between related assets or markets by simultaneously buying and selling associated contracts to lock in a risk-free profit. Arbitragers help to align prices across different markets and ensure no significant price divergences.

Other participants, such as institutional investors, proprietary trading firms, market makers, and speculators, contribute to futures markets' liquidity. Institutional investors may use futures contracts as investment strategies, while proprietary trading firms engage in high-frequency trading to profit from short-term price movements. Market makers play a vital role in providing continuous liquidity by quoting bids, asking prices, and facilitating trading activities.

Overall, the diverse participation of hedgers, speculators, arbitragers, institutional investors, proprietary trading firms, and market makers collectively contributes to the liquidity and efficiency of futures markets by buying and selling contracts based on their respective objectives and strategies.

Learn to be a specialist!

One observation I've made watching pit traders, which is especially notable on the trading floor, is that everyone who succeeds is a specialist. Unlike the novice trader, who may dabble in as many as a dozen different financial instruments, the professional floor trader is identified with just one kind of contract and one specific type of time-frame trading. Every market has its rhythm. By doing the same thing every day, the professional floor trader understands that rhythm to the degree that is not discernible to the casual participant.

With my trading experience, I have covered the specialization of technical approaches to the Trade Selector System. Nevertheless, I encourage you to become a specialist and excel in your chosen area of day trading, swing trading, position trading, or whatever you decide to be. You may be surprised at how some people react when they learn of your specialization. They may think you are limiting yourself by trading only one financial instrument, such as the S&P 500, Eurodollar, or Bitcoin.

Find a mentor!

To become a successful trader, it is essential to have a mentor who can guide and support you throughout your journey. Finding a mentor can be a game—changer as they can provide valuable insights and practical advice to help you navigate the complex world of trading. A good mentor can help you avoid common pitfalls, develop your trading strategy, and provide the necessary knowledge and tools to succeed.

Having a mentor has significantly influenced my growth as a trader. The insights and knowledge shared by my mentors have helped me refine my skills, stay motivated, and remain focused on my goals. Finding a mentor with experience in your area of interest and whose trading style aligns with your own is crucial.

In my early years of trading, I was fortunate to have mentors who appeared in my life at the right moment. They were able to offer guidance and support when I needed it the most. Finding the right mentor is one of the best investments you can make in yourself as a trader.

The technical and intuitive quantification of the trade!

As a trader, I have come to understand the importance of Trade Selector System market symmetry charting analysis compared to relying solely on intuition or many conventional mainstream indicators. While intuition and conventional trading indicators certainly have their place in the trading world, they are only sometimes the most reliable guides to market trends and changes. On the other hand, Trade Selector System charting analysis is a powerful tool for identifying opportunities and making informed decisions. Therefore, I make it a point to incorporate both approaches into my trading strategy, using my intuition (about 5%) to supplement the system's information.

After extensive trading experience over several decades, I have discovered and continue to uncover a direct correlation between the level of qualification in trade and its outcome. To determine the highest probability of a trade's success, I analyze the market's trading activity for the previous five days and compare it to the days of the week. This analysis allows me to identify accurate probabilities based on market symmetry, which I partially demonstrate on Trade View daily charts analysis.

For example, by analyzing market activity over a short or long period of time, one can determine and produce successful trades based on the market's price action data and market symmetry and make more informed decisions about dips and rallies, when to enter trades, and when to exit them.

The technical approach to trading is highly effective, particularly when combined with an intuitive strategy. Chart trajectories allow one to visualize statistical probabilities in real-time. As a result, a trader can gain a deeper understanding of market repetitious symmetry trends and make more informed decisions about their outcome.

The problem is that most traders need more patience to wait for profitable trades to develop. You need to learn before genuinely trading like a professional; therefore, a mentor who can guide and support you throughout your journey is essential.

Critical components to being a successful trader!

Becoming a successful trader is a challenging task that requires you to master two critical components. The first one is the analytical skills needed to read the market. This skill can be learned by carefully studying past trends, identifying patterns, and staying up-to-date with news and events that can impact the market. By developing analytical skills, you can predict with some degree of accuracy where the market is headed.

The second critical component is confidence in your trading skills. You need to know where the market is going and be able to capitalize on the situation. This is often referred to as money management. Still, it should be called self-management because it involves managing your money, emotions, discipline, and risk tolerance. To be a successful trader, you must be willing to take calculated risks, be patient, and be disciplined to stick to your trading plan.

It's worth noting that some of the best analysts often lack trading skills. They can tell you where the market is going but cannot utilize that knowledge in the marketplace. That's why gaining trading skills is essential to become a successful trader. By mastering both analytical skills and trading skills, you can confidently navigate the marketplace and capitalize on opportunities that come your way.

After years of trading, I realized that more than mastering analytical techniques was needed to guarantee success. I needed to refine my self-management trading skills and learn how to choose the right trades. I had learned to avoid obvious mistakes, but I knew that failure to observe money management rules could still doom even the most astute trader. That's why I focused on improving my trade selection skills, which can make the difference between a profitable and a failed trade.

Despite years of experience, I still needed to fine-tune my trade selection. Sometimes, five minutes too early or late could make or break a trade. But I remained determined to improve, knowing that careful analysis and strategic decision-making are essential for successful trading.

During my teaching, I observed the trading patterns of various traders, and two distinct syndromes prevailed. On the one hand, some traders were overly cautious and hesitant to enter the market. The fear of losing money often paralyzed them, and they would not take risks even when the market presented a favorable opportunity. On the other hand, some traders were excessively reckless, with a "go big or go home" mentality. They would only take significant risks with proper research or analysis, hoping to make a fortune overnight.

Many novice traders tend to follow a conventional approach when starting. They usually begin by trading one lot/contract, placing a stop order, and hoping to exit the trade with a profit at a predetermined exit point. If they succeed with this strategy, they start increasing the trade size. Although this approach seems rational, it only works in some cases. The reason is that, regardless of the trading strategy used, most of the profits are generated by a minority of one's trades.

The traders who succeed in the long run typically possess a unique ability to identify the potential big money makers and capitalize on this knowledge by taking more significant positions. They have a keen eye for finding opportunities that have the potential to yield substantial returns and manage their risk accordingly.

I have often observed this approach among experienced floor traders when watching the S&P 500 pit. The most successful traders start with modest positions and increase their commitment based on their confidence in the trade. They also vary their position size depending on the risk-reward ratio of the trade. By doing so, they can maximize their profits while minimizing their losses, which is the key to long-term success in the trading business.

Some traders tend to strategically place their positions within either buy or sell zones, knowing that the trade still appears favorable. However, if they realize that a trade is a mistake, the same trader will exit the market by giving up their edge and selling to another local to limit their losses. The main challenge then becomes identifying excellent trading opportunities. The question is: How can you determine the potential winners in advance?

Patience and selection of the trade!

Undoubtedly, one answer is patience. Another is selection. Considering the widely recognized fact that high-quality trading opportunities are limited daily, it's essential to reflect on how pursuing nine or ten trades could be justified. There are ways to optimize one's approach and make the most out of the limited opportunities available. Let's explore this further!

Your broker is usually the only one profiting when you overtrade. Only two or three good weekly trading opportunities require little effort to identify. If you've experienced the frustrating search-and-destroy trading pattern, where the market churns up and down, you know exactly what I'm talking about.

Based on my research, this pattern usually occurs in the middle of the week. By understanding this simple probability, you can mark your calendar and avoid these days, allowing you to enjoy activities such as golfing and fishing instead. This way, you can leave the frustration of a non-directional day to someone else.

Many traders want a high probability of winning trades, but only a few are willing to wait for the right opportunity. Knowing that things will eventually work out requires a lot of patience and confidence. It's essential to remember that a day without trading and losing money is better than a day when you do. Novice traders often try to force a trade, like capturing running water or lightning in a bottle.

I understand that the market always presents opportunities, but it's important to note that only some opportunities should be pursued. It's essential to take a balanced approach. As someone who struggled with patience, I can attest that the market teaches two valuable lessons. Firstly, trying to find absolute certainty can lead to adverse outcomes, as there are no guarantees in the market. Secondly, impulsive and reckless trading, like daredevil driving, can have predictable and unfavorable consequences.

Let me explain!

I became a winning trader when I discovered the existence of predictable patterns. This technique embraces time and price symmetry, support and resistance, and the clay of the week probability to determine the best moments to buy and sell in markets.

No, I don't claim to be the most intelligent guy on the planet. I used better analytical techniques based on the complexity of several forces: supply and demand, price theory, human behavioral psychology, and other sciences that account for how fundamental markets behave, which is the main factor in my system modeling.

In modern times, many more highly intellectual people are involved in various businesses. This creates a false impression that there is an explanation for everything and that the main objective is to find it due to the vast amount of information available on the internet.

A model I use at Trade Selector System is how a market would often "tip its hand," telling you exactly where it was going, usually well before the scenario played out. I took the best intuition my mentor used to earn himself a fortune. I translated the numbers into symbol patterns that told me the likelihood of a precise target goal and the target price would be hit.

I added a longer-term, daily scenario pattern—the day-of-the-week probabilities—to this, which indicated whether the market would likely rise or fall and, significantly, whether the move would occur early in the morning/week or late in the afternoon/week. The resultant numbers gave me a new way of looking at the market.

Never again would l have to guess about market direction. The answer was right there in front of me. Now, the next leg should rise (or fall) so many points in so many stages. It was simply a matter of learning to measure the market.

I was amazed by the market's symmetry when I started using this approach. W.D. Gann, the market pioneer who once predicted the price of Penn Central railroad shares to the exact eighth of a point, was correct when he asserted that there are predictable patterns in the market. Moreover, I realized the market's identification of trading moves using this approach, which I called symmetry of the time and price.

In closing, one needs to Fine-tune one's trading skills to predict where the market will go and when it will get there. The trader's goal is to use the tools at his disposal to understand better the situation of the asset he's trading, which will help improve the bottom line of his trading business.

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