All aspiring traders want and need effective, practical education. So they navigate the web with great effort and tenacity in order to find quality education…until they discover it may not exist. Or perhaps it does not exist in the form they expected to find it.

Frustration grows, and the aspiring traders attempt to go through “the school of hard knocks” in the belief that real-world trading-related knowledge is kept secret. The trader usually gives it his best effort, but fails to make any significant headway.

This is what happened to a reader who recently got in touch with us. Unfortunately, after spending a small fortune on “formal education”, was unable to make any headway. He was forced to “go at it alone” and has fortunately found a certain niche that works for him, but has remained highly skeptical of trading education latu sensu.

His story is not unique. Most aspiring traders proceed along the same path but the majority fail to embrace “experimentation” and go back to square one, paying for some kind of education that will give them a “recipe” for success. They are desperate for results and apply the “recipe” to everything that moves – without any consideration for market conditions, risk, position size, etc.

You get the point: it’s too easy to end up in a vicious, frustrating cycle in this job. But there is a way out. Let’s explore it together.

Experience and Experimentation

Let’s cut to the chase: the world is full of people with extraordinary talent who jump into an endeavour with great passion and are capable of learning through the school of hard knocks. Some market wizards and peers that started playing the game in the 1960s/70s did just this. But they represent the exception – the survivors that make history. Most people do not have that kind of talent or time to dedicate to the markets and as such, are better off to seek guidance.

If you still believe that there are “secrets”, unrevealed knowledge or insider information which allows certain people to succeed, know this:

all the market wizards have said there is no “secret ingredient”.

So you might be thinking: “if there’s no secret ingredient, how did they learn to trade the way they did?”

The answer is a combination of experience and experimentation: they garnered much of their FX trading knowledge from IMM futures traders (who were buying strength / selling weakness and adding on further strength / adding on further weakness). They also experimented with the new concepts Welles Wilder developed in the 1970s (RSI, ADX, etc.) and created the core building blocks that many systems were originally built on. And where did the IMM traders learn how to trade? They experimented with Dow theory, Gann’s studies and stock market analysis from the early 1900s.

All these people were forced to “experiment“. If there is one difference between successful market participants and unsuccessful ones, it is the amount of hard work that is deployed. Trial & error was the way the market wizards & their mentors came to understand concepts that work in the markets.

But so few people can actually be bothered to sit in a room and thoroughly practice, test, record results, fail to succeed and try again.

Mental Blockades

So to get you started on the right foot, here are some “recipies” of our own, going from long-term objectives through medium-term objectives down to short-term objectives.

We have laid down some systematic decision making rules in each “recipe”, and these recipies are freely available on our blog. We have no trouble disseminating these “recipies” because we know that mental biases will refrain most people from properly utilizing them:

  • Most people simply won’t put in the necessary time and effort in order to practice and demo trade the method chosen for a long enough time to thoroughlly understand it.
  • The people that overcome the first phase will attempt to trade it live, but will succumb to the psychological pressure of risking real money, and failing to realize that this job doesn’t suit their personality.
  • When the first string of losses comes up, most people will be frustrated and go searching for another model without understanding that over a small number of trades, the results are very much random. Furthermore, it’s not the win rate that counts – it’s how much you make when you win.
  • All the while, pressure to perform will be a burden that will impair the possibility to understand, adjust, and learn from the process.

Systematic Success

The real issue is that most aspiring traders are looking for a quick way to make money, and are not interested in learning the game. We’ve spoken many times about the negative effects of focusing on the money.

So here is how to properly test a trading strategy, to see if it suits your own beliefs and risk tolerance or not:

  • apply it on a demo so to avoid pressure and stress;
  • understand what the core concept of the model is;
  • understand which market types are most adequate for deploying the model;
  • diligently record the results and watch how the market responds;
  • after 30 trades, make necessary adjustments and start over;
  • seek to reach 3 months of consistent results before going live;
  • when you go live, deploy 20% of your total risk capital and trade small;
  • if you end the month in profit, deploy another 10%, and so fourth (so risk more based on your results).

You may not realize it at first, but just by having a systematic approach to the markets will cut in half the time it will take to gain consistency because you will have a focus and will not jump around. Also, by viewing the market from the same angle time & time again, you will become a specialist.

Education + Hard Knocks = Relevant Experience

The real solution is that quality education goes hand in hand with practical experience. You will need to get your hands dirty, and get your share of hard knocks before making headway.

And if you’re still stuck and can’t find a way out, get in touch. You do not have to face this challenge alone.

About the Author

Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.