Thread by @shiftingshares

If I had to start trading all over again, here is how I would start and get to profitability in 15 steps.

// THREAD //

1/ Find the exact types of stock you want to trade.

Specific sector?
Specific platform?
Specific market cap?

I would identify a segment of the market to trade and focus on.

I'd then:

• Learn about these stocks
• What drives the stock prices
• The mechanics of the market

2/ Find the exact patterns you want to see in those stocks.

I would look at historical data and pattern-match.

• Look for commonalities among trades
• Identify the time frame required for the trade
• Come up with a formula that can be used repeatedly

3/ Work out how you can find these patterns repeatedly.

I'd then need to know I can find my formula for future trades.

This may require:

• Swapping ideas
• Software/custom filtering
• Picking new information sources

Once you know how to find these patterns, you need to...

4/ Know the amount of time required per day/week to find these trades.

I'd want to have consistent idea generation.
No ideas = no trades.

Anything that saves you time saves you money.

This needs to be built into your existing routine to make it sustainable.

5/ Do the work required to find these opportunities.

I'd then keep on top of my trade inputs (news, software, filtering, idea swapping) to keep a pipeline of potential trades flowing.

This business is all about reps and you get out what you put in.
Lazy traders lose money.

6/ Build a morning routine to place these trades and monitor your business.

Lots of traders like to wait to see if they're right before placing a trade.

However, you're paid to execute when the risk/reward is in your favour.

Take the trade as your plan dictates. Then...

7/ Start collecting initial data from your trades into a journal.

I'd then create a simple Excel doc with several columns including entry, exit, position size, commissions, P&L, and emotional feelings.

Collecting data is essential because without it you can't improve.

8/ Open your journal to look at your winning trades to find consistencies.

A small amount of trades will generate most of your P&L.

If you can find the conditions for success, you can replicate them.

Look at:

• Entries
• Fundamentals
• Market conditions

9/ Check what happens after you close a trade to see if you're leaving money on the table.

Trading is about:

1) Losing less from your losers
2) Winning more from your winners
3) Increasing your potential trade ideas

If you're closing too early - what will you do about it?

10/ Work out how you can lose less from your losing trades.

Traders are money managers.
Protect your capital at all costs to stay in business.

Are you:

• Missing alerts to sell?
• Not honouring your stops?
• Getting slipped by your broker?

Fix these for immediate results.

11/ Identify your most profitable patterns from your playbook so you can now trade these in larger size.

Most traders make the mistake of sizing up too quickly.

Try 20% increments on R (not position size).

Remember, R is calculated by taking risk per share/ position size.

12/ Trade your best patterns in larger size and continually monitor your P&L to improve.

This is just repeating what you're already doing with your journal.

1. Idea generation
2. Backtest the idea
3. Execution (live testing)
4. Refine the idea (improve)

It's a journey. Now...

13/ Look for more patterns to scale up horizontally as well as vertically.

Markets change, and strategies can become obsolete any day.

Once you have a few profitable patterns the focus should then be on finding new profitable patterns.

You want to build a playbook of trades.

14/ Continue learning because the market changes and doesn’t always stay the same.

Those who adapt survive and prosper.
Those who don't enter the annals of history.

Nobody remembers the former pit traders who didn't adapt to electronic trading.

15) Show up daily because profitability is the result of small actions compounded.

Trading is about playing the long game.

You never know which trades will be big multi-R winners on your bell curve hence why you have to stay consistent.

Thanks for reading! Please RT the first tweet if this was useful.

You can also follow @shiftingshares for more threads on trading and investing.

https://twitter.com/shiftingshares/status/1447476082060500993

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