The 55 Steps to Trade

[The following is quoted from John Piper's book, The Way To Trade.]

1. We are intrigued by the market and start to do some preliminary reading and research.
2. We buy a book or two and perhaps some news letters.
3. We find something we quite like and start doing some research using this particular technique.
4. We dabble a bit in the market. Trading every now and then, mainly losingmoney, but not much, and having the occasional winner.
5. We generally forget about the losers and congratulate ourselves on ourwinners. Convincing ourselves that once we learn the techniques better therewill be fewer of the former and more, lots more, of the latter.
6. We keep manual charts, which may become quite large physically, andmaybe plot a few indicators manually (this was before computers becamequite so available).
7. We spot an approach to the market we think cannot fail to win!
8. We start to trade actively.
9. The results make it clear that it is not as easy as appeared to be the case. There were a few key points we failed to fully appreciate.
10. We continue to trade. Results are fairly indifferent (to bad) but there areenough profits to keep the interest up.
11. We continue to expect great results.
12. Trading volume increases and the amount of money in the marketgrows.
13. We continue to read and take newsletters, but our research has onlyscratched the surface. We still have no real idea what we are involved with.
14. Our technique scores a major success (the 1987 crash), but our lack oftrading skills means that we do not profit from it as we might.
15. The market begins to instill a little fear, but we have yet to learn the first keylesson.
16. We keep trading in size. We are overtrading and clearly act as a fugitivefrom the law of averages. It is only a matter of time.
17. We make a big profit. It is all going well, we start to get overconfident.
18. We suffer a big loss. Psychological problems start to develop.
19. We start to monitor many more indicators.
20. We look at other techniques and other markets.
21. We get wiped out.
22. It becomes clear this is not at all as easy as it looks.
23. We become impossible to live with.
24. It also becomes clear that the information we used is not much use to thoseseeking to make money from trading.
25. We determine to fill this void and look to create a newsletter telling it how it is.
26. We work with an analyst in the USA. Note how inappropriate this is forsomeone who wants to trade. Much better to work with a trader.
27. We continue to trade, but in a much reduced manner.
28. We start our newsletter which is an immediate success.
29. This requires a lot of research plus a lot of analysis, but it is still not clear thattrading is a psychological issue and that the externals (systems / software /computers / brokers / advisers, etc.) are almost completely irrelevant until theinternal set up is right.
30. We are plagued with fear and have no clear methodology.
31. It becomes clear that judgmental trading (without a clear methodology) is adead end.
32. We start to look for a suitable methodology.
33. Those available on the market do not seem to be suitable and so we designour own.
34. We start to trade using a clear methodology. This is not easy but some thingsstart to become obvious.
35. We find ourselves trading for no good reason (something that was impossibleto detect before we had a clear methodology), but then realize that it is due toan argument earlier. Self esteem clearly plays a role.
36. We realize that the key element in trading is our own mentality.Now we can start to make some real progress
37. We improve our systems and start to make some money on a one contract basis.
38. But we are still fearful and this remains a big problem. We learnt, some timeago, the necessity of cutting losses, we cannot get to the second secret untilwe deal with the fear.
39. We keep trading and we continue to do OK, we start to get more confidentand the fear starts to dissipate.
40. We take another big hit.
41. We feel awful and we think we should perhaps give up, should perhaps havegiven up some years ago when it all went wrong the first time.
42. We keep trading and determine not to get overconfident again. We reinforcethe stress management systems we had to learn in the early days and keepmeditating (essential to trading success). We realize the importance ofremaining humble and also of being an “empty vessel”. If you are full ofyourself there is no room of learning anything else.
43. We meet another trader who becomes a mentor. He introduces a newtechnique to us, which immediately “fits”. This is because we now have theright attitude.
44. We build on our success. Systems improve, results improve, and our mentalattitude improves, fear becomes less of a problem.
45. We decide to see a trading coach / psychologist and have an initial meeting.
46. We make a big profit by letting profits run. We have managed to do whatevery successful trader must. Can we repeat this trick?
47. We start to move away from fear, and start to become risk orientated.
48. We realize that mental attitude is all. We see that it is vital to be relaxed,we reduce position size, again!
49. We spend a few days in the USA working in a group with our trading coach psychologist.
50. We begin to make money with consistency.
51. We get a little overconfident again! But this time we realise the fact and thedamage is limited.
52. We start to trade almost subconsciously some of the time. We are becoming expert.
53. We know there are still many challenges ahead, but we are confident that wewill deal with them.
54. Money ceases to be a problem, we truly live in a world of abundance.
55. We find that our lives improve across the board and that we are achieving in awide range of areas.