StockFetcher Forums · General Discussion · 17 Steps to Becoming a Great Trader<< >>Post Follow-up
TheRumpledOne
6,358 posts
msg #42905
Ignore TheRumpledOne
4/12/2006 8:27:54 AM

17 Steps to Becoming a Great Trader


What ARE the 17 Steps?

by Van Tharp

I have worked closely with traders and the markets for over 20 years. I’ve seen the good and the bad,

which has given me experience and insights into what works and what doesn’t work in the trading game.

The same questions, fears and lessons continue to rear their heads year in and year out.

I believe that there are a series of steps and important questions that any trader must address to work

consistently and long term in the markets. Through my many years of coaching I've managed to evolve

this information into a series of 17 steps.

Lets take a look at the 17 steps one by one, with the first of the eight steps involving the

development of a sound business plan.

First — assess your beliefs about trading and about yourself.

Although it’s difficult to grasp, did you know that nobody actually trades the market? Instead, you

always trade your beliefs about the market

Second — determine your objectives for trading. System experts know that understanding your

objectives thoroughly is half the battle in developing a system but most people have never taken the

time to even consider what their objectives might be.

Third — understand the big picture. What’s the market doing overall and how can you measure it for

yourself? It's important that you know how to determine the big picture for yourself and how to

measure it.

Fourth — include three strategies that are compatible with the big picture in your business plan.

Although there are thousands of systems out there, there are not many types of strategies. Know the

essence of ten key strategies that you could use, the general picture of how they work and how you can

adapt them for yourself.

Fifth — understand what your personal edges might be and how they set you off from the crowd. Having

an edge in the markets isn’t just a slight advantage; it could be the pivotal difference in your

success. So it’s very important to list your edges in your business plan and be able to capitalize on

them. You need to know the key edges that almost any investor has over market makers or institutional

investors. Or if you are a CTA, hedge fund, or portfolio manager, you need to know what your key

edges might be.

Sixth — understand the key systems that almost every business must understand and start to think about

developing structures for those systems. From marketing to cash flow, to back office and clients,

trading is a business and should be regarded as such. More importantly, developing the right structures

and systems is crucial for business success. For example, if you are a private trader, you must deal

with clients – even if those clients are you and your family.

Seventh — develop a worst-case contingency plan. Most people don’t even consider this crucial

component until it’s too late, but the key to a successful business plan is to be able to overcome

disaster.

Eighth — select your trading market based upon two key factors. Learn what you need to know so that you

can determine the following: Are you going to trade stocks? Are you going to trade futures? Are

you going to trade mini-forex or real forex through the big banks? Are you going to do options on any

of these? What market will you trade? Whatever you select must take into account the big picture and

what is likely to happen in the next five to ten years.

Ninth — know about strategy preparation. There are several key sub steps that you should take before

you think about trading. You need to know what you should do to get ready and how to follow up.

Tenth — know the key steps in strategy development and how to test for each. You’ll need to

understand how to test exit signals, determine what your initial risk will be, and select and test your

profit taking exits.

Eleventh — properly evaluate your system. Know what information you’ll need to gather to really test

and compare your system with any other system. It's good to have a formula that will allow you to

compare your system with any other system in the world and rank that system. Thus, you’ll know

whether your system is weak, average, good, excellent, or superb.

Twelfth — master a simple way to get to know your system well without a lot of cost. You need a

method to understand if your back testing is accurate. And, to understand what the worst-case

scenarios will be for your system. Through this testing, you’ll be able to develop a simple position

sizing model to fit your objectives.

Thirteenth — work on your objectives to actually develop position sizing models. This step is one of

the keys to developing a system that fits you.

Fourteenth — know how to do a complete self-assessment. A successful trader needs to know the answer

to these questions: How does my personality type impact trading? What is the most important attitude

that I must have as a trader and how can I assess if I have it? What are my beliefs and values and how

can I assess them? How do I begin to assess my key issues so that I know what could happen that might

really interfere with my trading?

Fifteenth — commitment to do what it takes. There are many things you can do on a regular basis to

really improve yourself. And if you have the commitment to really doing them, you’ll be unstoppable.



Sixteenth — how to develop a top down approach to discipline. Few traders have the kind of discipline

needed for successful trading, but if you combine top-down discipline with regular self-work, you’ll

be amazed at the difference in your trading.

Seventeenth — put what you know into action. Learning and studying are very important factors in any

endeavor, however the only true way to be successful as a trader is to take action. Getting in there

and learning from your experiences.




glm47
51 posts
msg #42908
Ignore glm47
4/12/2006 12:42:26 PM

Nice post. Thanks for that.

Anyone got any thoughts on #11?

"11 — properly evaluate your system. Know what information you’ll need to gather to really test and compare your system with any other system. It's good to have a formula that will allow you to compare your system with any other system in the world and rank that system. Thus, you’ll know whether your system is weak, average, good, excellent, or superb."


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