Where do I Start ... ?

For anyone starting out in trading, the options, choices, advice and complexities are daunting.

In consideration of the various technical manuals, indicators, fabled literature and gurus I remember feeling utterly overwhelmed.

Each of us start out on a quest for a holy grail trading system, manual in one hand and 'Reminiscences of a Stock Operator' in the other; desperately trying to internalize time wizened trading maxims as we bring chart after chart up on our chosen trading platform...

For me two specific experiences stand out as critical in helping to clear the fog. The first was locating a guru that I felt I could trust. The second was reading the books of Alexander Elder and Mark Douglas. If you haven't read them you should.

These texts made 2 things crystal clear to me;

Firstly, that I alone would have to build a trading methodology and system all of my own.

Secondly, that specialization, focus and discipline would be of paramount importance in the construction and execution of that system.

These 2 rules trip quickly off the tongue, don't they ? But it has taken me 3 long years to truly absorb and apply their meaning. They have been of singular importance in establishing the trading consistency that I now enjoy...

... but it you will permit me, I'd like to offer you a short cut.

System Development.

People are falling over themselves to sell you their trading system and there is nothing wrong with that - but if you don't make a system 'your own' before you trade it, you will have nothing against which to anchor your discipline when trades move against you - as they inevitably will. You will attempt to second guess the market and you will hemorrhage money as a result; which is utterly demoralizing !

So it is essential that you take personal responsibility for the development of your trading system.

... and you must do this with your personality, appetite for risk and wider lifestyle (around which trading must fit) firmly at the forefront of your mind.

Here's how I do it;

1. I focus on a single commodity, index or currency pair. One Only !

2. I specialize, studying it over time in an attempt to identify it's repeatable, idiosyncrasies. This may seem daunting but every trade-able instrument has its own personality. If you look hard enough you will find it.

3. I conduct this review 'naked' in the first instance. Then I add my own horizontal lines where I see areas Support and Resistance. Only then might I add a dynamic resistance indicator such as moving averages or other leading indicators

Throughout this process I am trying to home in on an identifiable artifact that precedes, or triggers, the repeatable behavior I have identified.

Remember - you are not trying to capture every pip of every move here... although many try in vain.

...What you are trying to do is limit your market exposure to the absolute minimum time necessary to pick up and bank the easiest pips available.

It would be impossible to overemphasize the importance of this guiding principle.

4. Only when you are convinced you have something, is it time to break out your testing software and set about back-testing your new system to destruction.

And I'll come on to this when I've had an opportunity to order my thoughts on the subject !