Mark McRae, interviewed by the trader David Jenyns outlines how he thinks a beginner should start his professional trading career.
Mark: My first market was a Forex market, and I was taught how to trade a five-minute chart. And I think that was totally wrong. Now, and also with indicators — and I think that, number one, I don’t think anybody should trade very small time frames, unless they are very experienced, or they are that way inclined, because if you trade — and I am thinking of myself now, and I am thinking of virtually every single person I know of who has sat down at a screen — the Forex market during the week is 24 hours, so you can sit there as a five-minute trader and be there 24 hours.
And almost — it becomes ridiculous — you can be there for 24 hours solid, or just roll it over, — you begin to see things in a five-minute chart that aren’t actually there, because you’re so close to the market. And also because you are on the hard-right edge, you have to be able to step away from it. So my advice for beginners is to start with much larger time frames — daily charts, weekly charts. I don’t think monthly charts are practical, but nothing lower than a four-hour chart, because it gives you time.
And also, it’s amazing, you are trading five-minute charts. You sit there for hours on end, waiting for a setup or whatever, and then when it happens, you feel rushed. All of a sudden, the elastic band has hit. I think it is very practical and good for your traders, especially when they are beginning their professional trading, to be able to move away from the market and make a decision, make a trade, and then step back without any pressure of time.
Also they must allow the market to tell them what is happening, because nothing will beat your eyes. There is no indicator, if you are going to be in the technical side of the market and not the fundamental side, is price-driven, so the price will determine, and tell you everything you need to know about the market. The indicators follow — or every system you do will follow that, so it’s all supply and demand. You have to keep it as simple as possible, particularly when you start.
David: I love hearing these common themes. It really echoes a lot of what I talk about, those core themes that you have. Keeping it simple, the time frames.
Mark: I figure also in terms of price, if you think of price actions for professional trading, it takes a while to become familiar to recognize a good setup.
A successful trader in his own right, David Jenyns interviews long-term trader and friend Stuart McPhee about the need to learn stock trading if your time is limited, and how to start out as a trader.
Stuart: A questioner has asked what is the best to trade if you are time poor. There are methodologies you can use that really don’t demand a huge amount of your time and the obvious one is trading stocks using medium-term trends.
In fact you don’t even have to check things every single day. You don’t need to scan every day. My medium term funds I scan once a week. Admittedly when I’m in a trade, I’ll monitor during the week. So far as scanning and identifying new opportunities, it’s a once a week thing. I think a lot of people scoff at oh, only a few hours a week or one hour per day or less than an hour per day.
Absolutely you can trade using a specific style that doesn’t demand a huge amount of your time. Trading stocks medium term trends is certainly one of those and is the most obvious and common one for people who are time poor.
David: I think a number of people are facing this. The next question is: I’m a beginner in trading and I started trading the forex about six months ago. In one of your videos, you recommended for beginners not to start with short term trading such as intra day trading. For a person like me who has a full-time very demanding managerial job with the aim to trade on a part-time basis as a starting point, what type of trade would you recommend: forex, futures, stocks etc? What type of trading, swing trading position trading and can you specify timeframes, medium term or longer term?
Stuart: There may be people out there who can start trading foreign exchange straightaway and make a killing. I just know that’s going to be the exception rather than the rule, and it’s going to be a very rare exception. I really believe in laying the foundations. The groundwork for me is to learn stock trading for a period of time and just concentrate on trading stocks. They are the easiest, you won’t get hurt if things don’t go your way. You’re not trading with leverage, you can’t lose more than you physically have, where with some of the other products you can.
It’s just the easiest way to start, it’s a great grounding and then if you can’t trade stocks profitably consistently, then you’re certainly not going to be successful trading the others. That’s why I believe in starting with the basics.
When you have a demanding job time wise and trading such a short term instrument as forex, it’s difficult. The beauty today is you can place conditional orders and place our stops physically as soon as we get in so we don’t have to watching the screen but I think so far as analysis is concerned and doing other things it can be demanding of our time.
David: He also asked regarding swing trading and position trading or a particular method of trading. If you were to put a label on it so he’s got somewhere to start.
Stuart: Yes I just say learn stock trading using medium term trends. Analyze peaks and troughs. Identify those and those stocks achieving higher peaks, higher troughs, that’s the sort of thing I’m interested in. Good solid conservative, medium term steady sort of movement stocks.
Why do some people fail miserably at Forex trading while others have great success? What separates the winners from the losers? You might be surprised to know that successful Forex traders share certain characteristics. There are also characteristic shared by losers, these include making trades based upon emotions instead of logic or holding onto losses because they are afraid to admit they made a bad trade. Winners don’t make those mistakes. They go even further and take positive actions regularly so that they become success habits. Learning the things successful Forex traders do can help you become successful too.
Setting goals is essential. Successful Forex traders are goal oriented. Setting goals pushes you to do your best as you strive to reach your goals. However, you have to set good goals. Your goal has to be realistic. You no doubt would love to double your money every day. However, as a goal, that is unrealistic. When you have an unrealistic goal, it undermines your self confidence and sets you up for failure. Your goal also has to be attainable based upon your capabilities. Set a goal that matches your skill level. As your skills improve, your goals expand. In order to work for you, your goals must be realistic and attainable. One way to go about this is to set short term goals. Start with small ones that are easy to achieve. This builds your confidence; you can then raise the bar on your goals as your skills improve.
Your goal must also have measurability. A goal that cannot be measured isn’t really a goal at all; it is more like a dream. For example, if your goal is to be wealthy, how will you measure your progress? You need to set a specific dollar amount so you know how close you are to achieving your goal and can quantify your actions. This also helps you to measure changes you make to your strategies. If you measure your moves in dollar amounts, you can tell what works and what doesn’t. Don’t worry about setting goals that are too small. Your goals will grow with you as your success in Forex grows. Successful Forex traders set specific, measurable goals and move towards them with confidence. Lack of confidence is the deal breaker when it comes to Forex trading. The best way to build your confidence is to set small realistic goals that you can attain and raise the bar slightly with each new goal.
Successful Forex traders also apply skill and logic to all their trading decisions. They learn every day, and they use what they know to make intelligent choices on every trade. Successful Forex traders don`t worry about missing out on the next big thing, they focus on making good trades. One of the most common mistakes inexperienced Forex traders make is to trade when they see an opportunity they think might be too good to miss. Jumping into a position based on a hunch, or on the belief that you may be missing an opportunity, is no different than gambling. Almost every investor at one time or another has felt a rush of enthusiasm for a trade, based solely on their desire not to miss out on a great opportunity that might be available. Successful Forex traders know their market, and are disciplined in their trades so that they aren`t swayed by these kinds of concerns.
Successful Forex traders have a great deal of knowledge about the market but it is not humanly possible for one person to stay abreast of the entire market and all of the events that affect it. Therefore, a wise trader picks a specific area of investing and learns it like the back of his hand. For example, you may have an interest in trading commodities futures. Then you should learn all you can about that particular market. Learn its history and current events that affect it movement. It is much easier for you to become an expert in the commodities futures market than it is to become an expert on every single investment niche.
If you don’t have enthusiasm for currency trading, then take up other types of investing. Your lack of interest and motivation will cause you to make mistakes and lose track of your focus. It will be hard for you to be successful under those circumstances. Successful Forex traders on the other hand specialize in a particular area of the market they are interested in and study it thoroughly until they know it inside and out. This gives them them knowledge and confidence to make profitable trades. If you are just starting out in Forex, it is a good idea to pick just one method of investment and learn all you can about it before you branch into other areas.
Whether you`re a beginning trader, a trader with some experience, or someone who makes his or her living strictly from trading, you can be successful. Many people think they have to have significant capital, or years of experience, to trade successfully. That`s not true. It`s also true that if you don`t stay disciplined, focused, and rational, you`ll end up as a losing trader, regardless of your level of expertise. All successful Forex traders started as small investors; they didn`t trade more than they could safely risk, they learned from their mistakes, and they developed systems that worked for them and that fit their personal styles. There aren`t different strategies for different levels of Forex traders because the principles are the same for everyone in the markets: logical, focused, disciplined trading creates success.
