I said i’d do it, and it’s finally here.
This is the complete guide on how to become a successful trader from start to finish. You’ll notice I said successful trader there because what it means to trader varies depending who you ask.
Technically once you’ve downloaded the Robinhood app and collect your free stock you are a trader!
But as you most likely already know, since you are here reading this guide, you probably won’t be a successful one.
If you are like me, maybe you’ve already wasted years speculating and trying to guess what the market was going to do. You’ve had a few wins, and that felt good but you’ve also had some losses or
maybe a lot of losses
and now you’re ready to put in the real work to learn the market.
If this sounds like you then you’ve come to the right place, because by the end of this article, I guarantee, not only will you have the tools and knowledge to be a successful trader
But you will have skills most professional traders don’t have access to!
This is not some random algorithm and you’re learning to blindly follow it, but instead I’m giving you the tools to build and create your own algorithms that you’ll be able to adapt to any market conditions.
Even in a recession, when everyone is panicking and scrambling to get their money out of the market
You’ll still be making money.
In fact the recent 2020 recessions was one of the most profitable times I’ve had as a trader. While everyone else was losing all the profits they had worked so hard to make the past few years, I just sat back and watched in awe
I could finally see the difference between a trader who has put in the effort and one who was coasting by in a bull market.
The market isn’t fair
It doesn’t care if you have a family to feed or bills to pay.
That’s why it’s up to you to take learning this seriously. Stock trading doesn’t have to be risky, and if you follow what i’m about to show you it won’t be.
I know many of you are coming into this guide with varying levels of experience, but since this is a complete guide i’m going to get started with the simple stuff.
So if you are a more advanced trader, as i’m sure many of you are, just bear with me for a while until we get to the good stuff.
Who knows, you might pick up something you don’t know yet.
Most traders start off picking their stocks a few different ways. The first and most common is news events which in theory seems like a great idea, but in practice is probably going to cost you a lot more money than it ever makes.
By the time you are seeing the news that a stock has gone up it’s almost always too late. Even if you use the most reliable news site around this strategy is still lackluster at best.
The second is using their intuition, at this stage, maybe they looked at a chart
But more often than not these traders are really just guessing. I once listened to a friend spend 30 minutes explaining to me how he thought weather patterns affected stock prices and his strategy around this.
I don’t think I have to tell you this, but he did not have a lot of success with that plan.
These are the most common strategies because they are intuitive, and when you make normal predictions about events in your life these are the strategies you would use.
When it comes to the trading though these strategies just aren’t reliable!
You may have some limited results, but if you are honest with yourself over time you’d admit that you probably lost more times than you won.
We don’t trade like this here, we are technical traders
What that means is when we trade, we open up a chart and look at our indicators. If they say enter we enter, If they say exit we exit.
It’s a very precise and almost surgical process where we do our best to maximize our gains while also eliminating losses.
If that sounds a lot less fun, I promise you it’s not
In fact with what I teach here on Money Mercenaries, any crazy ideas you might have about the market can be made into an indicator and backtested to your heart’s content.
In fact I encourage it
As i’ve said many times before, we can get collectively better and better results over time the more of us we get backtesting and trying new and creative indicators.
Of the 6 indicators I use in my system, 4 are ones I’ve created myself that were either variations on older indicators or entirely new concepts that just seemed to work.
To get started using indicators to trade you will need to create an account at tradingview.com
You don’t need a paid account, unless you want one, everything we are covering here can be done without it but there are a few times you may run into hassle in day to day.
Once you are logged into tradingview click the button that says charts and if prompted click where it says view full featured charts.
You should see something that looks like this
If you are not seeing the candles on your screen then click near the top where I have the green arrow pointing and change the selection to the candles option.
What you’re looking at here is a basic chart. They are called candles because the top and bottom of the thicker part represent the open and close and the “wicks” coming out of either side represent the high and the low for each day.
Related: The Basics of technical trading
There are many different time frames you can trade on, but to get you started we are going to stay on the Daily time frame because it is easiest to have success here.
Now that we have our chart up we need to add some indicators.
To do this press the button that says indicators (black arrow in picture) and we are going to start off with 2 indicators.
First add the “atr” indicator by searching for it in the box, then add the “Lucid sar” indicator.
Now that you have a couple indicators on your chart it’s time to begin backtesting! This is the most important, but also the most time consuming part of trading.
Eventually you will learn to program a strategy that will do this for you automatically, but at least when you are starting out you should spend no less than 100 hours backtesting and trying different indicators to help you get a better grasp on how the market, and each indicator works.
This seems like a lot of time, but trust me, when you put in the work and you spend time backtesting and trying new indicators eventually you will start to “get it” and the more you understand the market and how these indicators work the more ideas you’ll start to have about how to improve them.
There is a big difference between just getting the tools and learning how to use them vs being able to create and change them at will.
To start backtesting you will need to determine when the indicator is signaling to enter a trade and place a trade box onto that spot so we can measure if it is a winning trade.
I usually go back 3 years on a stock to determine if it has been profitable in the past before I will even consider entering at full risk.
To place a sample trade click the prediction tools button (yellow arrow) and select Long trade. Then just above the recent candle click your cursor to place the trade.
We need to update the settings of the trade though to the most optimal settings.
Double click on the trade box and we are going to update our profit level “ticks” to x1 the atr and our stop level to 1.5x the atr
Related: Why you should trade using the ATR
I can hear it now
“But the stop loss is bigger than the take profit!!”
This doesn’t mean we are going to close the trade out early though, in fact we’re going to use this negative risk/reward ratio to our advantage.
It’s easy to make money when the market is trending, but our bread and butter is to be able to make money no matter what the market is doing. This way we can get consistent profits all the time and not give it back as soon as the market stops trending.
How we do this is when the trade hits our take profit we only close half the trade, and we will let the other half ride until our exit indicator says it’s time to get out.
We’re standing on the shoulders of giants with this technique. I have tried every other way to structure a trade and hands down have not come up with a more consistently profitable method.
Now that we have some potential trades on the chart, I think it’s time we have the talk.
Its okay to short the market
For some reason many people have this idea in their head that shorting the market is somehow more risky than entering long.
I want to put that idea to rest right now, if your system is telling you to go short and you’ve thoroughly backtested your system, then there’s no reason to be afraid of entering a short trade.
In fact, some of my most profitable trades ever have come from short trades and if there’s one thing that will really hurt your bottom line, it’s leaving money on the table.
No matter how good your system is, it will take losses sometimes. You want to make sure that you’re not missing out on any of the profitable trades that at the end of the year are going to look really nice in your bank account.
Money isn’t everything, but we have to make a living. If you want to be able to live comfortably off your trading earnings, you need to eliminate as many losses as you can.
We’re finally here
Especially if you are new to trading, a lot of what I went over here may have seemed a little confusing. But don’t worry because there is a lot of other information available on the site.
Releated: How to create your own custom indicators using tradingview
Check out the related posts for more information and sign up for our weekly email newsletter for access to a free indicator as well as a short guide on how to use it.
Use what you’ve learned here because there is money to be made in the market, and if you follow what i’ve covered in this guide, you’re going to be making a lot of it.