Okay, let’s get started.

There must be a reason you want to be a trader. If you’re not exactly sure, take some time to think about it. Take whatever time you need because this is extremely important. You need goals and they need to be very clear. It’s unlikely you’re going to be able to overcome the adversity you’re going to encounter without very clear goals that you feel you have to achieve. And setting smaller goals to accomplish the larger ones is the best way to do it. But in order to make your goals more concrete and achievable you need to know the what and the why. In other words, you need to know what you want from trading and why you want it.

First of all, it’s important to know whether you want to build your capital or just to preserve it. And if you want to build it as opposed to just preserve it, how aggressively do you want to build it? Generally, if your goal is simply to preserve your capital, you’re looking for trading styles that don’t take on a lot of risk and can generate an acceptable level of income over time. But if you’re looking to build your capital then you’re very likely going to be a little more aggressive with your risk. However, it’s important to understand that it can be dangerous to employ strategies with unfavorable risk-to-reward profiles in order to make large amounts of money in the markets. This is a sure way to lose a lot of money in one trade and give up all those gains you’ve worked so hard to earn. So it will be worth your while to spend a great deal of time focusing your efforts on styles that instead rely on good to great risk-to-reward profiles, like many intraday and swing trading styles for instance.

And why do you want to build it instead of just preserve it? What do you plan to do with that personal capital that will help you fulfill your dreams? Do you want to leave a large amount of it to your kids? Do you want to also put them through college? Will the reserve you want to build allow you to buy that boat you always wanted or that beautiful vacation home? Will it allow you to travel wherever you want to go, whenever you want to go there? Do you want all of the above?

Do you want to build a retirement? How much do you believe you’ll need and how do you see yourself living in retirement? Just comfortably or like a king or queen?

Do you want to become financially independent and trade for a living? Why? Are you tired of working for other people and want to take control of your own finances? I wanted to become a profitable trader in order to build a retirement but I added this reason later as I wanted to break free and go out on my own. It became a very powerful motivator for me.

Again, it’s important to know exactly what you want and why you’re trading. Otherwise it will be much easier to give up when adversity hits. Having clear goals keeps you focused and determined, which is essential if you want to achieve consistent profitability as a trader.

Why did I start trading?

I wish I had established a very strong what and why when I started my trading career. I didn’t realize at the time how hard it was going to be to persevere without these motivations. My main reason to start trading was to build a retirement because I was 41 years old and had saved next to nothing up to that point. 

In April of 2011 I sat down with my sister, who is the owner/attorney of our family’s law firm, and a manager of our family’s law firm at a local restaurant and impressed upon them the need to start thinking about our retirements. I decided it might be best to use the markets to do this and I asserted that I might be the best person to spearhead this operation since I was the Finance Manager of the law firm. I figured, how hard could it be? Little did I know…

My goal, as I said, was to figure out a way to build my retirement and theirs and I thought learning how to trade was probably the best way to do it. My sister had given me the green light so I had the time and opportunity. I started by buying and holding the typical stocks: AAPL, GOOG, IBM, etc. I had a friend who was an investment advisor who helped me buy and hold a few more stocks. So my journey had officially begun. 

Interestingly enough, I also had the instincts of a shorter-term trader and it was something I would take notice of later in my trading career. I figured stocks with earnings or news of some sort would be the better place to put my money on an intraday basis so I added these stocks to a watch list that showed only the bid, ask and volume and waited for the opening bell to ring. If volume started to tick up I would buy or sell the stock based on which way it started moving. I hadn’t learned technical analysis yet; I didn’t even know what it was at that point. And I actually did pretty well for a while.

But when the summer of 2011 came and the big selloff happened, I lost money in the investments and that distracted me from the intraday approach. It was at this point that I realized I really had no idea what I was doing and needed help if I was going to learn this craft. And this is when my journey REALLY began.

I was still very focused on learning how to trade but only because I figured if they (“they” being anyone who consistently makes money in the markets) can do it then I can do it. So I paid for training in technical analysis and options and really applied myself. The problem was that I really hadn’t nailed down a strong enough WHAT and WHY. And that’s why my journey ended up being so bumpy. I didn’t start out with motivators that were specific and powerful. I also hadn’t gotten myself sufficiently organized.

To get properly organized for trading, the first question you have to ask yourself is, “How much risk capital do I have?” and, if you don’t have much or any money saved, “Can I start saving something, anything, right now?” Risk capital can be defined as money you don’t mind putting at risk or, ultimately, losing in a speculative venture. This is not the money you need to live on or that has been earmarked for retirement. If there is any way you can start saving something, anything, figure out a way to start doing it now.

The second question you need to ask yourself is, “Can I pay off my debt or get it under control while I’m learning how to trade?” You need money for trading – money to use for building more money – and being saddled by debt makes this very difficult if not impossible. Figure out a way to pay down or pay off your debt while you’re learning how to trade, or at least figure out a way to get it under control so that you have the ability to save money that can be used to build more money.

The next question is, “How much time do I have per week to devote to learning how to trade?” Can you devote 10 hours per week to this? Even 5 hours per week can go a long way if you use your time wisely enough. Are you available to trade during the market day? This isn’t as important right off the bat. You want to study and test concepts and ideas before you start simulating trades in real time or actually trading in the live markets. But eventually you’ll have to figure out how much time you’ll be available to the open markets.

The next question is, “What kind of trader do I want to be?” In other words, do you want to be a trader or investor? Do you believe you lean toward a shorter time frame or a longer time frame? If you believe your time frame is longer and your comfort level would be in buying and holding stocks for long periods of time based on their balance sheets and future earnings projections, the previous question isn’t as important. But this question IS important. This is the beginning of finding out WHO YOU ARE as a trader. If you truly believe you’re more of an investor, that’s perfectly fine. I would suggest studying the investment philosophies of Benjamin Graham, Warren Buffett and Peter Lynch, just as a start. 

But if you believe your time frame is shorter, here are some things you need to do:

Start a journal. You’re going to have to journal about everything you learn so that you can keep track of the information and process it appropriately. You’ll need to really absorb the information and understand the concepts as fully as possible. You need to keep a log of your thoughts and opinions and how you feel about each concept, strategy and trade. This will help you identify those things that match your personality and lifestyle, which is crucial to your development.

Invest in at least one good PC with an above-average processor and a decent amount of RAM. Some people need to have 17 screens but I trade with only 4 screens, each a separate computer which includes a laptop, and that works just fine for me. It just depends on personal preference. Start with a reliable PC and build from there.

Make sure you have a reliable Internet connection. The reason for this is pretty obvious.

Did I get myself organized?

Like I said before, no. At least not to the level that I should have. I didn’t start a journal right away and I didn’t ask myself the important questions, like what kind of trader I wanted to be and how much time I had to devote to the learning process. I just jumped right in and figured those things out as I went along. This oversight not only delayed the process but made it difficult for me to deal with adversity.

I really had no savings to speak of when I started trading and wasn’t able to pay off all of my debt, but I was fortunate enough to build some savings from my work salary and started trading the amount of risk capital I could afford and with which I was comfortable. So at least I can say that not everything I did in the beginning was completely lamebrained. One of the reasons I was able to stick around for so long and finally become profitable was because I never risked more than I was comfortable with so I never blew up my account.

Take comfort in the fact that I made it to profitability in spite of not having strong enough motivations and not being adequately organized. If you feel confident in what kind of trader you want to be and why, you have very strong and specific motivators and you’re able to get your personal capital and time organized adequately, you’re way ahead of the game.