Professional trading education for beginners- part I

I got interested in derivatives and thereafter technical analysis somewhere around this time last year and started learning seriously in May last year after attending a seminar and buying Metastock.

First of all, let me explain the context of what I am trying to say(This is specially for young people who may have no trading or other work experience).:-

About six months back, I had read actor Aamir Khan’s “The making of Lagaan “. The director is a friend of his. Aamir made him go around for 3 years to know who would touch the project. Nobody did and when the director spent three full months in isolation preparing the script completely threadbare, did Aamir get excited. He had even authorized his wife and actor to choose the foreign actors for the two lead roles but on being dissatisfied he cancelled them but still made full payment and later chose the actors himself. Businessman apart, as an actor Aamir has a reputation for meticulousness.

Recently, former Pakistan cricket captain, Wasim Akram mentioned how futile it was for nations like Bangladesh to play test cricket without thoroughly developing their roots first.

My father, a CA has turned around a sick company, been a partner there for twenty years on the strength of management skills alone and is a very successful investor in the stock market.. When my brother, an engineer started manufacturing he made sure that he knew both the product and the project thoroughly by making an extensive project report although the product was our captive consumption. He also made sure that he new the balance sheet inside out.

I have mentioned one of my friends in another post who got six promotions in one year when I was working in the Kedia group. His name is Ashish(following the infotainment “trend” Poem “Ashish.doc” attached Normally I write like this on women. This was written exactly 10 years back.Think what I must have seen. Today, Ashish has built a huge project consultancy business). He would personally demonstrate to the peon how to serve drinks to the foreign collaborator and with the enforcement directorate on his head( Industrialists used to be extremely vary of them)and all his tension, he would point out how one of the room’s curtain was missing a bead. He is the best manager I have come across in my life and the most important lesson I learnt was thoroughness and so many examples above are to “make sure” as he would always say that you understand what I am trying to say.

Now all this in the context of trading, some extracts from Alexander Elder’s book on trading:-
“The market is not your mother. It consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth.”


“The markets offer many opportunities to self destruct without a safety net. Every trader tries to hit others. Every trader gets hit by others. The trading highway is littered with wrecks. Trading is the most dangerous human endeavour, short of war “.

“Trading is a minus sum game. Winners receive less than the losers lose because the industry drains money from the market. Better than average is not good enough. You have to be head and shoulders above the crowd to win a minus sum game “

“All losers knocked out of the game by a string of losses or a singly abysmally made trade. No matter how a good his system is, a streak of bad trades is sure to put the loser out of business. “

““A professional trader cannot afford illusions.””

Some people have been critical of my criticizing seminars in the earlier post. Well, in my view seminar may be good to finetune if you already have good professional trading experience or you are an engineer with good spatial intelligence and programming background. As can be seen above one cannot afford not being thorough.Now I want to mention a constructive alternative in a new software I discovered.

It would not be out of place to mention here that Ashish who despite all his intelligence and all those promotions had to be trained in practical accounts both by me and the accountant since he had no exposure to that. Some of the mistakes he was making were in the nature of “A small spark catches a big fire” “ A small leak can sink a big ship” and could have cost him his job. So no matter what the qualifications and intelligence, there are some things only practical experience under the right mentor can teach.

The Stocks and commodities people sent me a sample( their August’2004) issue. In that issue, one MBA from Harvard who gave up his real estate business to become a very successful options trader says,” If someone wants to be successful, they should follow somebody else who has done the same thing. If I am trading, I must find somebody who is good at it. If I want to become a restaurant manager, I need to find somebody who’s done it before and done it well. “ . This new software is very effective for that. It seems like a pygmy compared to Metastock/ Tradestation but from learning and economics point of view is a giant which I why I had to give so many examples above.

The Seminar people are competent and knowledgeable but to transfer that knowledge to a rookie is a different ballgame altogether. I seem to have bumped into a good alternative.
Before I mention it, I would like to say that when you learn to know how to drive a car, all you have to know is the basic functions of what clutch, accelerator, brake, gear etc is and start driving. Otherwise with something like free knowledge on the internet available, if you get too lost into theory and start reading about cars, you may end up more confused. Technical analysis is very dangerous that way with the multiplicity of websites and indicators available which do not always indicate what they are supposed to indicate . One can easily lose focus dangerously. Stating "Too much Analysis is paralysis", my father does not go beyond three or four main accounts parameters though he is a CA.

I hope I have proved that ““A professional trader cannot afford illusions.” And that something war like(“Trading is the most dangerous human endeavour, short of war “)has to be done on a war footing; thoroughly and systematically which is presented in the second post – part II

Attached Files

Ashish.doc (22.5 KB, 150 views)