How to use resources correctly
So many traders give in because they are overwhelmed
Good evening valued subscriber,
After a sketchy Saturday, premium subscribers enjoyed a clean sweep on Sunday’s race trading picks, topped up by further profits yesterday with a couple of shrewd trades on the Pakistan v England cricket match currently being played.
I will be posting trades frequently going forward (when possible). All you have to do is set and forget :)
In this post I want to explain the proper way of approaching learning when it comes to trading. Alot of budding traders who start out with a spring in their step, eager to learn and anxious to make money, nearly always fizzle out and give up. There’s various factors as to why that happens and one of the biggest factors is due to a lack of direction. New traders have misplaced expectations, greatly overestimating what they can learn within a short time frame and how quickly they can make money.
Once they get stuck in and reality sets and it dawns upon them how far away they are from where they say they want be, very few have the mettle to stick it out.
Telling someone when to back and lay is easy. Trading at its bare bones ultimately boils down to executing one or the other. It’s the numerous factors that influence the decision on when and how to execute that’s overwhelming.
If somebody was to watch me trade cricket and I were to explain the state of the pitch and how it evolves over the course of the game, coupled with the weather, the quality of batsmen and bowlers on both teams, the anticipated par score and where I think the price should be based on the current run rate at a given point in the game, it would seem like an overload of information. It would seem like an exhausting process that requires conscious effort to each detail.
When a budding trader realises the detail that’s involved in the decision making process at the highest level, it’s overwhelming because there’s so much to learn. Newbie’s foolishly try to learn everything, all together at the same time and subsequently glaze over many important steps in their pursuit to turn profitable as fast as possible.
Its like watching professional golf. A golf swing takes no more than 2 seconds. Swing the club back and through the ball. The balance, power and precision of a professional striking the ball may look simple. But if one were to break down the various components that must be correctly executed in order to strike the ball correctly, one would have to understand how far you stand from the ball, aiming your feet parallel to the target, holding the club with a neutral grip, making a full hip turn, having a neutral wrist position at the top of the backswing with the club head pointing at the target, transferring the weight into your inside of the back foot before initiating the downswing with your lead knee and lower body whilst keeping the wrists cocked for as long as possible before releasing through the ball. Simple right!
A newbie trying to swing a golf club whilst being mindful of every component of the swing will inevitably fail because it is impossible to think about so many details for a move that takes 2 seconds to execute. A skilled golfer is NOT consciously thinking about every checkpoint when hitting the ball because the components are already in place through correct repetition by practising specific drills for each movement. The move becomes instinctual.
Trading is similar. There can be dozens of variables that must be considered in order to execute a trade. It is impossible to consciously masters all at the same time when the window of opportunity to execute a position may be only a few seconds. A skilled trader has been through the process many times over. They are seasoned enough to build a memory bank of every scenario and depending on how diligently they’ve tracked the data, will instinctively be able to look at a price and determine whether or not it’s value.
To get to this level of mastery is impossible if you try to learn everything at once. The proper way to approach learning a new market is to understand one variable at a time. To learn slowly is to learn properly. You must be thorough in your process.
People OVERESTIMATEwhat they can do in a short space of time and UNDERESTIMATE what they can achieve over a longer horizon.
If you want to learn how to trade a market, you must start with the basics. Use the most basic resources in order to get the most basic understanding of the sport and what is influencing the prices.
Take racing for example. Watch race after race, understand what distress signals a horse displays when it is struggling. Understand what a patiently ridden horse looks like. Understand how both signals are useful for spotting horses to lay and back respectively. From there, understand the components of a race course: the stiffness of the fences, the hills, the going of the ground. Then learn to group race courses together in terms of likeness.
From there, you can use basic online resources such as the racingpost or at the races. Learn to read the basic factors of a race card ie course form, weight, the going of the ground, learn to read through a horses previous form and learn to highlight any consistencies that may throw up a clue as to how they’ll likely run on the day. Use the expert opinions and see if they match up with your analysis. For example, if a horse is racing at Exeter (a course that puts stamina at a premium due to the hills) and has run well at tracks like Cheltenham or Carlisle which are both stiff, we can potentially infer that the horse has good stamina and may be shortlisted for a back to lay.
Let’s use fences as another example. Newbury is regarded as a course with stiff fences. From course knowledge, if a horse’s form card includes well run races at say Warwick with similarly testing fences, then the horses jumping ability may be respected.
There’s plenty of variables to look through from the race times, going, distance, weight and form, all which form part of the larger mosaic.
It’s a process of branching out. Starting with 1 variable and moving on to the next. It’s not wise to expose yourself to sophisticated data sets early on because you do not know what you are looking for. You won’t know how to interpret the data. You won’t know how to weight the variables correctly and spot patterns. You’ll be overwhelmed by the information and waste energy spreading yourself too thin.
The basics of learning a new market start with picking the low hanging fruit. Start with the very basics. For racing, that means learning how a horse runs and understanding the course its running on. Then looking at race cards, understand the key variables that effect the outcome of a race and learn to spot patterns in form.
This is more than enough to profit consistently as a trader and my results are testament to that. Once this understanding has been obtained, it’s then up to you how far you want to fine tune your results. For example, you can then start looking at a horses historic price data. You can use the horses starting price, in play minimum and maximums to see if the data supports your race card reading and filter further.
Diving straight into the deep end will be overwhelming and exhausting for most because you don’t know where to start. You need a reference point before branching out. The transition is smooth when you move from 1st to 5th gear. Give the process time and learn each variable thoroughly.
There’s many free resources to learn from, some of which I’ve already highlighted. There’s no such thing as bad information when starting out. Anything is better than nothing. With experience, you’ll be able to decipher what’s useful and discard what’s not. You got this!
AT