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10 Great Ways to Learn Stock Trading in 2020
Posted by Blain Reinkensmeyer | Last updated on Apr 5th, 2020 | Published Mar 29th, 2020
March 2020 Update : Join me on Twitter, @InvestorBlain!
Beginners taking their first steps towards learning the basics of stock trading should have access to multiple sources of quality education. Just like riding a bike, trial and error, coupled with the ability to keep pressing forth, will eventually lead to success.
One great advantage of stock trading lies in the fact that the game itself lasts a lifetime. Investors have years to develop and hone their skills. Strategies used twenty years ago are still utilized today. SEE ALSO: How to Invest (2020 Beginners Guide).
When I made my first stock trade and purchased shares of stock, I was only 14 years old. Over 1,000 stock trades later, I am now 33 years old and still learning new lessons.
What is Stock Trading?
First things first, let’s quickly define stock trading. Stock trading is buying and selling shares of publicly traded companies. Popular stocks most Americans know include Apple (AAPL), Facebook (FB), Disney (DIS), Microsoft (MSFT), Amazon (AMZN), Google (GOOGL), Netflix (NFLX), and more recently listed companies such as Uber (UBER) and Pinterest (PINS).
In the stock market, for every buyer, there is a seller. When you buy 100 shares of stock, someone is selling 100 shares to you. Similarly, when you go to sell your shares of stock, someone has to buy them. If there are more buyers than sellers (demand), then the stock price will go up. Conversely, if there are more sellers than buyers (too much supply), the price will fall.
10 Great Ways to Learn Stock Trading as a Beginner
For beginners who want to learn how to trade stocks, here are ten great answers to the simple question, “How do I get started?”.
1. Open a stock broker account
Find a good online stock broker and open an account. Become familiarized with the layout and to take advantage of the free trading tools and research offered to clients only. Some brokers offer virtual trading which is beneficial because you can practice trading stocks with fake money (see #9 below).
2. Read books
Books provide a wealth of information and are inexpensive compared to the costs of classes, seminars, and educational DVDs sold across the web. See my list of 20 great stock trading books to get started. One of my personal favorites is How to Make Money in Stocks by William O’Neil (pictured below), founder of CANSLIM Trading.
3. Read articles
Articles are a fantastic resource for education. My most popular posts are listed on my stock education page. The most popular website for investment education is investopedia.com. I also highly recommend reading the memos of billionaire Howard Marks (Oaktree Capital), which are absolutely terrific. Naturally, searching with Google search is another great way to find educational material to read.
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4. Find a mentor or a friend to learn with
A mentor could be a family member, a friend, a coworker, a past or current professor, or any individual that has a fundamental understanding of the stock market. A good mentor is willing to answer questions, provide help, recommend useful resources, and keep spirits up when the market gets tough. All successful investors of the past and present have had mentors during their early days.
Despite being “old school,” online forums are still used today and they can be a great place to get questions answered. Two recommendations include Elite Trader and Trade2Win. Just be careful of who you listen to. The vast majority of participants are not professional traders, let alone profitable traders. Heed advice from forums with a heavy dose of salt and do not, under any circumstance, follow trade recommendations.
5. Study successful investors
Learning about great investors from the past provides perspective, inspiration, and appreciation for the game which is the stock market. Greats include Warren Buffett (below), Jesse Livermore, George Soros, Benjamin Graham, Peter Lynch, John Templeton and Paul Tudor Jones, among others. One of my favorite book series is the Market Wizards by Jack Schwager.
6. Read and casually follow the stock market
News sites such as CNBC and MarketWatch serve as a great resource for beginners. For in depth coverage, look no further than the Wall Street Journal and Bloomberg. By casually checking in on the stock market each day and reading headline stories, you will expose yourself to economic trends, third-party analysis, and general investing lingo. Pulling stock quotes on Yahoo Finance to view a stock chart, view news headlines, and check fundamental data can also serve as another quality source of exposure.
TV is another way to expose yourself to the stock market. No question, CNBC is the most popular channel. Even turning on CNBC for 15 minutes a day will broaden your knowledge base. Don’t let the lingo or the style of news intimidate you, just simply watch and allow the commentators, interviews, and discussions to soak in. Beware though, over time you may find that a lot of the investing shows on TV are more of a distraction and source of excitement than being actually useful. Recommendations rarely yield profitable trades.
7. Consider paid subscriptions
Paying for research and trade ideas can be educational. Some investors may find watching or observing market professionals to be more beneficial than trying to apply newly learned lessons themselves. There are a variety of paid subscription sites available across the web; the key is to find the right one for you. Here’s a list of the services I use myself. Two of the most well-respected subscription services are Investors.com and Morningstar.
CAUTION – Be careful. Many paid subscriptions marketed online, especially in social media, come from one-off traders that claim to have fantastic returns and can teach you how to be successful. 99.99% of them are a really poor investment and come with higher prices of $99 – $149 per month, or more. The worst damage though comes when you try to do what they do, invest way too much in a stock tip, and get burned when it doesn’t work out. See, Day Trading: 10 Lessons That Changed My Career.
8. Go to seminars, take online courses or live classes
Seminars can provide valuable insight into the overall market and specific investment types. Most seminars will focus on one specific aspect of the market and how the speaker has found success utilizing their own strategies over the years. Examples include Dan Zanger and Mark Minervini, both of which I have attended and reviewed thoroughly here on the site. Not all seminars have to be paid for either. Some seminars are provided free, which can be a beneficial experience, just be extremely conscious of the sales pitch that will almost always come at the end. Whatever is offered, just say no!
When it comes to courses and classes, these are typically pricey, but like seminars, can also be beneficial. Will O’Neil workshops, Warrior Trading, Bulls On Wall Street, and Online Trading Academy provide a variety of courses on investing and trading.
CAUTION – Like paid subscriptions, be very careful with classes and courses. Most are easily over $1,000 and are sold with promises of acquiring valuable knowledge. Their fantastic sales funnels will suck you in, take your money, excite you during the course, then leave you with a strategy that was profitable five or ten years ago, but is no longer relevant today. That, or you simply do not yet have the expertise required to be successful and trade the strategy properly.
9. Buy your first shares of stock or practice trading through a simulator
With your online broker account setup, the next step is to simply take the plunge and place your first stock trade (instructions further down!). Don’t be afraid to start small, even 1, 10, or 20 shares will serve its purpose.
If the thought of trading stocks with your hard earned money is to nerve racking, consider using a stock simulator for virtual trading. Online brokers TD Ameritrade and E*TRADE both offer virtual trading to practice buying and selling stocks.
CAUTION – One of the most common mistakes new investors make is to buy too many shares for their first stock trade; this is a mistake. Taking on too much risk as a beginner who is just getting started will very likely result in experiencing unnecessary losses. Instead, begin with trading small position sizes, then slowly work your way up to buying more shares, on average, each trade.
10. Follow Warren Buffett’s advice, buy and hold the market
For the majority, online trading (especially day trading) will not outperform simply buying the entire market, such as the S&P 500, and holding it for many years. Warren Buffett, the greatest investor of all-time, recommends individual investors simply passively invest (buy and hold) instead of trying to beat the market trading stocks on their own. See: How to Retire with at least $1 Million Dollars.
What is the Stock Market?
The stock market is built around the simple concept of connecting buyers and sellers who wish to trade shares of publicly traded companies. It is a marketplace.
Each publicly traded company lists their shares on a stock exchange. The two largest exchanges in the world are the New York Stock Exchange (NYSE) and the NASDAQ; both are based in the United States (Wikipedia). Attempting to grasp just how large the NYSE and NASDAQ both are is certainly not easy. The NYSE has a market cap of nearly $31 trillion and the NASDAQ’s is nearly $11 trillion. And yes, that is not a typo, I said, “trillion”.
Let’s take Apple (AAPL) for example, which is listed on the NASDAQ stock exchange. Apple currently has 4.6 billion shares outstanding, of which 4.35 billion are available to be traded (also known as the “float”). Using today’s closing price of $201.75 (July 11th, 2020), Apple has a market cap of $937.44 billion. That’s a big company! (By the way, market cap is a simple way to gauge the value of a company. If you bought every available share of stock, the market cap is how much it would cost you to buy the entire company.)
More recently, in May 2020, Uber (UBER) went public, listing its shares on the NYSE. As of today’s close, UBER’s stock trades for $43.99 per share and the company boasts a market cap of $74.59 billion.
Once a company has their shares listed on an exchange, then anyone, including you and I, can use an online broker account to trade shares. Whether you are an everyday investor or an institutional hedge fund managing hundreds of millions of dollars in client money, anyone can trade.
There are many strategies for trading stocks. The most common strategy is to buy and hold. You buy shares of stock, then hold them for years and years. The complete opposite strategy would be day trading, which is when you buy shares then sell them the same day before the market closes (for more on day trading, see my day trading guide).
Each strategy has its advantages and disadvantages. For example, day trading can be expensive since you are trading frequently. Furthermore, since your trades are less than a year in duration, any profits are subject to short-term capital gains taxes.
To keep costs as low as possible, famous investors like John Bogle and Warren Buffett recommend buying and holding the entire stock market. Known as passive investing, it is a buy and hold strategy where you buy an entire market index, typically the S&P 500, as a single mutual fund or exchange traded fund (ETF). By buying an entire index, you are properly diversified (have shares in
500 large companies, not just one), which reduces your risk long term. In fact, John Bogle is credited with creating the first index fund.
Three other common strategies you may hear traders refer to include momentum trading (buying shares of very fast growing companies and selling them for a profit before they inevitably peak in price), swing trading (using technical analysis to identify a trading range, and then buying and selling shares as the stock trades within that range), and penny stock trading (buying shares of very small companies whose stocks trade for less than $1 a share).
ETFs and Mutual Funds
By this point, we should already know what a stock is, so let’s break down ETFs and mutual funds. ETFs (exchange traded funds) and mutual funds are similar in that they both represent a collection, or “baskets”, of individual stocks or bonds.
Take for example the S&P 500 market index, which is comprised of 505 companies. Buying shares in 505 different companies would be very difficult to do. Thanks to mutual funds and ETFs, we can simply buy one single security that holds shares in all 505 companies. The largest S&P 500 mutual fund is the Vanguard 500 Index Fund Admiral Shares (VFIAX) and the largest S&P 500 ETF is the State Street Global Advisors SPDR S&P 500 ETF (SPY).
By buying an ETF or mutual fund, your portfolio is better diversified than just owning shares of one or two stocks; thus, you are taking on less risk overall. This is the primary advantage of buying ETFs and mutual funds over trading individual shares.
The main difference between ETFs and mutual funds is in how they trade. ETFs trade like stocks, which means you can buy and sell them throughout the day and they fluctuate in price depending on supply and demand. Contrarily, mutual funds are priced each day after the market closes, so everyone pays the same price. Also, mutual funds typically require a higher minimum investment than ETFs.
How to Buy Shares – Step by Step Instructions
Once you open and fund your online brokerage account, the process of placing a stock trade can be broken down into five simple steps:
- Choose whether to buy or sell
- Insert quantity
- Insert symbol
- Select order type
- Review order, place trade
1. Choose Buy or Sell
The first step is always to choose what we would like to do, buy shares long or sell shares short. As a new investor, keep it simple, buy shares long!
2. Insert Quantity
Next we enter how many shares we would like to buy or sell in total. To calculate how many shares we can afford, simply take the total amount of cash currently in the account and divide it buy the stock’s last price. So, if stock XYZ is trading at $10 and we have $1000 in our account, we can afford to purchase 100 shares of stock ($1000 / $10).
3. Insert Symbol
The ticker symbol represents the company we are going to trade. For example, Disney has a ticker symbol of “DIS”, Apple is “AAPL”, and Facebook is “FB”. If we are not sure of the company’s symbol, you can click on the Symbol field and search to find it. Tickers are also required to read a stock chart.
4. Choose Order Type
The most common order types: market, limit, and stop (see my guide, Best Order Types for Stock Trading). Market orders buy or sell immediately at the current best market price. Limit orders only buy or sell these shares at, “$xx price or better”. Lastly, stop loss orders are combined with a market or limit to trigger once $xx price hits. For new investors just getting started, I always suggest just sticking with market orders.
5. Review Order and Place Trade
After the basic inputs have been made, the “Place Trade” button will appear to complete the order. By default, a summary screen always appears once this button is clicked to summarize the order and confirm we have enough funds in our account. Once investors have experience and are comfortable with the trade ticket, this confirmation page can be disabled.
Here’s an example of a TD Ameritrade order ticket filled out,
Other fields (Expiration, Special Instructions, Routing)
New investors should ignore these fields and leave them set to their default values. These options give investors more control as to how long certain orders should remain active and how they should be filled. For example, “GTC” for expiration means “good-till-cancelled”.
Regarding routing, 99.9% of orders are routed using the online broker’s automated system. However, day traders will sometimes hand select (direct route) their orders to a specific market center to receive market rebates. See this StockBrokers.com guide for more on order routing.
Tips for Success
Learning from the greats, here are variety of stock trading tips from some very successful investors. By applying any of the following lessons, you can become a better trader. Success takes time, and these rules will lead you in the right direction.
William O’Neil is the founder of CANSLIM investing, Investors Business Daily, and has authored numerous books on investing, with his most famous being, How to Make Money in Stocks: A Winning System in Good Times and Bad.
- As a new investor, be prepared to take some small losses.
- Persistence is key when learning to invest. Don’t get discouraged.
- Learning to invest doesn’t happen overnight. It takes time and effort to become successful at it.
- As a beginner, set up a cash account, not a margin account.
- Concentrate on a few, high-quality stocks. There’s no need to own twenty or more stocks.
- Don’t get emotionally involved with your stocks. Follow a set of buying and selling rules, and don’t let your emotions change your mind.
- Don’t buy a stock under $15 a share. The best companies that are leaders in their fields simply do not come at $5 or $10 per share.
- Learning from the best stock market winners can guide you to tomorrow’s leaders.
- Always do a post-analysis of your stock market trades so that you can learn from your successes and mistakes.
- Stocks never go up by accident. There must be large buying, typically from big investors such as mutual funds and pension funds.
- Replace the old adage, “buy low and sell high” with “buy high and sell a lot higher.”
- History always repeats itself in the stock market.
- Ignore personal opinions about the market.
- Three out of four stocks, regardless of how “good,” will eventually follow the trend of the overall market.
- When starting to invest, keep it simple.
- Short stocks only in a bear market. Use tight stop losses and take profits often.
Jesse Livermore, respected as one of the greatest investors of all time, has been featured in many investment books. The most iconic was Reminiscences of a Stock Operator by Edwin Lefevre in 1923. During the course of his life he made and lost millions, going broke several times before committing suicide in 1940. These are his seven greatest trading lessons:
- Cut your losses quickly.
- Confirm your judgments before going all in.
- Watch leading stocks for the best action.
- Let profits ride until price action dictates otherwise.
- Buy all-time new highs.
- Use pivot points to determine trends.
- Control your emotions.
John Paulson, a hedge-fund manager in New York, lead his firm to make $20 billion in profits between 2007 and early 2009. By betting heavily against first the housing market and then later financial stocks, his firm made a killing. Paulson’s success netted him a paycheck of some $4 billion, or more than $10 million a day. His funds during this time had returns of several hundred percent. These are his eight investing lessons:
- Don’t rely on experts, be skeptical.
- Always have an exit strategy.
- Debt markets can do a better job predicting problems than stock markets.
- Always educate yourself on new investment vehicles.
- Don’t underestimate insurance (such as put options).
- Experience counts.
- Don’t fall in love with any single investment, keep emotions aside.
- Don’t risk too much on any single trade, diversify risk.
My Three Favorite Stock Tips
After completing over 1,000 stock trades, representing over 4,000 individual buys and sells, here are three tips I wish I knew and fully appreciated on day one:
- Think win/win. Psychology is a huge aspect of trading. If you have a big winner on your hands and aren’t sure whether you should hold the shares to try for higher prices or sell them to lock in a profit, consider selling half and holding the rest with a stop loss (at worst) back at your original buy price. That way, if the stock drops back to your buy price, you still win because you sold half and made a profit. Similarly, if the stock shoot higher in price, you also win because you still hold half your original position. Heads you win, tails you win too.
- Set strict rules to help you stay disciplined.
- Always know the day and time (pre or post hours) when your stock holdings are posting earnings next!
Something that I always emphasize to new stock traders when they email in is that investing is a life long game. Take your time! There is no reason to rush into the stock market.
Start with a small amount to invest, keep it simple, and learn from every trade you make. If you find yourself emotionally charged with trading, then passively investing in the overall market with a simple index fund (see above, “Trading Strategies”) is likely a better choice.
Hopefully the helps answer some of your questions about stock trading.
If you feel this guide was helpful for you, please share it on Facebook, Twitter, or email it to a friend! I appreciate your support.
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The Best and Worst Trading Times
The question of what are the best and worst trading times comes up over and over again. If only it was as easy as “only trade from 9:30–11:00 a.m., except on Fridays…”
The reality is, there’s a lot more to it than that. It’s not an exact science. I do have preferred trading times … but it’s a disservice to limit the discussion to specific hours. In the Trading Challenge, I teach all the nuances I’ve learned in two decades of trading and a decade of teaching.
Read on because this post outlines my thoughts on the best trading times. Also, later in this post, there’s a video with two different points of view about the best trading times. (And a bit of fun with Tim Bohen about his desire to hunt and eat animals.)
Before we get to that, there are some things to consider…
Table of Contents
Does the Time of Day Matter for Trading?
Yes, the time of day matters, but it’s not the be-all and end-all. One thing you must consider is what works best for you. Your personal schedule. It’s so important, I’ve made it one of the seven indicators of the Sykes Sliding Scale (S3) from my Trader Checklist guide. Read on for more about the S3…
Take A Step Back To Find the Best Times to Trade
As you go through the testing process, you want to figure out your sweet spot. But to do that, you have to take a step back and review every trade. It takes time — like a few years or more. I’d say for most traders it’s more because anything less and you’re still a newbie.
Think about it, if you take up any serious discipline, it takes years to hone your skills. Ask any professional athlete or musician. They don’t think they have it all figured out in less than a year. Trading is no different. And don’t let any of those fake ‘gurus’ talk you into anything different. Ask them to show you the details of every trade before you buy their snake oil.
What should you look for? If you keep a trading journal — which I recommend — then make the time of day one of the criteria you track. It’s much easier to be objective about it that way. All my top students tested and tracked various setups until they figured out what works for them.
I hear it over and over again when I interview top students…
“I took a look at my stats and realized this was the best setup for me and this other setup was bad.”
Why is your personal schedule so important? Because you don’t want to be distracted when you trade. You need to be 100% focused. It’s too easy to make costly mistakes if you’re not focused.
Remember, it’s not an exact science. I can’t say, “You should trade the first 90 minutes after the open and the last hour before the markets close.” That’s ridiculous.
S3: At What Time and Your Personal Schedule
This is one of the seven indicators on the Sykes Sliding Scale. The S3 is my tool to quickly evaluate a trade ahead of time. It’s covered in depth in my Trader Checklist guide. It kills me that so few traders take the time to study the guide and use what it teaches.
The seven indicators aren’t equal. Three of the seven have a max value of 20 points each. The other four have a max value of 10 points each. Therefore, the highest possible score is 100. Check this out…
… at what time and your personal schedule is one of the three more heavily weighted indicators. So don’t overlook it. If you’ve gotta walk out the door in 10 minutes … it’s unlikely you want to enter a trade. That’s not to say you couldn’t achieve your goals in 10 minutes. It’s just very risky to expect it to happen.
© 2020 Millionaire Media, LLC
Sometimes the Best Trade Is No Trade
This brings up one of the most important concepts I’ve been trying to pound into students’ heads for years…
Sometimes the best trade is no trade. Start with that underlying concept before you try to figure out what the best trading times are. Be willing to walk away — completely.
I’ll come back to the best times to trade. But let’s start with…
The Worst Times to Trade
When There Are No Plays
This should be obvious, but I can’t tell you how often I get messages from newbies saying they just want to trade. Today. To “get their feet wet.” Then they lose a lot of money.
The sad thing is, sometimes they don’t learn. They keep getting into trades with no clear reason and no plan. This is the typical degenerate gambler mentality. Don’t get sucked into that trap.
Wait for the plays to come to you.
Don’t try to make up for a big loss by taking another trade. I see it over and over again. I’ve even fallen for this myself. It’s not worth it. Most traders do it at some point. The key is to recognize it and learn to avoid it.
If you catch yourself trading the same stock saying “I’m gonna at least get back to zero on this one,” that’s a bad sign. Or, “That trade screwed up my weekly profit/loss… I need a winning trade to get back up…” That’s also a bad sign. See rule #47 here.
If you feel like you need some action … that’s a terrible time to trade. That’s also degenerate gambler mentality. Walk away. Start to think like a retired trader. Only come out of retirement when the setup is so good you’d be stupid not to trade it.
(That’s not to say you’re gonna win just because the setup is right. If it was only that easy. To learn all the nuances, apply for the Trading Challenge now.)
© 2020 Millionaire Media, LLC
When You Have Other Commitments
This is related to your personal schedule.
Look, I think you should be the best you can be at everything you do. Whether it’s trading, your relationships, hobbies … whatever. Be the best you can be.
It’s nearly impossible to be a great trader if you’re focused on something else. Likewise, it’s nearly impossible to focus on a conversation if you’re in the middle of a trade.
(Yes, swing traders do things a little different. Still, I wonder how many of them can detach when they have a large open position? I find it very difficult. If you can, more power to you.)
I sometimes trade when I’m feeling ill. But my stats show that I don’t trade as well. If you’re sick, why not rest? It’s OK to have a sick day as a trader. It’s much better than taking a big loss because you think you need to trade.
Dudes on Ludes Shouldn’t Trade
There’s a twisted undercurrent of coke heads and other drug abusers in the trading world. From Wall Street to the offshore pumpers, it’s there. I’m not saying everyone does it. But I do want to warn you against it. I assure you it doesn’t give you an edge.
Heck, I can barely take over-the-counter cold medication without feeling weird. So I try to avoid it.
Look, I’m not saying I haven’t done this. I’m human and trading isn’t like the Olympics. So learn from my experience. Trading while hungover is not the best idea. Your brain is cloudy. Your judgment is skewed. Go hydrate, instead. Then avoid overdoing it when markets are open the next day.
Now, that said, the key to trading when things aren’t perfect is preparation. I’ve traded from planes, trains, cruise ships, and cars. I was on a train once where the WiFi dropped as we went downhill and only came back again at the top of the next hill.
Trading doesn’t have to be the perfect controlled environment. But the key is preparation. If you’re prepared it’s possible to overcome obstacles. If not … you could pay a big price.
Alright, those are some of the worst times to trade in terms of your personal schedule. Now for the best trading times…
© 2020 Millionaire Media, LLC
The Best Times to Trade
This list of best trading times closely follows my Trader Checklist guide.
Wait, you want actual times of day, right? Keep reading, I’ll get there. I just don’t want you to think this is an exact science. It’s not.
When the Pattern/Price Action Is Clear
Again, this seems obvious. But I see newbies try to impose their will on a stock’s price action or imagine they see a pattern that’s just not there. And … this is very important … it’s not only about the price action or pattern. Yes, it’s one of the three more heavily weighted S3 indicators. But it’s still only one of seven indicators.
So look for patterns and price action. But also use the other indicators.
When the Risk vs. Reward Is in Your Favor
If you don’t know your risk versus reward … or it isn’t reasonably in your favor … don’t trade. Trade with clearly defined risk. And know your potential reward so you can exit when you’ve met your goals or if the trade turns against you. Anything less is almost worse than a degenerate gambler. You’ve been warned.
When the Stock Is Liquid
I try to avoid illiquid stocks. I learned my lesson the hard way on my worst ever loss. I was, essentially, stuck in a position and took a big loss. So focus on trading when a stock has enough volume to get in and out. You still might have slippage, but at least you won’t be completely stuck.
© 2020 Millionaire Media, LLC
When the Time of Day Is Good for the Pattern You’re Trading
Now we get a little more into the actual time of day. But be prepared to adapt because markets shift.
Have you noticed some of my pattern names include a time of day? I love morning panic dip buys. It’s my favorite pattern recently. That’s not to say I never dip buy other times of the day. But I particularly like the morning panic dip buys. It’s easier for me to anticipate what might happen.
Also, I don’t like to chase. There were a few weeks earlier this year when the panics were a little later. They were coming in the late morning and even into early afternoon. I attempted to adapt, but I didn’t chase. Nor should you. If the setup you like is happening but the time of day has shifted, test with small positions until you figure it out. Better yet, paper trade it.
That said, the morning panics I prefer shifted back closer to the market open. It was sort of a short-term anomaly. The lesson: be willing to adapt to changing markets.
© 2020 Millionaire Media, LLC
When the Reason or Catalyst Is Strong
Learn to observe how the market reacts to news. Also, try to determine if the news is already built into the price. I prefer to trade a stock when there’s a clear catalyst.
Does that mean I never trade a stock with no news? No. But when a stock comes up on StocksToTrade’s biggest percent gain scan, I search for news on it. I want to know what’s driving price action before I risk my hard-earned money. If there’s no news, I’m even more conservative.
When the Market Environment Is Suitable
A lot of newbies overlook this. If you’ve read my recent posts you know I’ve commented on the current market environment. Especially the trade war and how it’s creating uncertainty. As a trader, you have to be aware of the overall markets.
When you aren’t worried about a tweet causing a sudden drop in the S&P 500 … it can be much easier to trade. But if you don’t know when the next tweet or piece of news might tank the market … be more conservative.
Video: When Is the Best Time To Trade
Check out the video I made with Tim Bohen. In under seven minutes, you’ll learn…
- Why I love to trade the market open (but Bohen doesn’t).
- The pros and cons of market open and power hour trading.
- Why Bohen thinks ‘deer in the headlights’ is a bad way to trade…
- When it pays to buy near the market open. (And what you must understand about trading the open to protect yourself.)
- PLUS: a little fun between me and Tim. (He tried to get away with using one of my favorite sayings but I called him out…)
Trading Times Market Wrap
My goal is to help you become a self-sufficient trader. That way you have skills for life. When it comes to the best times to trade, like everything else in trading, it’s not an exact science.
I hope this post gives you some things to consider as you build your knowledge account. Now take what you’ve learned and start testing. Even if you’re not trading yet, you can paper trade and get a feel for how stocks move at different times. Keep a trading journal as you practice — it can potentially pay dividends in the future.
Do you have favorite trading times? Comment below and share your experience with other readers. New to trading? What time fits best with your personal schedule? Comment below, I love to hear from all my readers!
How much has this post helped you?
Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More
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Comments ( 6 )
As many of you already know I grew up in a middle class family and didn’t have many luxuries. But through trading I was able to change my circumstances –not just for me — but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!
Which is why I’ve launched my Trading Challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.
So when you get a chance make sure you check it out.
PS: Don’t forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading.
I would kill the market while eating fresh back straps from the deer in the headlights. Thanks for another cool video!
You and Bohen would get along great.
Still reading the book and I’ll probably start in the afternoons at first just because it’s slower and I will have a better chance of not messing up to badly.
I like to trade in the morning when the market just open but also depending on a prices factor and news. But I like to plan ahead the day before. I am very new but I learn from you. Still a long way to learn.
Great information! Thank you.
Kill it in the market!♂️
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I became a self-made millionaire by the age of 21, trading thousands of Penny Stocks – yep you read that right, penny stocks. You may have heard . Read more
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10 Things You Can Learn From The World’s Best Traders
Today’s lesson is a virtual treasure trove of wisdom and insight from some of the best trading minds of all time. We are going to go on a journey of discovery and learn a little about some of the best traders ever and dissect some of their famous quotes to see what we can learn and how it applies to our own trading.
The way to learn anything is to learn from the greats, have mentors, teachers, study and read; you must make a concerted effort to absorb as much knowledge from the best in your field as possible, for that is truly the fastest way to success, be it in trading or any other field.
Below, you will find a brief introduction to 10 of the best traders of all time, followed by an inspiring quote from them and how I view that quote and apply it to my own trading principles. Hopefully, after reading today’s lesson you will be able to apply this wisdom to your own trading and start improving your market performance as a result…
George Soros gained international notoriety when, in September of 1992, he invested $10 billion on a single currency trade when he shorted the British pound. He turned out to be right, and in a single day the trade generated a profit of $1 billion – ultimately, it was reported that his profit on the transaction almost reached $2 billion. As a result, he is famously known as the “the man who broke the Bank of England.”
Soros went off on his own in 1973, founding the hedge fund company of Soros Fund Management, which eventually evolved into the well-known and respected Quantum Fund. For almost two decades, he ran this aggressive and successful hedge fund, reportedly racking up returns in excess of 30% per year and, on two occasions, posting annual returns of more than 100%.
Here is a famous quote from Mr. Soros:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.”
The above quote is a big reason why I love George Soros. Indeed, what he is saying describes the way I think about the markets and even some of my price action strategies. My fakey pattern and even a false break strategy in general, are both setups that reflect a way we can use price action to “discount the obvious and bet on the unexpected” as Soros said. Typically, most market players become fixated on one view, one bias of the market, forgetting that markets can switch direction and bias on a dime. You must be ready for everything and be an adaptable trader if you want to be able to make money over the long-run. Certainly, for Soros, betting against the British pound when the whole world was long, paid off; it’s a good example of how not following the herd and not being over-committed to a view can pay off.
In the chart below, we actually see that an obvious bearish fakey (sell signal) had formed the day before the GBPUSD crashed in 1992, leading to George Soro’s most famous trade…
Livermore, who is the author of “How to Trade in Stocks”(1940), was one of the greatest traders of all time. At his peak in 1929, Jesse Livermore was worth $100 million, which in today’s dollars roughly equates to $1.5-13 billion, depending on the index used. He is most famous, perhaps, for selling short U.S. stocks before they crashed in 1929, swelling his bank account to $100 million.
Here is a famous quote from Jesse Livermore:
“Play the market only when all factors are in your favor. No person can play the market all the time and win. There are times when you should be completely out of the market, for emotional as well as economic reasons.”
The above quote by Jesse Livermore is one of my favorites. I am all about keeping a low-frequency trading approach and trading like a sniper not a machine gunner which is also what Livermore is saying here. Playing the market when all factors are you in favor means, as with other quotes in this lesson (seeing a theme here?) trading with confluence. He says you should be out of the market at times for emotional as well as economic reasons. Meaning, for your trading account’s sake and your mindset’s sake, you should not be in the market all the time. In fact, most of the time you should be out of the market, which is a cornerstone of my trading philosophy.
Trading as a trend follower, Ed Seykota turned $5,000 into $15,000,000 over a 12-year time period in his model account – an actual client account. In the early 1970s, Seykota was hired as an analyst by a major brokerage firm. He conceived and developed the first commercial computerized trading system for managing clients’ money in the futures markets
Here is quote from Ed Seykota from The Market Wizards by Jack D. Schwager:
“Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them “funny-mentals”. I am primarily a trend trader with touches of hunches based on about twenty years of experience. In order of importance to me are: (1) the long-term trend, (2) the current chart pattern, and (3) picking a good spot to buy or sell. Those are the three primary components of my trading. Way down in a very distant fourth place are my fundamental ideas and, quite likely, on balance, they have cost me money.”
What Ed is saying in the above quote is very important because it really is something I agree with and it reflects some of the concepts I teach in my courses. I am also primarily a trend-follower who uses gut feel as an assistant, and as I’ve written about before, a trader’s gut feel is something they must develop over education and screen time. Ed also talks about chart patterns, which to me means price action patterns, which obviously you know I am a huge proponent of.
Picking a good spot to buy or sell is what I describe as trading with confluence. It takes a keen knowledge of price action and staying in tune with the story on the charts to identify good spots to buy or sell. Lastly, what Ed says about fundamental analysis is pretty much spot-on with my trading outlook; I put little stock in fundamentals because the market has typically discounted them in the price. In other words, the price action reflects all market variables, more or less. Certainly, the price action gives you enough to analyze a market and find high-probability entry and exit scenarios, so don’t over-complicate it by trying to analyze every market variable under the sun.
Paulson became world-famous in 2007 by shorting the US housing market, as he foresaw the subprime mortgage crisis and bet against mortgage backed securities by investing in credit default swaps. Sometimes referred to as the greatest trade in history, Paulson’s firm made a fortune and he earned over $4 billion personally on this trade alone.
Here is a great quote from John Paulson:
“Many investors make the mistake of buying high and selling low while the exact opposite is the right strategy.”
What he means here, is that most investors and traders will tend to buy when a market is high, typically because that’s when it looks and feels good to buy. However, when a market has already moved up a lot, it’s typically ready to pullback, which is why I like to trade on market pull backs in most cases. The inverse is true for shorting; when a market has sold-off big time, you usually don’t want to sell, or you’ll end up selling the bottom, so to speak. You want to wait for a bounce in price, back to a resistance or value area, then watch for a price action sell signal there to rejoin the trend after a pull back.
Paul Tudor Jones
Paul Tudor Jones shorting of Black Monday was one of the most famous trades ever. Paul Tudor Jones correctly predicted on his documentary in 1986 based on chart patterns that the market was on the path to a crash of epic proportions. He profited handsomely from the Black Monday crash in the fall of 1987, the largest single-day U.S. stock market decline (by percentage) ever. Jones reportedly tripled his money by shorting futures, making as much as $100 million on that trade as the Dow Jones Industrial Average plunged 22 percent. An amazing trade to walk away from with a fortune when so many others were ruined in the aftermath. He played it to perfection. His funds had great consistent returns for decades.
Here is a favorite quote of mine from Paul Tudor Jones featured in the Market Wizards:
“That was when I first decided I had to learn discipline and money management. It was a cathartic experience for me, in the sense that I went to the edge, questioned my very ability as a trader, and decided that I was not going to quit. I was determined to come back and fight. I decided that I was going to become very disciplined and businesslike about my trading.”
What Jones is saying here, is that there will be a time when every trader makes a huge mistake regarding money management, and they must take a cold, hard look at themselves and decide what to do next. Will you continue to bleed money from your account by continuing to make poor money management decisions? Or, will you finally get disciplined and “businesslike” in your trading? In trading, money management is literally what determines your fate, so you need to focus on it early-on if you want to have any chance of success.
Richard J. Dennis, a commodities speculator once known as the “Prince of the Pit,” was born in Chicago, in January, 1949. In the early 1970s, he borrowed $1,600 and reportedly made $200 million in about ten years. Dennis and his friend William Eckhardt, are most famous for starting the Turtle Traders, which was a group of 21 average people to whom they taught their rules to and proved that anyone, given the right training, could trade successfully.
Here is a good quote from Richard Dennis:
“I’ve certainly done it – that is, made counter-trend initiations. However, as a rule of thumb, I don’t think you should do it.”
Richard Dennis was famously a very successful trend trader and in the above quote he is stating his feelings on trading counter trend. Interestingly, this is pretty much how I feel about trading counter-trend; sometimes it’s warranted, but most of the time it’s not, and it takes a skilled trader to be able to trade counter-trend successfully. I teach my students to master trading with the trend first and foremast and to make that the most important piece of their technical analysis.
Stanley Druckenmiller is an American investor, hedge fund manager and philanthropist.
In 1988, he was hired by George Soros to replace Victor Niederhoffer at Quantum Fund. He and Soros famously “broke the Bank of England” when they shorted British pound sterling in 1992, reputedly making more than $1 billion in profits. They calculated that the Bank of England did not have enough foreign currency reserves with which to buy enough sterling to prop up the currency and that raising interest rates would be politically unsustainable.
“I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”
The above quote is reference to George Soros who mentored Druckenmiller for a while. This quote fits perfectly with an article I wrote recently about how you don’t have to be right to make money trading. Most traders get far too concerned about the number of winners they have compared to losers when really, they should totally forget about that number and instead focus on their overall risk / reward. In other words, how much money are they making for every dollar they have risked.
James Beeland “Jim” Rogers, Jr. is a Singapore based business magnate of American origin. Regarded by the business world as a brilliant investor, Rogers is also an author and financial commentator. He co-founded the global investment partnership, Quantum Fund, along with George Soros, another equally brilliant businessman.
Here’s one of my all-time favorite trading and investing quotes, courtesy of Mr. Rogers:
“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, “I just lost my money, now I have to do something to make it back.” No, you don’t. You should sit there until you find something.”
I really like the part above where Jim Rogers says “I just wait until there is money lying in the corner…” because that really sums up what I try to teach my students as well as my own personal trading style. Rogers is dead-on with the above quotes; most traders do WAY too much…there is nothing wrong with doing nothing if there isn’t anything to do! In other words, don’t force a trade if an obvious one isn’t there, it’s better to save your capital for a solid opportunity that’s just around the corner.
Raymond Dalio is an American billionaire investor, hedge fund manager, and philanthropist. Dalio is the founder of investment firm Bridgewater Associates, one of the world’s largest hedge funds. As of January 2020, he is one of the world’s 100 wealthiest people, according to Bloomberg.
Here is a pretty deep quote by Ray Dalio:
“I believe that the biggest problem that humanity faces is an ego sensitivity to finding out whether one is right or wrong and identifying what one’s strengths and weaknesses are.”
This quote by Mr. Dalio is deep, for a few reasons. One, having a sensitive ego is very bad in trading, because the fact is, you’re going to have losing trades, probably more than you want. So, if you become overly-affected / emotional by every loser, it’s going to catapult you into a huge string of trading mistakes, as I wrote about more in-depth in my article on the top trading mistakes people make.
Next, being right or wrong is and should be 100% irrelevant in trading. As the late, great Mark Douglas teaches, you can be wrong on average and still make money, and your trading success or failure doesn’t depend on whether you’re right on your next trade, read my article on the secret to trading success for more on this. Finally, you must determine what your strengths and weaknesses are as a person before you can find trading success. We all drag our personal baggage into the markets and it influences our trading, for better or worse.
Known as the “Oracle of Omaha,” Warren Buffett is one of the most successful investors of all time. He runs Berkshire Hathaway, which owns more than 60 companies, including insurer Geico, battery maker Duracell and restaurant chain Dairy Queen. He has committed to giving more than 99% of his fortune to charity. So far, he has given nearly $32 billion.
Here is perhaps a lesser-known quote from Warren but one that I like nonetheless:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
To me, this quote is saying that high-probability trade signals happen infrequently, which is something I teach as any of you know who have followed me for any length of time. Thus, when you do get a nice and obvious / confluent trade signal (there’s that confluent word again) you need to maximize your gains, not take a quick / easy profit. This fits nicely in my teachings about the power of risk reward and how to catch big moves in the market. I am all about waiting patiently, with discipline, for days, weeks or even months and then pouncing on that one super-obvious setup that will net me a large 1:3, 1:4, 1:5 or even greater winner. This is the basis behind my approach that proves you don’t need to win a lot to make money trading.
Personally, if you’re a beginning or struggling trader, I think the most important thing to takeaway from all the wisdom in today’s lesson is to first get YOURSELF straight; get your money straight, get your patience and discipline straight, know what your trading edge is and how to properly trade it BEFORE you start risking real money in the markets. If you do this, you will largely be trading in-line with the insight and advice that the above trading greats have provided you with.
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