The Path to Successful Trading
In the broad category of “trading the markets,” there are basically three types of
trading: discretionary, technical, and strategy-based. When I sat down to write this
book, my intent was to write only about strategy trading. But then I realized that
to fully describe strategy trading, it was also necessary to discuss discretionary and
technical trading. It’s important that you understand the difference between them,
which is not always clear. I’ve met many people who believe they are strategy
traders when they’re actually technical traders, and vice versa.
I have known and taught many traders, and have observed that there are four
distinct stages of trader education: discretionary trader, technical trader, strategy trader, and complete strategy trader. All successful traders have gone through them. It is almost impossible to be a successful strategy trader without going through all of these stages. My goal with this book is to help you understand and move through the stages at much less cost in both time and money.
Every trader usually starts out as a discretionary trader. The amount of money lost
generally determines how long it takes the individual to start using technical
indicators to make trading decisions. Eventually, as even employing technical
indicators fails to move the trader into profitability, the trader moves into the
third stage and starts to write strategies based on quantifiable data. It is at this
stage that the trader ordinarily starts to make money. Finally, the strategies and
money management approaches are refined and the individual becomes successful
as a strategy trader.