Five Steps to Develop a Working Trading Philosophy

Five Steps to Develop a Working Trading Philosophy – Introduction

The financial industry is one of the largest industries in the world. It provides the capital needed for other industries to thrive. Every day, millions of people participate in this industry. In the forex market alone, more than $5 trillion change hands. Some of the participants are usually the brightest people in their industry. Therefore, for you to succeed in it, you need to have a philosophy. The following is a simple guide on how you can create such a philosophy if you want to succeed in the industry.

Technical Knowledge

The first thing you need to do is to have a technical knowledge of finance and economics. This knowledge is gained by taking a financial-related course in school. If you are yet to go to college, you should consider doing so and take a course that will introduce you to these concepts. If you have done a course that is unrelated to finance, don’t worry. You can start by enrolling in one of the short courses that are offered online. The benefit of taking these courses is that they will help you understand the key concepts. For example, it will help you to understand what concepts like GDP and GNP mean and how to read and interpret a balance sheet.

Generate a general view of the market

Second, you need to have a general view about the market. Every investor have a view about this. For example, Ray Dalio uses the famed template to make decisions while Warren Buffet has a view of buying cheap and holding stocks for the long term. Bill Ackman has a view of buying and influencing the management to influence change. Your views of the market will depend on how you read, what you read, and how you interpret them.


There is a lot of literature on the market out there. The materials include books on all fields including on finance, economics, hedge funds, macro, currencies, stocks, and business among others. A rule I have always advised my students to follow is on reading different materials. By reading, you learn new things and you also learn from the experiences of other people. For example, reading a book by David Einhorn will tell you how he started his fund with less than a million dollars and grew it to billions of assets. Similarly, reading Stress Test by the former treasury secretary (Timothy Geithner) will tell you about his views on the crisis. I recommend that you read a book every month.

Exchanging Ideas With Fellow Traders

An important way to grow as a trader is to exchange ideas with people in the industry. This is the main reason why many wealthy people pay hundreds of thousands of dollars every year to attend the meeting at Davos. They want to make deals and also listen from their fellow wealthy peers. Similarly, you should do the best to learn from other traders and investors. A good way to do this is to attend conferences and seminars om trading.


Finally, trading will give you the knowledge and experience that you need to develop and master your craft. You should employ all the skills learned in the previous four points to better your trading skills. You should view all trades that you start as a learning experience for you. In this, you should learn from the winning and losing trades as well.

Five Steps to Develop a Working Trading Philosophy – UsefulTips

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