introduction
Since its inception in 1957, the S&P 500 (Index which tracks the 500 most robust companies in the US) has historically delivered an average annual return of approximately 10% to investors. While long-term investors benefit from this steady growth, traders take a different approach by actively speculating and betting on various strategies to capitalize on market movements. By engaging in active trading, they aim to outperform the market's average returns and significantly enlarge their profit margins. This hands-on involvement requires a deep understanding of market trends, technical analysis, and quick decision-making to seize opportunities as they arise.
Welcome to the exciting world of trading—a dynamic and challenging arena where the U.S. stock market, with companies ranging from tech giants like Apple and Amazon to innovative startups, plays a pivotal role in shaping the global economy. This series aims to equip you with the knowledge and skills to navigate the complexities of trading, understanding not just market trends and strategies but also the importance of self-awareness and continuous learning.
time price opportunity (TPO)
Imagine you are at a shopping mall, eyeing winter clothes at the end of the season when prices are slashed. This scenario mirrors trading, where understanding the concepts of premium and discount is crucial. In trading, the right timing can make or break your success. Assets, much like winter clothes, can be overvalued or undervalued based on market conditions and timing. This section of the lesson will delve into how you can identify these opportunities to buy low and sell high, understanding market cycles, and making strategic decisions.
We will go over how time, price and opportunity is used in trading.
trading and profits
Stepping into the trading arena is like entering a competition where the odds are stacked against you—with approximately 90% of traders failing to make a lasting impact. This sobering statistic highlights the immense demands placed on traders, requiring not just a deep understanding of market trends and strategies but also rigorous risk management and disciplined decision-making. We will discuss how to thrive in trading by mastering core concepts and tailoring strategies to fit your unique psychological profile.
We will use journaling to identify a strategy to overcome shortcomings often faced by new traders.
the challenges of trading
Why is trading considered so difficult? Similar to a novice athlete owning the best sports equipment but still performing poorly, traders often struggle despite having access to top-notch tools and resources. The real challenge lies in overcoming the mental and emotional hurdles that accompany critical decision-making under pressure. This segment will explore the psychological resilience, discipline, and emotion management required to achieve consistency in trading.
Journaling will show the shortcomings of your unique psychological makeup during trading.
conclusion and future lessons
As we wrap up this introduction, remember that trading is not just about making transactions—it's about making informed decisions based on a solid understanding of market dynamics and personal introspection. In the next lessons, we will explore how we learn and adapt in trading environments, introducing you to technical analysis and other essential tools that will aid in your journey. Stay tuned as we continue to unravel the complexities of trading and set you on a path to potential success.
Brokerage Accounts
A brokerage account is a type of financial account that allows an individual to buy and sell securities such as stocks, bonds, mutual funds, and ETFs. Managed by a brokerage firm, this account provides the necessary platform and tools for executing trades, tracking investments, and managing a portfolio. Additionally, brokerage accounts may offer various features like margin trading and access to financial advice and research.
Notas adicionales
Robinhood: Su simplicidad y cero comisiones lo hacen atractivo para principiantes. Sin embargo, tiene menos herramientas de análisis y soporte educativo que otros brokers. Se utiliza junto con una aplicación de gráficos gratuita, Tradingview.com.
Webull: Ofrece análisis técnico más robusto y una interfaz más moderna que Robinhood, con noticias en tiempo real y gráficos avanzados.
Schwab: Conocido por su excelente servicio al cliente y una amplia variedad de productos de inversión. La plataforma puede ser un poco intimidante para los nuevos inversores, pero es muy completa.
TradeStation: Es una de las plataformas más avanzadas, adecuada para traders serios y experimentados. Ofrece un alto nivel de personalización y una amplia gama de herramientas de análisis.
journaling
Successful trading relies on two critical ingredients: win rate and win-loss ratio. The win rate is how often you close successful trades, while the win-loss ratio measures the amount you gain on a winning trade versus the mount you lose on losing trades. Combining these two concepts determine your market edge—the unique advantage that differentiates successful traders. Developing and honing this edge is essential for achieving consistent market profitability.
The key to introspection and trading
Introspection, much like trading itself, will demand more from you than from the market. A significant portion of successful trading occurs outside the screen, involving preparation, analysis, and reflection. To improve and refine your trading skills, it’s essential to start journaling your trades. This practice will allow you to self-correct, understand your decision-making process, and identify patterns in your successes and mistakes.
By keeping a detailed journal, you can track your performance, assess your strategies, and make informed adjustments. This introspective approach is crucial for continuous improvement and developing the resilience needed to thrive in the trading world. You want to replicate your results over the long term far from having a week or "lucky" month. The journal's main job will be to help you remove "luck" from the equation by recalling your best moves and patterns.
We will be using Airtable to journal and detail closed trades
User Entry
Date: date of trade (time is irrelevant given a chart)
Ticker: symbol of the stock
Stock price: price of stock at time of purchase
Notes: Reasoning for trade, or emotions involved. Lessons learned
Reference: pictures or charts for trade plan.
Entry: price of contract at time of purchase, show amount willing to lose
Profit: amount of gross profit on trade
Strike: Determines the OTM factor for reviewing
Type: type of contract. CALL or PUT
DTE: days to expiration, same day is known as 0d
Delta: delta factor at time of purchase, determines how much earning potential you're buying.
WLR: win, loss, or break even tag for win rate calculation.
Ticker: symbol of the stock
Stock price: price of stock at time of purchase
Notes: Reasoning for trade, or emotions involved. Lessons learned
Reference: pictures or charts for trade plan.
Entry: price of contract at time of purchase, show amount willing to lose
Profit: amount of gross profit on trade
Strike: Determines the OTM factor for reviewing
Type: type of contract. CALL or PUT
DTE: days to expiration, same day is known as 0d
Delta: delta factor at time of purchase, determines how much earning potential you're buying.
WLR: win, loss, or break even tag for win rate calculation.
Automático
%OTM: Determines what you're buying and for how much
Win: Determines percentage of trades won.
Broke-even: Determines percentage of trade when you made no profit or loss.
Loss: Determines the percentage of trades when you lost.
P&L %: Determines the percent of profit/loss
Statistics Panel
Last 5 days, Current Month, All-Time
P/L%: shows cumulative profit/loss
Trades: Quantity of trades performed
Avg. OTM: Average percent of OTM options traded
Avg. DTE: Average days to expiration Traded
Bear/Bull: Shows if you are bearish or bullish trader
Win/Loss: shows your hit rate
T-model: Shows you how often each strategy is traded
P/L History: displays profits in a chronological order
P/L Distribution: displays profits in a weighted order
P/L Bell Curve: (advanced) displays profit in a bell distribution (shows where your most consistent trades lie)
Trades: Quantity of trades performed
Avg. OTM: Average percent of OTM options traded
Avg. DTE: Average days to expiration Traded
Bear/Bull: Shows if you are bearish or bullish trader
Win/Loss: shows your hit rate
T-model: Shows you how often each strategy is traded
P/L History: displays profits in a chronological order
P/L Distribution: displays profits in a weighted order
P/L Bell Curve: (advanced) displays profit in a bell distribution (shows where your most consistent trades lie)
Trading is very unique to individuals and therefore mistakes are sometimes unique. First, we need to figure out if our current strategy is profitable and will remain profitable in the long term (edge). then we need to figure out if we are losing more than we are winning. and how often we win. which strategies are winning the most and which mistakes we need to eliminate and avoid.
