Mentoring: 25 Tips For Stock Traders
Why Mentoring a Trader is a Two-Way Street
Mentoring advice can be difficult.
You never want to shatter someone's dreams but you want to be honest. It's a fine line to walk.
When you have an honest desire to give back, mentoring is an obligation. A responsibility.
It's common for new traders to ask experienced traders for advice. Often they say no. It's not for the reason you think.
They say no because you aren't putting in the time. They refuse because they see you aren't working hard on your own.
Trust me, experienced traders notice if you arrive at 9am and leave at 4pm. Start to come in early, stay late. You will have no problem finding a mentor if you do this. Hard work is the price of admission.
A mentor is not interested in helping someone who is lazy. Show them you are willing to go the extra mile. Someone who takes responsibility for their results.
You can't improve without this extra effort. I've been there. Day trading success will take twice the effort you expect.
Why do I Think Mentoring Traders is Important?
Profitable trading is hard. It takes time to learn. It can be a lonely endeavor.
Your family thinks you're a stock broker and they are secretly worried. Your friends are jealous of your perceived career but they enjoy the paycheck that comes with 9-5.
In 2003 my cousin told me he wished he could do what I did. I said "Really? You wish you could work 60 hours this week and be negative $2,000 for your efforts?"
Mentoring matters to me because I can help someone avoid mistakes. I can help someone lose less or understand how and when to hold a good trade longer.
If you have spent long nights after a losing day trying to figure out what you missed, you understand what I mean.
Mentoring is important because it's strategy or tactics peppered with experience. Don't ask for an entry or exit. Ask how to make better decisions. You become a trader for the freedom, not to be a robot.
A mentor enjoys helping because it's a chance to reflect on their own career and be proud.
When you are an experienced trader you will understand.
What is Good Mentoring?
- Good mentoring teaches, it doesn't show a student to mimic. It teaches you to think for yourself.
- Good mentoring teaches you to ask the right questions. A good trading mentor listens to the answers.
- Good mentoring is structured. Each phase of the process has a purpose.
- Good mentoring has planned ascension and a recognition by the mentor of skill level.
- Good mentoring focuses on mastering the basics. Without a solid foundation in core principles, trading mastery will be challenging.
- Good mentoring requires the student to show personal initiative. Students should work on their own and bring topics to the conversation.
Mentoring Advice for Day Traders | My Top 25 Tips
1. Don't whine about market conditions being tough. That's like an entrepreneur complaining about competition. Learn how to adapt.
2. Spend most of your time developing an edge. This means real trades. Not paper trades.
3. Commit to one strategy, one edge. You can't trade everything. You think you can but you can't. Trust me on this one.
4. Document your trading plan on one sheet of paper. If it takes more than this it will be difficult to follow.
5. Never move or cancel a stop-loss. You put it there for a reason. If you still like the scenario reduce risk. You can always put the shares back on.
6. It will take you longer to learn how to make money than you think. Learning how to trade is simple. Learning how to make money requires experience.
7. Don't ask for trade ideas. Learn how to find your own. You want to put yourself in a position where you are responsible for your success.
8. Learn what not to do first. This will help you stay in the game as you gain experience. Learn to minimize mistakes and avoid low probability scenarios.
9. Do not trade bigger until you have a track record of performance. At least 3 consecutive months. This means you have an edge and you can follow it.
10. Learn the market conditions that warrant adding to trades, holding longer and multiple positions
11. Be prepared or don't risk a penny. Have the discipline to do your research.
12. If you are a 100% technical trader that doesn't excuse you from reading and understanding the news. You may not trade the news but you must know it.
13. Don't trade if you have a personal stress affecting your mindset. It will be an expensive lesson.
14. Counter-trend trading is a very challenging way to make a living. Follow the obvious demand or supply, there is no reason to get cute.
15. Ask a lot of questions from the beginning. Most traders I have managed gave themselves "6 months" to learn trading before their money ran out and never asked questions until month #5.
16. Learn multiple time-frame analysis. It can be multiple moving averages on one chart or multiple charts but you need to understand the big picture before you commit capital. When I first started trading everyone looked at one minute charts.
17. Be careful about risk tolerance when you are on a winning streak. You will tend to take extra risk because you can "afford it." This is foolish but we all do it.
18. Game Plan the same time every day. Put it on your schedule. Never break this appointment.
19. Be diligent keeping a trading journal. It is the most important trading book you will ever read because it is a story about you.
20. Save more money when you are trading well. There will always be a dry spell around the corner. (I guarantee it)
21. A stop-loss is a business expense. Treat is as such. This will reduce the emotional component of losses.
22. Money management is how much you risk per trade. Risk management is how you manage the trade. Learn the difference and commit to your numbers.
23. Spur of the moment trades are usually losers. Plan your trades in advance, this leads to conviction.
24. Reduce your size when you are in a slump.
25. There is a tuition to learn how to make money. You will pay a teacher, a mentor or the market. There is no avoiding this. You are not the exception.
- Bonus #1: How to recover from a large loss: Re frame it as an expensive seminar.
- Bonus #2: Define your trading style. Momentum traders exit into a pause and look for another trade. Trend traders add on a pause anticipating a new leg of the trend. It is very difficult to do both.
- Bonus #3: Get a part-time job at the beginning. It will keep you sane and help pay the bills.
- Bonus #4: If you have a choice between more buying power or lower commissions, choose buying power. This means you believe you can make money. Cutting expenses is good but it doesn't make you a better trader.
- Bonus #5: Short-selling a strong stock with fewer shares is not reducing risk. It is still a bad idea. Many active traders over the last 2 years feel good they have tried to pick a top and not lost too much money. Their focus is off. They should be angry they were not long.