The-TraderLion-Ultimate-Trading-Guide

Ultimate Trading GuideIntroduction Welcome to the TraderLion Ultimate Trading Guide. This is the perfect resource if you are looking to take your trading to the next level. Inside you'll find foundational topics, setups, risk management, trading psychology, and dozens more essential concepts that will help you improve your trading, execution, and performance. The Phases of Trading 01 Building a Trading Foundation 08 An Introduction to Stage Analysis 23 Key Moving Averages 41 Relative Strength Line 46 Volume 49 3 Setups You Can Master 51 Finding Champion Stocks 69 Managing Risk 75 Position Sizing 84 When To Sell 86 Build a Champion Routine 94 We will also be following up on this guide with additional resources sent by email that help reinforce the most important concepts. This guide will accelerate your learning curve and help you build a resilient and effective trading system.Before we go any further, we want to emphasize that the single most important factor that will determine how successful you will be at trading is your commitment to learning. Your passion for trading and determination to improve will sustain you through the early stages of your journey and help you persevere through any obstacle you experience. Take a minute and get out a piece of paper and a pen. Once you have that ready, write down the motivations you have for learning to trade and invest in the market. Finally, write a personal commitment contract (example shown below) to yourself declaring that you will put in the work to learn and improve your trading. We also encourage you to tweet out this contract or otherwise proclaim it to the world. You may find this a bit ridiculous but written goals have an interesting way of becoming true. Remember, your choices and habits will over time form your reality. If you want to become a fantastic trader it is fully within your power to do so. Read this guide, perform studies, do your homework and you will be well on your way to progressing along your trading journey. It all starts with a look in the mirror and a commitment to yourself. I ________________ will do my utmost to make incremental improvements and put in the work that will allow me to learn and improve as a trader. I will establish routines, read books, conduct studies, and otherwise look for ways to extend my knowledge base and perform at my best. ___________________________The Phases of Trading Along your trading journey, you will go through 4 distinct phases. This journey is nonnegotiable, but you can expedite your progress by dedicating yourself to learning from the correct resources. Our goal with this guide is to lay out the knowledge you need to progress from Phases 1 and 2, and into Phase 3. To enter Phase 3 takes time and dedication and most traders grow frustrated and quit before they achieve this consistency phase and see higher lows in their equity curve. However, with enough focus and hard work any trader can achieve Phase 3 in a relatively short amount of time. TraderLion Ultimate Trading Guide 1Even after a trader achieves Phase 3 the work is not done. Instead, it becomes all about incremental improvements and mastery of oneself outside of trading. There will always be aspects of trading that you can work on and ways to refine your process. It will take time to achieve, but once again, if you refuse to quit then there is no doubt you can reach the performance phase and consistently see a rapid trend of higher lows and higher highs on your equity curve. As you work continuously on your process you can reach an additional phase: Phase 4 - The Performance Phase. As you are reading this guide, be brutally honest with yourself about which phase you are currently in. Armed with this knowledge, focus on our recommendations for how you can progress to the next phase whether it be through implementing routines or running deep dives into specific setups. Now let’s get into more specifics of each phase so you can recognize where you currently are at. TraderLion Ultimate Trading Guide 2Every trader no matter how experienced they are now, initially started in Phase 1. This phase is characterized by a volatile, down-trending equity curve. Traders in Phase 1 act randomly without a system, acting on tips and impulses. Unprofitable Phase Phase 1: There is very little rhyme or reason when it comes to buys and sells and often traders in this phase have not received any trading education outside of social media posts. They lack any cohesive plan or trading rules with regard to entries, exits, and risk management. Traders in this phase often begin trading during strong bull markets and achieve a few wins before the tides change and random entries are no longer as effective. In this phase, traders are often easily swayed by the emotions of trading, thrilled at small wins, and crushed by losses. Their equity curves generally trend downward with short-lived uptrends and high volatility. Depending on how determined traders in this phase are, they may decide to leave trading behind them. If you recognize yourself as a Phase 1 Trader, keep going! With sound trading rules and discipline, you can quickly move past this phase and advance along your journey. It will take a lot of hard work, but it will be more than worth it. TraderLion Ultimate Trading Guide 3Boom-and-Bust Phase Phase 2: In this Phase, traders have often gotten more serious about trading and have done some research and even read a few books on strategies and setups. However, they may struggle with consistently implementing a system and often lack proper risk management. Traders in Phase 2 have a volatile equity curve with upswings when the market is good and then they often give all their profits back when the market turns. Phase 2 traders may feel disheartened when they attempt strategies they have read about and still can’t seem to make them work. However, with just a bit more effort, tighter risk management, and trade discipline, they can easily turn the corner and enter Phase 3: The Consistency Phase. TraderLion Ultimate Trading Guide 4Consistency Phase Phase 3: In this phase, traders have fully committed to learning and have often read multiple trading books and found a sound strategy that makes sense for them and their situation. They may have also received mentorship from a more experienced trader using a similar style. At this point they follow their system nearly all the time, they have improved risk management skills, they also have an awareness of the trends in the market and react accordingly. The transition from Phase 2 to 3 generally occurs when traders limit noise and focus on mastering one strategy and even just one setup. Proper risk management through position sizing and repeatable sell rules is also crucial to progressing to this phase. In Phase 3, a trader’s equity curve will generally be upward trending from left to right and form higher lows as they protect their profits from one market cycle to the next. At this point, they have started to build confidence but still require many improvements and tweaks to start truly performing. TraderLion Ultimate Trading Guide 5Performance Phase Phase 4: Phase 4 may be the last phase but it by no means signifies that the learning or hard work is done. Traders in this phase have achieved mastery of their trading system but they are continuously looking for ways to improve edges and their performance. Performance Phase traders have nailed down routines that keep them focused on the highest potential stocks for their system and aware of the current market conditions. They know when to press the gas as well as when to take a step back and limit their involvement in the markets. This does not mean that they avoid drawdowns or never experience setbacks. However, they have confidence in their process and method and know when the environment is right they can perform vastly better than the indexes. This confidence allows them to be patient and selective when their style is not well suited for the market environment. In Phase 4 your equity curve will have a sharp upward trend with higher lows. What differentiates it from Phase 3 is the steepness during uptrends and the shallowness of any drawdown. It should stair step higher, going mostly flat when conditions are not right for your style. TraderLion Ultimate Trading Guide 6System Hopping Oversizing Overtrading Randomness Overconfidence Underconfidence Buying Extended/Late Generalization Using Too Many Indicators Lack of Risk Management No Sell Rules No Post-analysis FOMO At TraderLion, we have seen many traders run into issues that become roadblocks to their progress. I’m sure reading through the list you will find many familiar. Our guide is specifically designed to address these problems and help set you on the path to overcome them. Some examples: Now that we have described the 4 Phases of Trading, take a minute and reflect on your current trading ability and take a close look at your equity curve over the past two years. It may be helpful to plot along with it an index so you can have a visual representation of how the market was performing during different periods of time. It will also be helpful to jot down your strengths and weaknesses as a trader, and be brutally honest with yourself in this self-analysis. That is the only way you can identify your pain points and look to eliminate them. These are common problems that many traders experience throughout their careers. However, this does not mean that you can not accelerate your learning curve, if not avoid these problems altogether with the help of a strong trading system. With this in mind, let’s get to work on building your trading system starting with a strong foundation. TraderLion Ultimate Trading Guide 7