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Robert

Does Education Matter in Trading?

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Does one need to be well educated to trade the markets? I find that top traders are very intellectual. Without the proper education, can one succeed as a trader?

 

Any thoughts are welcome.

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BA, Masters, PHD required? NO.

 

Intelligence required? YES

 

I know alot of traders who do not have college degrees and are very successful. But one trait in common is that they are street smart. Bookies tend to make good traders also. Higher education is definitely not necessarily to be a professional trader. But at the same time, you need to be somewhat intelligent. Afterall, intelligent people are usually attracted to the markets and you are going against some of the smartest minds in the world.

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I think you need to have a degree of intelligence to be able to trade the markets.

 

Im not saying that you need to have bags of qualifications, but you need to have a good grasp of maths to work out valuations, and be able to think on your feet.

 

Sometimes it the people you least expect who make the best traders.

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Educational qualifiction can only help matters a little bit but ultimately it is the intellegence which is more required. I have seen many persons who do not posses the so-called high qualifications but they have reached to the highest point in their career by virtue of hard work and intelligence.

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You do not actually need Education/Degree for trading. However like soultrader said, you need intelligence and ofcource piece of mind to do trading.

You do not want someone to fool you right? :p

If a 17 yr old guy can do it, you can expect yourself to do it too. :D

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I think young age does help in trading/poker because there is no fear. I remember when I was younger I was alot more aggressive. More of a cowboy type. Now with experience, I do not think I will ever be as aggressive as I once was. Agressive play is exciting but as one gets older, you are no longer in it for the excitement. I am more concerned about being conservative and stable. Kinda ironic when you apply conservatism to trading.

 

Trading to me is a daily grind. I have better odds of survival grinding my way in this game then dumping my entire chips in one hand.

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It's true for all aspects in life. When you are young you tend to take chances a dare-devil kind of attitude, but as you grow older you gain experience and understands the inner things of any subject. Then as you can visualize what's in store you tend to get cautious. Just like a child who does not know what fire is and tend to touch upon it.

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Hmm.. I find this to be one of the most interesting questions at this forum thus far.

 

First let me say that all the posted answers thus far were generally right on the button to one degree or another. But, if you will be kind enough to bear with me, I would like to diverge just a wee bit from the opinions expressed here and say that I believe that education is absolutely essential to successful trading.

 

Now, before the rest of you posters and readers here lodge huge storms of protest, let me qualify my remarks just a bit.

 

The education I am speaking of is not normally to be gained at a college or university of higher learning, at least not from most of the formalized courses available. Does that mean that I am suggesting that simple "streetsmarts" is the better way to go? Well, let me give that a qualfied yes and no.

 

Streetsmarts is far from simple and usually only comes after many years of a rough and tumble life where you are forced by necessity to learn through live daily interaction with people (both pleasant and unpleasant) in both personal and work situations. The challenge to gaining streetsmarts is in remaining vigilant enough to discern the lessons being taught. Most people simply get caught up too heavily in the emotions of the moment and miss the valuable lessons, thus seldom ever really learning how to adjust their own behaviors in order to excel in similar situations that befall them further down the road.

 

I am saying you need intense education in at least three areas:

 

1) Knowledge of the structure of the market(s) you wish to trade (which includes what the instrument is, in what increments it moves, how far the price might move in points or ticks during an average day, what times of day or week or month it exhibits certain repetitive performance, etc., what level of volume can normally be found there on good moves versus moves that have no follow-through, etc.;

 

2) Knowledge of yourself (your tolerance for risk, how you react to both winning and losing, your willingness to pull the trigger based upon the confidence or lack thereof that you have in your method or trading plan, review of the areas where you make repetitive mistakes and plans to either avoid similar situations or change your response to get a different result, and most of all, an honest and deep understanding of why you are really involved in trading in the first place and whether that reason is truly serious and meaningful enough to put your hard earned capital at serious risk and also to keep you working through the tough times until you reach your goal; and

 

3) Knowledge of price action (this only comes from lots and lots and yes, even lots more screen time, watching those monitors and getting an internal feel for what happens as price moves across your screen toward, above and below key lines of value, support and resistance, observance of the reactions of the multitudes of traders at those key points of decision where price suddenly leaves its consolidating chop and runs for a new goal on your screen.

 

As regards "screen time", don't just sit there like a couch potato watching a table tennis match on television. You must really focus on what is happening on the screen by asking yourself questions like "Hmm. .why did price break out of that consolidation and all of a sudden come right back to the break out point again once or twice before it actually took off?" Ask yourself "Gee, how often does that happen at break-out points and how can I take advantage of it?" Ask yourself why price moves the way it does. Is it really random as so many claim or is it manipulated by the big money players whose actions leave clues right on your price charts if you just pay enough attention? Hint: if you believe it is the former, you still are in need of a great deal more screen time and you need to ask yourself a lot more questions.

 

You may see price moving up slowly yet it suddenly accelerates. Ask yourself "Hey, who poured gasoline on this fire?" Was it that the stops of the retail traders were clustered at a certain expected point and got hit? Was there yet another acceleration upward after a short pause in price because those who missed the initial move have jumped in at the first or second retracement in the action as they were hoping the move has further to go?

 

When you see these things, constantly ask yourself "What are the pros doing to take advantage of this move?" Surely you realize that if the retail traders are all buying in a frenzy, somebody out there must be selling? Whom do you think that might be? Might it be the pros who accumulated positions in that instrument during the last sell off just 10 or 20 minutes prior when the retail traders were literally almost jumping out of their shorts (pun intended) to get out of the move against them? What about program trading? Surely you have at least heard of it? But what is it? How much of the total trading volume of an average day comes from program trades and if it is truly meaningful (yes, it actually is!) then how can you track it and take advantage of it? During price declines, perhaps you might look for those tipping points or price points in the market where the retail traders realize they are caught in their long positions and suddenly are on the wrong side of the move. Please don't forget that whatever personal preference you might have for playing longs or shorts, price more often than not still moves up via the stairs and comes down via the elevator.

 

Become a life-long student of people. Yes, you can learn some of what you need to know from fine trading psychology books like "Trading In The Zone. " You might even genuinely learn something useful in a class or two on human behavior. But don't fail to pay attention to the almost daily tales of woe from family, friends and work associates as well. If you pay careful attention to what is being said, you will find much useful information about how people react daily toward risk and reward. You will find those same exact reactions played out on your trading charts each day.

 

Lastly, some of you may disagree with the points I have set forth above. That is probably normal for any group of 2 or more people getting together to discuss an idea, but let me say this - for those who feel some other type of education is far better than what has been suggested, I am sure that if you just tell some of the more seasoned traders here at this forum what instruments you trade and at what times of day you will be trading, they will be happy to relieve you of any more of that pesky old stress of trading by quickly depositiing your trading capital into their own bank accounts as you continue to experience that painful string of losses, despite your continuing to do what all the "gurus" told you would work.

 

Happy Trading ;)

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Great post ez :)

 

When I was young... a wise man once told me. "There are no dumb people in this world. There are the educated and the uneducated." His statement had a big impact on my life as a teenager and I started viewing people differently from that day.

 

Just because one has a PHD from Harvard does not make him a better trader than a guy with a BA. Like ez mentioned, the knowledge and education required in trading is not found by going to colllege or university. I truly believe one must step outside box.... self education is a better term.

 

Do you have what it takes to do whatever you can to become a successful trader? Once you fall do you have the strength to get up? Developing traders will hit a big wall in their early stages. Whether you break this or not depends on your passion and motivation for the markets. If it wasnt for my passion, I would of never made it as a trader.

 

I do not have a college degree. Does that intimidate me? NO. Is english my first language? NO. Street smart? YES (according to most ppl I know)

 

Please don't forget that whatever personal preference you might have for playing longs or shorts, price more often than not still moves up via the stairs and comes down via the elevator.

 

Absolutely true. Probably one of the reasons I tend to short more than I go long. (roughly 65% compared to 35%) I was also told by a trading buddy of mine that locals like to short it since money is made faster. (not sure how true this is)

 

Talking about questions...

 

Asking yourself questions throughout the trading day is a must. If I can not answer my own question, I choose to stay flat. I am not trying to predict market behavior.. all I am trying to do is analyze and intepret market generated information.

 

Couple questions that I like to ask myself are:

 

1. What is the market trying to do?

2. Is it doing a good job trying to do that?

3. Are they going to take it to the next line of S&R?

4. Is there price rejection above/below value?

5. Is there price acceptance above/below value?

6. Can the markets hold?

7. It's top of the hour (10am eastern), where will they take this market?

8. It's top of the hour (2pm eastern), where will they take this market?

9. Who's trading today? Locals, institutions, and private traders or just the locals?

 

Just a few of the hundreds of questions you may ask yourself.

 

Last thing I want to mention is that I am able to trade full-time because I chose to specialize in the YM for the time being. I know everything there is to know about the YM. This includes the ATR, personality, S&R levels, etc..

 

I know it usually respects the 00 level's. I know that it likes to go one way in the open and reverse. I know the pullbacks or retracements on a trend is usually 15-20 points. On a break of value, i know it likes to test the previous days high or low, etc....

 

Think of the financial instrument you trade as your gf. If you are not putting the time and effort to get to know her... she'll leave you in a heart beat. She may give you a hard time, may spend your money, and will never have it your way. Therefore its necessary to create rules... if she trades above and below the opening price, I'm not going to let her use my money until she breaks out of the opening range.

 

Regards,

 

James

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Personally, I do not think a degree really means too much of anything, especially when dealing with something like trading. It's kind of like this car mechanic in the town I grew up in. He couldn't tell you what the hubble telescope was, or probably even spell it, but that guy could rebuild a transmission blindfolded. (hint: rebuilding transmissions is much more profitable than spelling well). I think the markets are just something you learn from exposure, and I don't mean go out and start trading with real money to learn, I mean get amongst it and just learn it, and it will become intuitive to you over time. I have met some very intelligent people that have degrees, and I have met some very unintelligent people that have degrees. I think the ability to participate well in the markets is a learned trait that is completely separate from formal "book" knowledge. I personally went into the military while my friends were heading to college and I am playing catch up now, but I know for a fact that I learned more from actually travelling the world than my buddies did in college. Long, rambling post I know: The point I'm making is, learning the markets and becoming a profitable trader is something you can acheive with or without formal education.

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