Cheds - Trading Wisdom: 50 lessons every trader should know

Trading Wisdom

50 lessons every trader should know

by Cheds

About the Author

I love trading and have been doing it for many years. My formal training is with Japanese candlesticks and classical charting, and I am certified as a CMT (Chartered Market Technician) level 1. My educational background in psychology and brief career as an amateur poker player also guide my approach, paying proper respect to risk management and the study of one's opponent.

On twitter is where I am most well known and can be found @BigCheds. I am also a proud founding analyst at Bitcoin Live, the best in class educational platform for Crypto.

This is my second book. My first published work was titled My Battles with Cancer, a candid patient and caregiver's memoir.

Introduction

My early days of trading were filled with frustration, confusion and constant losses. After making some of the same mistakes over and over again I began to adapt and learned a few tricks to minimize my losses.

As I began passing these tricks on to my fellow traders through my twitter account and blog (chedstrading.blogspot.com) it launched me on a path of learning and teaching. With enough time that path lead to dedicated studies of Japanese candlesticks and classical charting, and ultimately CMT certification.

My career and brand have been built on helping new traders avoid my old mistakes and this book is a natural extension of those efforts.

This book is also a natural extension of my Complete Beginners Guide to Trading that I wrote on the blog back in 2017 when I was undergoing chemotherapy for lymphoma. I subsequently beat my cancer and wrote a book about that experience, and have since continued to grow in my journey as a trader and educator.

Building on years of work with my twitter account, learning blog and various other writings on trading subjects, I am happy to now bring together in one place all those bits and pieces that have helped to make me a successful trader.

I have personally made every single mistake mentioned in this book multiple times and therefore can speak from the heart, which I hope makes each lesson a little bit easier to learn.

Thank you for reading and best of luck in your trading journey.

Version 1.1 Updated for Audible

Table of contents

Lesson 1 - Respect your funds

Lesson 2 - What's the rush?

Lesson 3 - Stay calm under pressure

Lesson 4 - Wait for opportunity

Lesson 5 - Go easy on yourself

Lesson 6 - Experience comes first

Lesson 7 - Keep grinding

Lesson 8 - Don't marry your bags

Lesson 9 - Profit taking

Lesson 10 - Emotional mindfulness

Lesson 11 - Be ready to buy the fear

Lesson 12 - Define your risk

Lesson 13 - Manage your stack

Lesson 14 - Pick your spots carefully

Lesson 15 - Stick with what works

Lesson 16 - Switch time-frames wisely

Lesson 17 - Don't fight the trend, ride it

Lesson 18 - Stay focused

Lesson 19 - Sell and move on

Lesson 20 - Trust your first instinct

Lesson 21 - Dangers of social media

Lesson 22 - Buy the rumor, sell the news

Lesson 23 - Trading journal

Lesson 24 - Addiction to gambling

Lesson 25 - Fight the FOMO

Lesson 26 - Dealing with Success

Lesson 27 - Don't compare yourself to others

Lesson 28 - Scale in and scale out

Lesson 29 - Self punishing

Lesson 30 - Trade with confidence

Lesson 31 - Contrarian theory

Lesson 32 - Mind your trend lines

Lesson 33 - Volume basics

Lesson 34 - Indicator basics

Lesson 35 - Lesson on confirmation

Lesson 36 - Candlestick context matters

Lesson 37 - Both sides of the trend

Lesson 38 - All divergences are not equal

Lesson 39 - Principle of polarity

Lesson 40 - Common naming mistakes

Lesson 41 - Moving average basics

Lesson 42 - BB Basics

Lesson 43 - All gaps are not created equally

Lesson 44 - Wait for the re-test

Lesson 45 - How to set your target

Lesson 46 - Fasten your seat-belt

Lesson 47 - Outside/Inside bars

Lesson 48 - Limit Orders vs Market orders

Lesson 49 - Patterns rules of thumb

Lesson 50 - Look for relative strength

TRADING WISDOM

Lesson 1 - Respect your funds

Treat your money right or it will find a new owner.

I love that quote. It really cuts to the bottom line by reminding us to respect our funds before they disappear.

In the process of finding good risk/reward opportunities, avoid over exposing yourself when there is no reason to do so.

In trading, the minute you let your guard down is when the capital destruction begins. Stay vigilant and respect your funds.

An interesting way to think about this is to look at what the average person is willing to spend their funds on. Many refuse to pay for training materials or premium educational sites but they have no problem allocating major funds for high risk short term trades.

If you are going to risk large amounts of money you should respect those funds by spending the rather minimal amount it takes to buy a textbook or pay for a training service. The money spent in this fashion will have a multiplier effect. As your trading skill improves, your ability to properly utilize your capital will as well, and over time that will lead to bigger wins and smaller losses.

Either take trading seriously by studying hard and investing in yourself, or go find a new hobby.

Always amazes me that some people are willing to risk $50,000 or more on speculative trades but refuse to read a trading textbook that might cost $70-$100.

Lesson 2 - What's the rush?

If you are in a rush to trade, do not be surprised if your money is in a rush to go somewhere else.

Every trade you execute should be well thought out ahead of time. Putting your money to work and risking capital loss is a serious thing and should only be done with a clear plan in mind. That plan should include a trading thesis and a stop loss.

When you rush into your trades you are prone to making simple mistakes. How often have you entered a long position and smiled after the price went up, only to find out that you hit the wrong button and you went short instead? How many times have you entered a trade and bought far more or far less than you intended by mistake? Going too fast and clicking the wrong button can lead to disaster, so always take a deep breath and go slow when you enter your trade.

Most of the time in these bottoming situations I lose money when I fool around throwing in bids before any type of bottoming pattern has even started to form. Wait for things to settle down and identify a solid idea that you can use as your fail point.

I have found that it is really difficult to stay away from trading when I think something is in the process of bottoming. When this happens an incredible urge to jump in to the action comes over me. Since I do not want to miss that perfect entry I scale into every minor bottoming formation I see only to get stopped out minutes later.

This happens over and over, when in the end if I had just waited for a little while I could have played a clear bottom forming pattern when the price action offered a better signal. More times than not the bottom is slow to form, so there is plenty of time to jump in on a support re-test, diagonal break or horizontal break.

My best advice is to follow momentum. Don't be fancy and try to anticipate when it is going to turn around.

Momentum has a way of making itself clear if you are willing be observant and look for clues in the price action about when the trend is changing.

Traders talk about catching falling knives, referring to the process of anticipating a bottom before it has formed. Messing around and trying to catch falling knives will shred your bankroll, unless you are a pro.