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The 3 Phases of a Trader’s Education
Senior Analyst Jeffrey Kennedy explains why traders need to understand both personal and crowd psychology

By Jill Noble
Tue, 01 Oct 2013 11:45:00 ET

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 Jeffrey Kennedy, editor of our educational Elliott Wave Junctures service, tells us that there are three phases of a trader’s education, and that aspiring traders typically go through them in this order:

When sizing up a trading opportunity, the rule-of-thumb I go by is 3:1. That is, if my risk on a given trading opportunity is $500, then the profit objective for that trade should equal $1,500, or more. With regard to risk as a percentage of account size, I’m more than comfortable using the same guidelines many professional money managers use: 1%-3% of the account per position. If your trading account is $100,000, then you should risk no more than $3,000 on a single position. Following this guideline not only helps to contain losses if one’s trade decision is incorrect, but it also insures longevity. It’s one thing to have a winning quarter; the real trick is to have a winning quarter next year and the year after.

When aspiring traders grasp the importance of psychology and money management, they should then move to phase three: determining their methodology, a defined and unwavering way of examining price action. I principally use the Wave Principle as my methodology. However, wave analysis certainly isn’t the only way to view price action. One can choose candlestick charts, Dow Theory, cycles, etc. My best advice in this realm is that whatever you choose to use, it should be simple. In fact, it should be simple enough to put on the back of a business card, because, like an appliance, the fewer parts it has, the less likely it is to break down.

Announcing Trader Education Week: Learn How to Spot Trading Opportunities in Your Charts

Don't miss this chance to learn even more from Jeffrey Kennedy in a daily online video format, including: 

 

• How to discover trading opportunities using the Elliott Wave Principle
• Unique ways to time the market using Trendlines
• How to use Fibonacci ratios to calculate price targets
• Candlestick and bar patterns that have proved to be reliable
• How to apply Jeffrey's proprietary channeling technique
• How to set your protective stops
• And much more!

Subscribers and Club EWI Members: Log in to register for Trader Education Week

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