I've been trading on and off since '99. I read tons of books, went through different stages, and at age 28, I've got a really good framework for the rest of my life.
Don't be afraid to put time and effort into. The market is going to be around for the rest of your life. What makes the market go up and down is never going to change (fear and greed). As you get older, you get more experience, you have more money to trade/invest with, and your possibilities go way up.
My rules...
1). Eliminate all the junk. 98% of all the stuff ever written or said about the market is useless. CNBC, hot tips, rumors, fly by night promoters (guys like Wade Cook), message board silliness on yahoo, etc. You'll make your life very easy doing this.
2)Read the really good stuff. Buffett, Jim Rogers, the Market Wizards series of books. Understand what the market is, understand some general principles (buy on fear, sell hysteria). If you were really grounded in the fundamentals, you wouldn't have been suprised by the tech bubble and subsequent collapse.
I know I wasn't grounded at all in the fundamentals in '99, '00. It'd be like trying to surf and not understanding the cycles of the ocean. You can surf for a little while, but if you don't understand how things can change, you can go under water (and lose your board and maybe drown and die).
Understand why top traders and investors make money. It's not just luck or mysticism. Buffett has been making money consistently for 50+ years!! The guy was a millionaire in his 20's. Study him the way you'd study sosuave and girls. Jim Rogers has made gazillons since he bought commodities at the their low in '98. The guys on TV and the "experts" touted in the press are rank amateurs compared to these guys.
3). Think for yourself and observe what's going on around you. I live in California and in the last few years, "expert" after "expert" said there was no real estate bubble. Of course there was a bubble, the market is going down and alot of people are going to get hurt in the next few years. In some states no one can afford the property taxes. You've got to be a critical thinker, you have to understand that people have biases and flaws, people believe what they want to believe.
When you observe life outside of trading (dating, women, work, the problems and trials people have), no one is going to take that and suddenly become super logical and orderly when they buy or sell a stock. You have to see the big picture. See the market as more than just a bunch of quotes at the bottom of a screen.
4). Come up with a plan and stick to it. Only trade when you have an edge. Using a texas hold'em analogy, only trade when you get AA or KK dealt to you. Don't throw your money away on 7-2 offsuit just because someone in the back of the card room thinks it's a good idea (i.e. Cramer telling you what to do).
Use analogies and metaphors to better understand the market. This has really helped me "see" the market and get better clarity. Play around with it. What would your trades look like if they were poker hands? Pocket aces? Pocket kings? 10-2 offsuit? Is someone distracting you in the card room (i.e.CNBC on in the background)?
I have to have clarity about what I'm doing to be successful. I have to have peace and quiet. I don't want to play in a card room where there's 10,000 people in the stands, and they're all screaming different opinions at me (The FED will do this, the FED will do that, watch the CPI, etc). The top traders all say "think independently" for a reason.
Maybe this will sound arrogant or like I'm full of it, but most people fail in the market because they just don't know what they're doing. It'd be like sitting down at a Texas Hold'em game and not really understanding the rules. You place bets here and there, but you don't really "get it". You don't see how CANSLIM, value investing, growth, hedge funds, how they all fit together and how they all occupy seats at the same table. You don't see how your dealer (i.e. your brokerage house) is selling a bunch of stuff people don't really need (research, fancy quotes).
It's just like anything else in life. You've got to be different than the crowd to get better results than the crowd. If you want Cindy Crawford, you can't just be the average joe on the street.
Best of success guys.
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