I was reading through the "ask any trading question" thread and noticed that there are many questions falling into the category "how to learn how to trade" (not surprisingly). Many of Mike's (great) answers focus on this question even if the question wasn't exactly worded as above. I wanted to propose an alternate answer - I'm not disagreeing with anything Mike's said, I just want to present another view and possibly discuss if there's interest.
Mainstream advice for succeeding at trading tells you to start small, study the markets, develop a profitable trading method through backtesting and/or forwardtesting, write this up into a well-defined trading plan, then work on discipline/emotion/psychology until you are able to follow your plan and be consistently profitable, then slowly build your size.
I think this sounds like great, well-reasoned advice. I also think most traders try to follow it. I know that most traders fail to make money (I am not saying they fail to follow this advice or they fail to follow any individual part of it - just that they fail to make money). So what do these observations taken together mean? I actually don't know. :)
They may mean that this workflow is not the best one for becoming a consistently profitable trader. Or it may mean that most who try to become a profitable trader via the above workflow do not try hard enough, do not try long enough, or skip part of the workflow. Again, I don't know.
I want to propose an alternative method for learning how to trade. My view stems from the idea that trading is a skill-based activity. It is not an engineering problem, a mathematical problem, a statistical problem, or a graphical problem (again, this is my view - I understand that others will disagree). As a skill-based activity, trading has much more in common with playing a sport than it does with engineering an architectural structure or working out a math equation, or writing a legal brief. Many have described trading as a Mental Sport and I think this is an apt metaphor.
What are the most important factors for succeeding in a high-level, competitive sport? My view is that skill and confidence are, by far and away, the most important factors. When a player has excellent skill they are able to get to the ball quicker, shoot the puck more accurately, or serve the ball with greater velocity. When a player has complete confidence in their skill, they execute without self-generated errors and compete without reservation or hesitation.
Following from the above, my view is that to learn how to trade, one should develop skill, then develop confidence in that skill. Period. My view is that if you can develop the skill of buying things for less than you sell them for or selling them for more than you buy them for AND you have complete confidence in your ability to do so, you will make money trading. If these two things are true, you don't need a plan, you don't need a system, you don't need any specific type of knowledge, you don't need a journal, etc, etc, etc.
I must add a caveat here that I don't want to be misconstrued as saying you shouldn't do any of these things. You may find them useful - however, if you lose sight of developing the two most important things (skill and confidence) and spend your time/energy doing anything else for its own sake, then in my view that is counter productive. For instance, if you work on a trading plan for its own sake and believe it will create your success rather than using it as a tool to develop the two most important things, this is counter-productive. My point here is that it is easy to work hard at trading and believe that your work should be advancing you toward your goal when in fact it is merely taking you sideways. My view is that if your work is not directly increasing one of the two things, it may be taking you sideways rather than forward.
I'm going to stop here and start another post with some prescriptive advice (again, this is food for thought - if you like …