How to Start Trading
To start trading, pick one instrument and one timeframe, learn to write three prices before every entry, and size the position from the stop rather than from the setup. Then record 100 trades before judging anything, because the order of these decisions matters more than any of them individually.
The first decision is not which strategy. It is how much of the account rides on each attempt — and that one is made before you have looked at a single chart.
Before you start
Know the base rate first: most new day traders lose money. The largest study of it, by Chague, De-Losso and Giovannetti, followed every individual who began day trading Brazilian equity futures between 2013 and 2015 and kept at it for at least 300 days: 97% lost money, and only 0.4% earned more than a bank teller’s pay. Trading can still be worth learning, but treat it as a skill you pay to learn, not as income.
Do the dull things first. An emergency fund, and any 401k employer match, come before a trading account; the emergency fund page sets out the order.
Money you can lose entirely. Not money with a job. This is the only precondition on the page that is not negotiable.
One instrument. SPY is the usual honest answer for a first account: tight spread, real volume, and no single company whose announcement can gap it violently overnight.
A free charting account. Every major platform has one and it is sufficient for everything here.
Nothing on this page requires a paid tool, a course, or a signal service.
The steps
1. Pick one instrument and one timeframe
Not because they are the best — because everything after this depends on them being fixed. Changing either resets the record.
2. Learn to write three prices
Where you get in, where the read is wrong, where you are done. All three before the position exists, per entry and exit.
3. Size so that five losses in a row is dull
Money you will risk, divided by the stop distance. At 2% a trade, five losses leaves 90% of the account; at 20% it leaves 33% and needs +205% to recover.
4. Find your round-trip cost
Spread plus commission, divided by a typical bar’s range. That single ratio decides more outcomes than any indicator you will ever add.
5. Record every trade, including the ones you skipped
Entry, stop, target, and one sentence of reason — written before the outcome is known. If the sentence will not come, do not take the trade.
6. Take 100 of them before changing anything
No adjustments in between. A hundred trades pins a win rate to about ten percentage points either way; twenty-five leaves it uncertain by twenty.
How to tell it worked
Not by the money. By four things you can count at the end of the hundred.
Every trade had three prices written before entry. Count the ones that did not — that number is the first thing to fix, and it has nothing to do with the market.
No trade risked more than the number you set. One that did is not a bad trade, it is a broken rule, and it will be the one you remember.
The instrument and timeframe never changed. If they did, you have a record of several experiments rather than one.
And you sat through a losing run without changing anything. Five in a row is ordinary — a method that wins half its trades has about an 81% chance of at least one run of five losses somewhere in 100 trades.
What to expect in the first year
Mostly nothing. One rule on one instrument and one timeframe can go weeks or months between setups, and every day in between is a day with nothing to do.
Costs larger than you expect. Say a round trip costs $0.03 a share and your trades gross an average of $0.05 a share: 60% of the gross goes to spread and commission before any trade is judged.
A losing run that feels like proof. It is not proof; it is what an even-money rule does over a hundred attempts.
And no moment where it becomes obvious. The what nobody tells beginners page has the rest of this list.
What to learn, and in what order
The order below is the point. Most people run it backwards and spend a year on the last item first.
One: the arithmetic. Position size, cost per trade, sample size. None of it needs a chart and all of it decides more than anything that does.
Two: the chart itself. Candles, levels, structure — how to read a chart in four steps, and nothing beyond it yet.
Three: one entry method. One. Written down, tested against a schedule per how to find an entry, and left alone for a hundred trades.
Four: everything else. Indicators, patterns, sessions, the whole vocabulary. It is genuinely useful and it is fourth, because none of it changes an outcome that the first item has already decided.
The reason the order gets reversed is that item four is the only one that is interesting to watch, so it is what almost all of the material is about — 594 videos on relative strength index (RSI) alone.
The original data
Across our study of 24,971 trading videos, 59 have start trading or starting trading in the title. The median one gets 62,648 views — among the highest measured anywhere in this glossary — and only 46% fail to pass 50,000, which is one of the lowest saturation figures here. The median length is 16.3 minutes.
The corpus carries description text for 8 of those 59, and across those 8, 0 mention invalidation, failure, or what a bad read looks like.
About one in forty-five. The most-watched entry point into the subject, and the material almost never mentions a read going wrong — which is a reasonable summary of why the first year surprises people.
When it fails
The size was decided by the setup
“This one looks good, so I will take more” is how an ordinary losing run becomes permanent. The size comes from the stop, and the stop comes from the chart.
The rule changed every week
A record of a rule you kept adjusting is a record of many rules with one trade each — the trading journal failure, arriving in the first month.
The boredom got filled
Every hour spent watching creates pressure to justify the hour. That pressure, not bad analysis, is behind almost every trade taken outside a plan.
You judged it from the finished chart
The question: So: buy, sell, or wait?
Every chart you have learned on had its answer already printed. The live one does not, and learning to decide without it is the entire skill.
Related
How to build a trading plan turns these six steps into four numbers on one page.
How to read the market is the session routine that sits on top of them.
And what nobody tells beginners is the longer version of what the first year actually contains.
If there is one thing worth hearing at the start, it is not a strategy. It is that the boredom is the job. Treating every hour out of a position as an hour wasted costs more than bad reads do.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.