The title of this post may sound conceited for many people in the finance industry, but actually whatever the path you follow (autodidact or academical) you must upload these steps, and not just once but many times along your professional life.
Of course, as always, you should not forget these key remarks:
I.- It’s not about data, it’s about analysis
Once you open your internet connection to financial markets, you will be overwhelmed with data. It’s not just a question of newspapers offering tons of free info, but a question of the economical, financial and political news which affect directly to markets, so you need tools to analyze if the price that people will pay in the near future for things is over or under the price the industry can offer it. You must have adequate tools to make this fundamental analysis.
Even more, the markets itself have become an independent being into the economy as long as the tools used there are trying to predict the movements in the real economy and react to the needs of the markets (and some times, unfortunately, over-react). So, you need to have a set of tools to make a right technical analysis of the markets.
Finally, you must realize you are not the only smart guy in the city. There is a third layer here: everyone wants to be the richest one and you must have the tools to analyze the impact of greed in the markets.
Do you have the best tools to make economical, technical and psichological analysis of the markets? Do you understand how that tools work? A good training course will show you the basics on that tools, but you can too learn a lot with some books, or if you spend some time reading and watching all around the web for forums, investoo training videos, articles and actual info about the markets itself.
II.- It seems to be simple, actually is complicated
Even if you are an experienced trader, or better, because you are an experienced trader, you know markets are easy to be misunderstood. Once you have the best tools to make the best analysis you can afford with the info you can manage, you must apply your knowledge against the reality. Obviously, the best way to make it, is with simulators. This is known as backtesting: everything in your tests is real but the money.
The first time you check your analysis tools against the reality, you will have poor results. Then you need to refine your tools for months until you get good results. In a training course, your tutor will help you to detect your errors. If you are an autodidact, you will need a nice dose of self criticism to correct yourself.
In this step is really important to do the same thing you could do with real money in real life. You could learn nothing if you operate with amounts you will never manage in real life or if you operate with risky options, and sometimes it works and sometimes it doesn’t.
This is the time to be honest with yourself and decide if you believe in your method. Yes or not.
III.- Back to reality
Once you have the tools and the strategy, it is time to work with real money. Suddenly appears the psychological side of the markets:it is time to test if our tools can manage the fear, tha anxiety.
If you believe in your method, because it has been tested for months with good results you should maintain it and do not fall in the hysteria at first risk That is a sure path to failure.
Whether you are someone just lurking the markets or you are someone thinking to recycle yourself, these three steps are unavoidable: analysis, testing and reality check, and you need to be a good one in each area to survive the markets.