“You can be free. You can live and work anywhere in the world, be independent from the routine and not answer to anybody.” With those words I began my first book, Trading for a Living. One of my great pleasures in the years since its publication has been meeting and becoming friends with people who became free thanks to successful trading. Several times a year I run a Traders’ Camp, a week of intensive classes at remote resorts. I enjoy my campers’ successes. A stockbroker became a full-time trader, closed his business, and moved to Rio to pursue a life-long interest in Latin women. A psychologist became such a successful options writer that she paid for an early retirement
for her husband and moved with him to the Virgin Islands to become an expert in what she calls synchronous hammocking. A man bought a mountain in Vermont and trades from the house he built on its top. I wish all students could succeed, but it’s not that simple.

How many psychiatrists does it take to change a lightbulb? Only
one—but the bulb has to want to change. To succeed in trading you need several innate traits without which you shouldn’t even start. They include discipline, risk tolerance, and facility with numbers. A big fat guy who is often drunk and can’t kick a cigarette habit is unlikely to make a good trader—he lacks discipline. A nitpicker who obsesses over each dime is too tense to live with market risks. A daydreamer who cannot do simple arithmetic on the run
becomes lost when prices change rapidly. In addition to discipline, risk tolerance, and ease with numbers, successful trading requires 3 M’s—Mind, Method, and Money. Mind means developing psychological rules that will keep you calm amidst the noise of the markets.

Method is a system of analyzing prices and developing a decision-making tree. Money refers to money management, which means risking only a small part of your trading capital on any trade; think of the way a submarine is divided into many compartments so that it won’t sink if one section becomes flooded—you have to structure your account this way. Psychology, trading tactics, money management—you can learn these skills. How long will it take you to become a competent trader and how much will it cost? What rules do you set, what methods do you use, and how do you split your trading capital? What should you study first, second, and third? What markets should you trade, and how much money can you expect to make? If these questions interest you, you
picked the right book.

You can succeed in trading. It has been done before, and it’s being done right now, today, by people who started from scratch, learned to trade and are making a good living at it. The best ones make fortunes. Others fail, out of ignorance or lack of discipline. If you work through this book, ignorance will not be a problem, and you will hear me yell at you again and again, pointing you towards disciplined, responsible, professional trading. Trading is a journey of self-discovery. If you enjoy learning, if you are not scared of risk, if the rewards appeal to you, if you are prepared to put in the work, you have a great project ahead of you. You will work hard and enjoy the discoveries you’ll make along the way.

Books written from the heart acquire their own direction. They develop and change in the process of being written. You start with a plan, but the book takes over, and before you know it, you’re going much farther than planned. I began writing this book three years ago on a flight to New York, returning from a Traders’ Camp in Mexico. We had more beginners than usual, many of them women. They kept asking for a book that they jokingly called Trading for Dummies. There were no dummies in our group. Those campers were smart, sharp, and motivated—but they needed to learn the rules and the tools. I figured I would write a brief practical introduction, call it Financial Trading for Babes in the Woods, and be done by Christmas.

Three Christmases passed before I completed my project. The beginner part was easy, but I kept tunneling into the depths of trading, sharing what I learned in the nine years since Trading for a Living was published. I developed new indicators and systems. My money management became crisper, and I designed a new approach to record keeping. My work with hundreds of traders showed me how to teach people to turn their trading lives around and move from haphazard jumping in and out to a calm professional style. Take a few minutes to read how this book is organized, so that you may get full value out of it.

I wish you success. Now let us begin.