Why You Should Learn Trading Concepts

learn trading concepts for online trading

If you could ask a successful trader one question, what would it be? I can assure you that most people would not ask about trading concepts or the best way to learn how to trade.

To prove my point, pop into any of the trading forums that are on the internet, head over to the trading systems or trading strategies category, and click a few links. Very rarely will you see questions asking about the concepts that are at play in the trading system.

For me, when people see my trading chart, even with just bars on it, I get asked “what indicators do you use?” It’s a beginners type of question (such as “what is trading?”)  that should be more common with those that have had little exposure to the markets.

But it isn’t.

It is asked by those who profess to be a student of the market and trading in general.


Learn Online Trading By Learning Trading Concepts

Let’s just say it loud and clear: it is not and never will be the indicator that will define your success in trading Forex, Futures or any other instrument.

Neither is it the settings that are used nor the number of trading indicators that are laid upon the chart.   That question is actually quite meaningless and will get you no closer to your trading goals knowing that information.

As an example, if you see moving averages on a chart, would you think that is the most important aspect of their strategy? Would you think that the moving average is the determining factor to which a trade will or will not be taken?

How about stochastic or the MACD? Will knowing a stochastic is used and it’s settings help you in making trading decisions?

It won’t help you at all without knowing something that is much more vital.

How the indicator is used.

Now that has something you can work with.

What if I showed you a chart with two moving average on it. Nothing too special or complicated, are they?

If I told you that trading with these just these two averages you could have a decent win rate with low risk profiles and high profit potential trades, what is the logical question?

If you said “how do you use them”, you would be correct!

Now that is actionable information that you could start using to improve your trading!


Think Beyond The Basics Of Online Training Courses

You’ve probably seen a ton of trading courses that seem to be a rehash of the same old information from the same old tired sources. You know the ones where they say something basic line “put 2 moving averages on your chart (must be the 20 and 50 because the pros use them) and look for the cross and pullback”.

Questions that you ask can point you in the direction of your goals or further from them.

The first question that comes to mind I hope is “how do we really know that the pros use them?”

The second is “why not the 25 and 55?”

We don’t know if any great number of the bigger players use a moving average as the basis for a system. I don’t think there’s ever been a study done that researched that claim to any great degree. What we do know is there is probably nothing magical about the exact moving average input.

Far too many people get caught up in irrelevant thoughts and questions that do not move them closer to where they want to be. If we agree that psychology plays a big part in your trading success, don’t you think that you should laser focus on the things that matter?

How about the question “What type of concept are we looking at the will signify a trading opportunity if we use the average?”

Ask questions that can produce actionable answers.

If you saw this chart for the first time and could ask one question, you would want to ask a question that would focus on concepts. That question is obviously about how to use what is on the chart.

learn trading concepts

Let’s compare the questions:

What indicators are you using? I am using two moving averages. Does that help you? Of course not.

What happens in the market that has you making use of these averages?  Great question!


Learn The Concept Behind The Trading Opportunity

I use the cross over as a proxy for trend determination during a quick market scan. I am able to glance and see if the market is trending or is in a consolidation pattern. The state of the market determines the trading approach.

In the case of the earlier chart, price is above the averages which are sloping nicely to the upside. I will look for a mean reversion trade with a qualifier.

Trading Basics Tip: You must see a reason for another trend leg if trading pullback.

I will use the concept of a stretched rubber band. If price is far from the moving average I will anticipate a snap back in price. As long as there is no climax in the up move, I will position for another run for the bulls.  I need to see the band stretched (price far from the moving average)

One overplayed trading concept is that moving averages provide support or resistance. I don’t think that is the case (look left for clues) but it does frame the market so I will look in the area of the average for the trend to continue.

Markets expand and contract…that is a legitimate trading truth. The concept of mean reversion is a viable one to build a trade plan on.


Your Trading Success Relies On Focus

There are many shiny objects that are looking to grasp your attention. In trading though, focus is everything.

  • Focusing on following your trading plan.
  • Focusing on following proper capital management so you are able to stay in business even after a string of losses.
  • Focus on understanding that the indicator will not make you successful.

I remember when I got into trading and was deciding how to approach the markets, my question was about how to get on board the trend. How can I get involved in the action and, knowing that most people lose, learn proper risk protocols to protect my trading capital?

Once I understood the concepts that I wanted to use to approach trading, I then set out to find how to make the concepts come alive. I can honestly tell you that I never system jumped. I worked through things and if I was not “getting it”, I moved on to something else.

My beginner questions were all related to basic trading concepts such as what was behind price movement.  That was my focus

Questions are good but your questions should focus on actionable information   Ask question in relation to trading concepts and that can actually propel you into developing your own trading system.

Even people that use trading systems such as the ones offered here at Netpicks, have added/subtracted a few things to suit their needs. and their understanding of the markets.

They understand what their needs are because they have focused on the important questions that will empower their trading. They have tweaked it to suit their needs and they can only understand their needs because they focused on what mattered.

What matters is that you learn trading concepts that will allow you to seek out different ways to approach the market.  Once you understand the basics of online trading, the basics of price movement, you will be on the road from beginner to intermediate and hopefully to an advanced profitable trader.

Since many traders like to use indicators (usually the wrong way) for their trading method, Netpicks has put together a free and vital “Indicator Blueprint” to put you on the right track when using an indicator for your trading decision.
Get access to the PDF and videos by clicking here.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.