The College Degree Is Not the Guaranteed Ticket to Success

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Dear Mr. Michael Covel, I really want to thank you for the great collection of books you wrote about trend following trading. Bought all of them and almost done reading them all. They are eye-opening books! I want to tell you a bit about myself. I am Lebanese and 22 years old. My family couldn’t afford to help me in my university education, but I have a capital of 5,000 U.S. Dollars and I want to use it for real-live trading (so that I can gain experience and educate myself more about it). I live in Lebanon and don’t want to take any student loans because that will [just] put me in debt. Do you think I have a chance to learn all about programming, trend following trading, and all the required materials to be able to become a systematic trend-following trader without an undergraduate university degree? What is your advice? Thank you.
Kind Regards,
[name]

First, $5000 is not a large stake. You will want to save more. Second, you absolutely will not learn trend following trading in a university. Can you learn it if you want to? Yes. Then again you can do almost anything if you want it bad enough. Good first read for the needed attitude? Linchpin. Also? My podcast. That price can’t be beat, eh?

One thought on “The College Degree Is Not the Guaranteed Ticket to Success

  1. If I may, I’d like to offer some comments based entirely on my experiences as a personal, small-time, and relatively recent, trend-following trader, which I think apply directly to your situation.

    First, re Michael’s comment about $5000 not being a large stake, and you needing to save more. I don’t know whether that remark was intended to mean “don’t trade with only $5000”, or simply that it will limit your options, but I trade with alot less than that at the moment, and, while indeed my options to trade are very limited, it doesn’t mean that it’s impossible. And yes, I would like to trade with more as well, but I’m not there yet.

    Two very important factors which allow low-capital trading are proper money management, and finding ways to reduce costs. Michael’s books easily cover the first; with regard to the second, in my case, I use a spread betting site, rather than trading in actual equities, etc, without which I probably would have no options to trade with my risk parameters at all! I suggest to you that such a means of trading is advantageous to reduce costs, as well as for a number of other reasons. However, ensure you understand its mechanisms *fully*, since the leveraging it allows you is not a risk to be sniffed at (nor should you necessarily take advantage of it).

    Second, “programming”. I am a programmer, so can talk from that side of the table, as it were, but given a list of the instruments you wish to consider trading in, it is perfectly possible to implement a trend-following strategy in the likes of Excel. I don’t mean Visual Basic, I mean purely using formulae, so your level of expertise at “programming” need not be as great as you might be imagining.

    Again, in my case as an example, I currently use a computer program to do the legwork of filtering the instruments available for me to trade into a subset in which my system parameters actually would allow me to trade in (irrespective of currently whether a signal is being provided for any of those), and then I use a spreadsheet to “manually” monitor those instruments for entry signals, as well as to manage my stop-losses and check for exit signals once I do enter a trade (the reasons *why* I do this in these two steps are not relevant to what I am saying here; that’s just the way I do it).

    The spreadsheet came first, though, and before I wrote the computer program I used one of the many websites available to filter equities by price range (avoiding “penny shares” as well as those too large for me to trade in), capitalisation (to filter out small companies whose price movements were not that liquid), and spread (since upon opening a trade, the spread is your initial loss, and there’s no point trading anything whose spread is a significant percentage of your maximum risk per position). Naturally, the more things that are being actively tracked, the more time it takes up, but a balance can be achieved by playing around with the filtering and ordering possibilities on the selection side.

    It took alot of work early on (hence the impetus to write a computer program!), but it shows that you do not need to be a computer programmer in order to systematically trend-follow.

    It also forces you to quantify your system completely. Using either a spreadsheet or a computer program soon tells you if you’re leaving any trading decisions up to your gut!

    Third, “real-live trading”. Actually, and I’m sure others will disagree, I’m fully in agreement with that. Initially, I tried doing “pretend” trades, but it just doesn’t work because, despite best efforts, your brain knows that it’s not real. I tried so hard to be objective; thinking, yes, I would enter *this* trade, or take *that* loss, or close at *that* point despite what my trying-to-be-ignored gut was telling me. Then when I used real money, it was different.

    So again, based on my experience, my advice is that, yes, get stuck in and use your capital to practice, but what I did was … (a bit of background is needed here: on the spread betting site I use, there is a “minimum stake” which may be used on each instrument; a calculation of position size translates directly into a stake per point moved) … I always used the minimum stake, irrespective of the (larger) position size my system wanted me to use, but still used the same stop-losses. Since commission doesn’t come into spread betting, this let me practice realistically with less risk to my capital, while still letting me see if the actual system was reasonable.

    Finally, as you develop your system, you’ll find that you decide that some mechanism you want doesn’t work as you expected, so you’ll redo things, and adjust things, and so on. You will also find errors (whether in manual calculations, or in spreadsheet formulae, or in your computer programs). The fact is that these adjustments and mistakes will cost you money. I think of them as the price of learning. You also have to get used to letting a systematic process take control, and that process will cost you money too. C’est la vie.

    I hope some of this helps.

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