I’m reading Trade Your Way to Financial Freedom right now. Excellent book, in my opinion. I had stopped doing any type of trading personally a couple years ago, but I have always found it interesting so decided to get active in it again.
I’m only going to “paper” trade for right now. This is “fake” trading to see how your performance is before ever risking any real money. A way to prove out a system somewhat to see how it would have done if you traded real money (though if you traded real money it would then have some “effect” on the market and may change the outcome).
“Trade Your Way to Financial Freedom” is a great book that isn’t about teaching you any specific system on how to trade, but it is more about how you evaluate the system you are using and yourself. It does briefly cover a variety of strategies and their basis. Not recommending one or the other, but discussing what is commonly used out there and why it may appeal to different individuals.
Chapter 3 has a great list of questions that you need to answer about yourself and try to gauge your capabilities. Items like:
- How much time do you have to trade? Do you already have a full time job?
- What is your risk tolerance? Will you lose sleep at night if you have money tied up in the markets?
- What skills do you have? Good at math? Good with computers? Analytical?
Analyzing the System
A lot of terminology is used here but explained very clearly. Reward to Risk ratio is commonly used to guage how good your returns are compared to the risk you are taking. Position sizing is touched on. I’m only 3/4’s of the way through the book, but it has been excellent. I recommend the read to anyone thinking of getting into it.