The art of trading: The beginning. Choosing a market and style.

Trading as a profession is laden with randomness (see Nassim Taleb's book Fooled by Randomness, and it is quite impossible to distinguish between a lucky trader vs. a good trader just by looking at the results. In my opinion, though, it is quite possible to distinguish by looking at the generators of the results.

My personal viewpoint is that trading is more of a performance art than a pure science, and the progress of a novice trader charts much the same path towards mastery as an apprentice artisan. At the start, any success by the novice trader will be due largely to luck. This is no different from the apprentice carpenter successfully creating his/her first piece of furniture, or an architect completing his first desireable home, or a sculptor creating his first sculpture: often, initial success is due to a fortunate accidental combination of factors, some of which are temporary.

Sustained mastery comes from a firm grasp of required skills. Like his/her artisanal counterparts, the novice trader needs to be dedicated to his craft, and will need to learn the mechanics required to be a successful trader, namely managing his/her own emotions, crafting a trading plan, executing the plan, knowing when to add to one's position, knowing when to take losses, etc.

But a huge element of luck comes from the choice of market (or product: both terms really mean the same thing). Why? Because like relationships and personal chemistry, the only real way you will know whether a market suits you or not is for you to try trading that market. This is especially pertinent if you're just starting out at trading, and you have no idea (a) what type of market suits you, and (b) what one means by different types of markets.

If a trader is lucky when starting out and there is a great fit between the trader's personality with the market in question, then the trader will make money very quickly and early in his/her career. If not, then the trader will experience big losses, frustration, loss of enthusiasm, and maybe even a loss of libido. There's a further danger that starting out with the wrong market will cause the novice trader to pick up damaging and bad habits due to fear.

So how, then, can one overcome this? According to Dr. Brett Steenbarger, the author of Psychology of Trading and (in my opinion) the seminal and groundbreaking Enhancing Trader Performance, it is important for a beginning trader who aspires to mastery of trading, to start by playing with different markets and different trading styles.

So for each week, one could paper trade different markets in different styles. For example, one week could be spent on the Chicago Board of Trade (CBOT)'s corn contract , doing day trading; the next week could be spent trying out swing trading on the corn and soybeans; the third week could be spent trying out inter-day trend trading on an equity index market like the E-Mini S&P 500 contract .

At this point, what you are trying to do is not make as much money as possible on the paper-trading account: what you are trying to identify is which market is fun and which market is interesting and challenging. That's your criterion.

While doing this, it will be useful to research and compile a sort of product matrix of possible markets that you want to trade. In this Excel spreadsheet, it will be good to have columns covering the trading hours, last trading days, expiration months, tick values, contract size, initial and maintenance margins for various brokers and other information in the contract specification. You might even want to include a column specifying the most liquid trading times. That way you have a personal reference at a glance, as to which markets you like trading, and the individual characteristics of each market.

Have fun experimenting!