Getting started in learning about how to trade stocks was one of my biggest obstacles. Yeah, I had the fear but after I researched many a website, it came down to a list of a few that you will see as links on this blog. One of the first websites I liked that taught me quite a bit about how to read charts was www.clearstation.etrade.com The education tab is a must see. The benefit of that site, is that it allows you to set up a portfolio and trade it on "paper." This means that you are not trading real money, but following your trading system and trading it using fake money.

How long did it take? Only about 6 months of daily chart analysis before I finally got the nerve up to begin trading real money. My first stock trading system was to trade the MACD. Under the education tab, it teaches you how to trade the MACD. So here was the sequence of events I followed.

1. Log on to www.clearstation.etrade.com
2. Type in the symbol of the stock I was following (I only followed one stock so that I could get used to trading stocks) It was AAPL at that time.
3. Under "Range" I changed it to 6 months to get a closer look at the recent activity.
4. A buy signal was triggered when the red line crossed above the blue line. A sell signal was triggered when the red line crossed below the blue line.

After trading this for a while, I realized that I was out of the stock trade for long periods of time. In essence, my account was only cash and I did not have a stock position. When I looked back and analyzed my stock trading diary*, I realized that was a good thing. When I was out of a stock trade, the stock was falling. That meant that this MACD indicator was putting me into the market when it was on the rise and out when it was on a decline. I realized that being out of the market is great. Another thing I realized about the MACD indicator that is only specific to www.clearstation.etrade.com, I made a lot more money when I took an "all-in" trade when the little green "hammer" showed up. You'll have to go to the website to figure out what I mean about the green hammer. So this was the first modification I made to my trading system. Here is the actual note from my trading diary:

"change rule #4 to: Continue to buy when red line crosses over blue line, but only buy 50% of what I would normally buy. Buy the remainder of the 50% when the green hammer shows up." I kept the sell rule the same.

As noted in my first blog, my financial advisor (FA) told me I could not beat his performance. We had a little contest for six months to see whom could do better. He allowed me to control 10% of my portfolio being held by him. My performance for the six months was 28% while his was 11%. I liked my performance better. We made a deal that if I beat him, I would be able to take control of 25% of my portfolio. He made good on that offer, but when I said I wanted to control 50% of my portfolio if I beat him again for the next six months, he gave me the same line of BS that I couldn't beat him and that it was just "beginner's luck." Time warp six more months - guess what? I beat his ass again. This time 39% to his -4%. Yes, that's right, I beat him by 43%. His 1 year performance was 7% and mine was 67%. When I told him that I now wanted to control 50% of my portfolio, he flat out told me "NO."

His explanation was that I could not keep this performance up and he brought out all this crap about how the general public can't match the performance of FAs. The greatest study that he showed me was that dollar cost averaging was the best way to invest. Being the antagonist that I am, I analyzed the study myself and I found the greatest flaw in the study. The study looked at an investor and said that he would still be in the market on the biggest down days when the market was beginning a downturn and out of the market when the stock market was turning back up after bottoming out. If one looks at the MACD and trades the buy/sell signals you will be in the market slightly after a big upturn, but out of the market before a huge downturn. Go to cleartstation, type in a symbol and find out for yourself.

So now you know the impetus for determining my own financial future - I was told by my FA and friends that I couldn't do it. So here's to a 331% return in four years. So now you have in your hands the first stock trading system that you can trade and the directions on how to perform the trade. That's a lot more of what I had when I started.

* Keeping a trading diary allows you to learn successes as well as failures. This is a must.