Learn to Trade

What Is Trading, Anyway?

By Rob on August 30, 2017

Reading Time: 4 minutes

Even the most epic journeys begin with only an initial step, so if you’re just doing some preliminary fact finding about trading, or still deciding whether trading is right for you, welcome. This is a good place to be for honest insights that are straightforward and easy to understand.

You know, in part because there’s so much information available about trading, sometimes it’s hard to figure out what’s the truth, and what some folks just want you to believe. Afterall, plenty of brokers and trading service providers out there might tell you that trading is easy and everyone should try their hand at it. Critics, however, might argue that trading is dangerous, and a way for large and powerful institutions to take advantage of “the little guy,” those inexperienced retail traders.

So which is “right,” you might ask? Well, probably neither, and that’s why our goal for right here, right now is to accurately show you what trading is (and isn’t) and help you decide for yourself. So with that, let’s get started…

Our Definition of Trading

To keep proper focus on the process instead of end results like profits, we like to define trading, quite simply, as the long-term application of a carefully tested and proven, rule-based methodology across selected market(s) and time frame(s).

With that, trading is not about “betting,” “gambling,” or “speculation,” really, but instead about consistently applying methods that have a documented track record for success over time. You simply use what you already know works, and do it time and again to create a framework for success in the markets…and it doesn’t have to be complicated.

For example:

Profitable long-term trading is done using, say, one to four high-probability trades each month
Part-time trading can take as little as 10 minutes per day—no spending hours glued to a screen
Simple, pure-price-action patterns are easier to spot and execute than complex ones requiring one or more indicators, and perform every bit as well

Finding Your Trading Identity

How to Find Your Trading Identity Deciding what kind of trader you’re going to become is probably the first and most important question aspiring traders like you must answer in the early part of your career. Take myself, for example. Like our fellow Lazy Traders, I’m a longer-term swing trader, but that’s not the only way to trade. Intraday traders and scalpers, for instance, may enter dozens of trades each day, staying in for only a matter of minutes or a few hours each time, and that works for them. Gap traders basically trade the market open looking for wide price swings, or gaps, and that works for them.

Here’s a bit more about why we chose our particular path in the markets, and why you, as an aspiring trader, might want to as well:

Longer-term swing trading: Enables traders to use higher time frames like the daily, weekly, and even monthly to find well-established price patterns that commonly repeat, giving way to high-probability trading opportunities that typically last several weeks to several months or more.
Trend trading: Leverages the higher-probability nature of trades that are taken in the market’s prevailing direction, thus enabling the trader, for example, to buy pullbacks to key support in an upward-trending market, or sell retracements to established resistance in downward-trending markets.
Reversal trading: Offering higher potential reward, but lower probability, reversal trades can make a nice complement to trend trades as part of a well-balanced swing trading regimen.

The “Secret” to Lazy Trading

Usually, an unveiling or big reveal comes with plenty of pageantry, some kind of curtain, or someone calling out “Drumroll, please!” But we’re going to go about this big “reveal” much differently… You see, I’m going to show you our #1, most trusted chart pattern, and the one that forms the entire basis for The Lazy Trader methodology right here and right now. It’s the pin bar reversal, and if you just take a look, it’s immediately to your right.

Why do I give it away so easy, you ask? Well, because our so-called “secret” is really no secret at all. Pin bar reversals have been around for decades, which is long before Lazy Trading came along. Plenty of modern-day traders who follow other methodologies use them as well, and I’d go so far as to say that they’ll be around even after all of our trading days are over. In fact, that’s part of the appeal, because you and I can be certain that this works, and is well worth the time and effort you’ll put into learning how to use it.

And Finally, a Trade Example

Now, as you saw in our pin bar examples above, recognizing a tradable pattern on a price action chart doesn’t have to be shrouded in mystery. Even newbies can spot pin bars and pin bar reversals, which are occurring all the time across multiple markets and time frames. Just check out the below example, which occurred in GBPNOK:

Trading Example in GBP/NOK

As you see, the pin bar occurring at or very close to established resistance represents a valid, bearish pin bar reversal, which we used to structure a short entry (sell) opportunity for which risk could be carefully controlled. Furthermore, we use the individual candles to guide our stop placement and trade management decisions, both processes you can read more about in subsequent lessons:

Lesson 1: How Do You Use Technical Analysis in Your Trading?
Lesson 2: What Is Money Management for Traders?

Clear-cut entries like the one above are what swing traders like us are looking for most days, and while they don’t come around all the time, waiting patiently and catching them when they do is a lot of what trading is all about!