To be clear, I’m talking about ‘How To’ advice that goes something like:

  • “If you want to make money, do this.”
  • “I did ______ and became a successful trader. If you want to be successful, do what I did.”

Even with the best intentions, such advice is rarely helpful because ‘How To’ instructions work poorly in complex environments.

‘How To’ prescriptions don’t work in complex environments

With simple problems – such as putting an Ikea shelf together, or changing a car tire – ‘How To’ prescriptions can be very helpful.

These are straight-forward problems that can be uniformly solved by following a series of steps.

But, this is not how trading works.

If you’ve ever followed someone’s advice on ‘how to trade’ or tried to duplicate what a successful trader did (perhaps after reading the Market Wizards books), you already know that it almost never works out.

This is because financial markets are complex environments driven by countless variables with non-linear relationships. No two situations are identical, and there is no set of instructions that will work for most people, most of the time.

This being said, there are certain types of trading advice that can be helpful.

Trading advice that’s actually helpful

Unlike ‘How To’ advice, principles do not prescribe any specific course of action. Rather, they are guidelines that keep you focused on what’s important.

One useful trading principle is: Trade with low effective leverage. In almost all trading situations, this is a good guideline to follow.

Another type of helpful trading advice is negative advice. It’s refers to advice that tells you what not to do. For example: Don’t move your stop loss.

Negative advice is especially useful in complex environments where it’s far easier to make errors, and where a single mistake can lead to ruin.

Avoid ‘How To’ trading advice

Principles and negative advice can be helpful, but they don’t tell you exactly how to be trading. At the end of the day, YOU are the only one who can figure that out based to your unique set of skills, knowledge, preferences and resources.

Books and courses can point you in the right direction, but only you can chart the specific ‘How To’ path for yourself.