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Trading Secrets for Beginners

Kevin Davey, founder of KJ Trading Systems and World Champion Trader, said he did everything wrong at first. It all started after college when he received a direct mail piece detailing how great trading was. It filled him with the dream of making a lot of money with just a few thousand dollars to start. From that point on, he says he was hooked!

Kevin jumped right in with both feet and realized very quickly that trading would not be the easy money he had initially thought. He took a step back and started researching (in a time before computers and the internet made things as easy and automatic as they are today). Listen to hear Kevin’s amazing story from stock market novice to Algo Trading Mastermind! Read along as he shares his successful algorithmic trading strategy.

Listen to this episode of How To Trade It to hear @kjtrading Algo trading journey and strategy. #stocks #trading #StockMarket #Investing #AlgoTrading#DayTrading Click To Tweet

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You’ll want to hear this episode if you are interested in…

  • [0:54] How Kevin Davey got his start in trading.
  • [8:43] The motivating factor that kept Kevin coming back.
  • [9:08] The turning point that finally got him over the top.
  • [11:23] The change Kevin made that turned everything around.
  • [13:12] How Kevin won the 2006 World Trading Championship.
  • [16:10] How to start trading with the end in mind.
  • [18:15] Where a lot of people mess up with Algo Trading.
  • [22:10] Good starting points for beginners.

The Motivating Factor That Kept Kevin Coming Back

In the first decade or more of Kevin’s journey into trading, he had many stops and starts. In the beginning, he would try one system for a while and when that proved unsuccessful, he would switch course and try the exact opposite. He would stop and save up capital and come back in with a different strategy. Kevin’s motivating factor was that trading was just a large puzzle he wanted to solve. He had fun trading despite the frustration and the losses.

Kevin blames Mad Cow Disease for making him finally realize that things needed to change for him to be a successful trader. In December 2003, he decided to purchase live cattle on a whim. That night, right after the close, the US Government announced its discovery of Mad Cow Disease in cattle in the US. The market collapsed and they stopped trading—he couldn’t sell. He ended up losing far more than his stop limit. By some estimates, the 2003 Mad Cow Disease Outbreak had an $11 billion impact on the economy.

Kevin realized that he needed to change. He decided to follow the rules 100% so he could test them. As long as he had rules that worked historically, he theorized he would be heading in the right direction. His real turning point came when he committed to this practice. From that point on things started getting better.

How Kevin Won the World Trading Championship

In 2004, Larry Williams turned $10,000 into $1,000,000 and won that year’s World Championship title. Kevin noticed that if he had been trading in that contest—using the systems he had been developing—he would have won that year. So he decided he should try the contest for real. He researched the top 3 finishers over the last ten years. Kevin calculated that he needed to hit a 100% annual return to finish in the top 3.

So Kevin worked to develop some trading strategies that would give him over 100% return and used them in the 2005 contest. He finished second with over a 100% return. He finished at over 100% in 2006 and 2007 as well, and ultimately won the contest in 2006.

He said the neat thing wasn’t necessarily how well he accomplished this but that he had a goal to—a system—that he got to put into action and it worked out. Developing a consistent, principle-driven system is the key to developing any trading strategy. Any doubt he had about systems trading (what Algo trading was called at the time) was gone. His experience showed him he needed to continue focusing his efforts.

How did @kjtrading win the World Trading Championship? Listen to this episode of How To Trade It to hear the fascinating tale! #stocks #trading #StockMarket #Investing #AlgoTrading #DayTrading Click To Tweet

How to Start With the End in Mind

Having a generic goal like “ I want to make a lot of money” is NOT enough. You must know the exact percentage terms:

  • What annual return rate do I want?
  • How much drawdown can I accept?

If you don’t know upfront, you will never be able to develop a strategy that will work. Kevin says the problem is that most people are unrealistic about the amount of risk they can accept. The old adage “to make more, you need to risk more” is usually true most of the time. The key is coming up with your quitting point based on your system before you start trading. The people he knows who fail at this have no predetermined endpoint.

Good Starting Points for Beginners

Where should beginners start? Here are Kevin’s tips:

Educate yourself: Take advantage of the free strategies that can be found online or in books. When you have learned all you can from these avenues, there are some great paid resources out there as well.

Test things for yourself: Do NOT take everything you read or hear as truth. Test everything for yourself. This will build confidence so that when you do hit a downturn you will have the knowledge that in the long run, things will most likely work out. Kevin emphasizes that there is no better teacher than experience.

To hear more about Kevin’s algo trading strategy, listen to the whole episode!

In this episode of How To Trade It, @kjtrading shares some amazing advice for beginners. Don’t miss it! #stocks #trading #StockMarket #Investing #AlgoTrading #DayTrading Click To Tweet

Resources & People Mentioned

Connect with Kevin Davey

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