How To Become A Better Trader In 30 Days Using StockTwits

The number one question I get asked by readers of my blog is “how can I become a better trader?”  My answer is usually “find a mentor.”  What I am going to show you in this post is how to find that person using StockTwits (and how that process in itself can make you a better trader).

How does a mentor make you a better trader?  Think of it this way, if you are trying to get better at golf, there are a number of different things that you can do to improve your game. Problem is, you may not know what those things are, nor where to start, or how to implement them.

If you had a teacher/mentor who could cut out the superfluous and focus you more on what’s important, your learning curve would shorten drastically.  Having a mentor will make you a better trader, and the process of finding a mentor will also make you a better trader as well.

A few quick codicils first…

What is a mentor?

Unless you are a new hire in the trading department at Goldman Sachs or your uncle is Paul Tudor Jones, you are going to have to redefine what you consider a “mentor” to be. Having a veteran trader sit down with you and walk you through his collected knowledge while sipping brandy by the fireplace is not going to happen.

We live in a different time where the one on one mentor/protégé relationship rarely exists in that form.  If you have it, consider yourself extremely lucky.  However the rest of us can still use the power of social media to find someone who is a guide.  Someone with experience in trading that you can have a two-way interaction with on a semi-regular basis.  And in fact, it doesn’t even matter if your “mentor” actually knows they are being a mentor.

This is the context in which I use the term “mentor.”

Reasonable expectations.

There is no substitute for time and experience, and I am not saying that you will all of a sudden be able to quit your job and trade for a living after completing this process. What I am saying is that if you do follow this process, whether novice, intermediate, or experienced trader, you will be a better trader by the time you are finished.  And you may come away with not only a mentor, but a friend as well.

Time frame.

Is 30 days really enough time to find a mentor and/or make you a better trader?   The optimal way to do this would be to expand each 1-week phase to a couple of weeks, or a month, and if you have the time and patience, I recommend it.  However,  I think if this process is done in a focused and methodical way and if you put in enough hours working at it every day, 30 days is enough time to make an impact.

So don’t be in a rush to go through this process.  You may be tempted to cut the time frames down, but don’t.  Take your time and do this right.  I would also suggest, especially if you are a beginning trader, that you don’t trade during the first three-week time period. Focus on this project solely during that time in order to get the most out of it.  You have the rest of your life to crush the markets.

Week 1 – Watch, Filter, and Follow

Your goal in the first week is to find 7-10 candidates on StockTwits that you would like as potential mentors.  There are a number of ways you can find them.

  • Watch the “Recommended” stream.  These people have been handpicked by StockTwits for being “smart, generous, and adding value to the community.”
  • Ask questions regarding quality follows via direct message of users you know and trust.  (More on this later).
  • Keep an eye out for the “#FF” designation in messages on Fridays.  These indicate suggestions of quality follows.
  • Check out the StockTwits blog network and monitor the author’s streams.

You also want to filter by asset class.  If you trade exclusively Forex, at least for this process, try to focus only on the currency streams.  Same goes if you trade exclusively options, futures, or equities.

You could even refine the process more.  If you only stick to trading big cap tech stocks, monitor the streams of companies like Apple ($AAPL), Google ($GOOG), and the like to see who the “axe” is in those type of names.

These are just suggestions for the filtering process; the point is, use whatever method you prefer to cull some top candidates.

This first week is the most critical, and once again a reminder of why you want to use the full-time period to find candidates.  You want to find someone who not only knows what they are doing, but has the right tone and temperament to be a mentor, and you will need as much time as possible in order to get the best “feel” for those people.

Once you have your candidates selected, if you are not already, make sure to follow them.

Week 2 – Analyze

This week is all about analyzing the 7-10 mentor candidates that came out of the first week’s filtering process.

If you are able to be at your computer during the trading day, then you can analyze them in real-time, however, this is not crucial.  If you have a day job and can only do your analysis at night, it will work just as well.

By clicking on the name of a candidate you will see their specific stream with all the messages they put out during the day, each with a timestamp.

Start with the first message of the day and follow along with what that user does during the course of the day.  Look at what type of information are they giving out.  It is timely? Is it insightful?  Does it add value?  Is it the type of information that fits in your trading style?

If someone is sending out messages about fundamental analysis and macroeconomic trends, even though they may be a quality follow, if you are day trading, they probably won’t work as a mentor for you.

If they are calling out live trade entries and exits, match them up with charts from the day. Look at the style of trading they are doing.  Are they entering on a breakout or pullback? Are they exiting at chart based targets or loss of a trendline?

The list of things to examine is endless, but the ultimate goal again is to see if their style fits with yours.  If you are more comfortable with swing trading, it won’t do you any good to have a scalper as a mentor.

If they have a blog put it into a reader and then go back through a few months worth of posts to find out what they are all about.

You are looking to find users that have a compatible style, a methodological approach, and are profitable.

(One note on this: even the best trader can have a losing month, let alone a losing week, so makes sure that the user you are analyzing is at least using good risk/reward techniques.  If they are a net loser during this week, but obeyed their risk criteria, this should not automatically rule them out as a candidate).

And if you are worried that some of the people you are considering may not actually be trading, read my post “When You Catch Somebody Faking It.”

You also want to take into account if they are already interacting with people and if so, how they do it.  The best trader in the world can’t be a good mentor if he communicates with people badly.  Throw those users out as potential candidates, as well as any whose style doesn’t fit yours.

Week 3 – Ask and Interact

Now that you have refined your candidate list down even more, it’s time to “break the ice” and interact with them.  Let me expand on this a bit.

It is important to emphasize that StockTwits is a free service and the people who post on it do not charge a fee.  Some of them are also full-time traders, meaning that trading is only way they make their living.  Even if they are not full-time trader, people have lives outside of trading, and may have limited time to respond to every tweet addressed to them.

So to best improve your chances of a reply when reaching out to a user;

  • Be polite and respectful
  • Do not take an entitlement attitude
  • Don’t challenge them i.e. “Why did you make that trade if the market was dropping?”
  • Don’t freak out if they take a while to respond.
  • Don’t just say “hey will you be my mentor.”
  • Don’t bombard them.
  • Try to approach them when less busy i.e. outside market hours.

You are looking for a relationship, not a one night stand, and you have to remember that you are trying to interact with someone and benefit from their knowledge; knowledge that may have taken them 10 or 20 years to learn trading through the school of hard knocks.

That knowledge  is like gold to a trader and they are under no obligation to share it.  The way you make initial contact will set the tone going forward, so here are some examples of how best to do it.

Ask a question about a successful trade they made.

“That was a nice trade on $BIDU.  Can I ask how you determined the entry?”

If you see a something of value that they tweeted, retweet it with a comment.

“Finally it makes sense to me.  Thanks for the insight! RT@bclund – How To Explain Short Selling To Your Mother

Or bring some value to them.

“@bclund I saw you said Steve Cohen was your favorite trader.  Here’s a cool article he wrote”

The best thing you can do is just be “real” and approach them in an honest and sincere way; like you would anyone you wanted to start a relationship with.

After the first two weeks, you should have a pretty good idea as to who is more open to continued interaction.  But if somebody is not interested in communicating don’t be upset or bitter, just let it go, and move on.  Being a mentor is not for everyone.

Week 4 – Implement

At this point, if you have done this process right, you should have found at least one person that you can call a nascent mentor. Now it’s time to put what you have learned through this process into action.

The purpose of this week is to take the applicable parts of what you have learned and incorporate them into your trading, NOT TO COPY YOUR MENTORS TRADES OR METHODOLOGY.

If you have never traded before, this is the week to begin.  Start by using very small positions and to try to craft a trading methodology using your mentor’s trading as a guide.  Do not paper trade!  You can read why in “Thoughts On Paper Trading.”

If you are an intermediate or experienced trader, you will take this week to refine your trading methodology with some of the ideas and techniques you have gleaned, once again, using positions that are smaller than your normal size.

Assuming that week 3 went well, this is where you will also want to give your mentor some (positive) feedback about how what you have learned from them is working out.

Review break.

Yes, I know that four weeks is only 28 days, and that is why you will spend the last two days of this process reviewing everything that you have done from day one.  You will hopefully have a sense of accomplishment, not only in what you achieved towards bettering yourself as a trader, but also in actively starting the process of engaging with your mentor (or mentors).

Continuing the process.

As you may have guessed, this is the just the beginning of an ongoing process.  From here your goal is to continue to engage your mentor, broaden your interaction, and improve your trading.

You should continually be on the lookout for quality traders on the streams, and when you find them, repeat the process that got you your first mentors.  Before you know it, you will have a group of people who can both passively and actively help you to become a better trader.

Then at some point the process reverses itself and you may find yourself in the role of potential mentor.  If that happens, do whatever you can to help those that were once in your shoes.  Post into the streams, write a trading blog, suggest quality follows to others, or if you think you are up to it, mentor somebody who needs the help.

…and don’t forget to subscribe to a quality blog about the markets, trading, and life.  By the way, what bclund is, is the intersection of markets, trading, and life (with some punk rock, pop culture, and off-beat humor mixed in).  Subscribe for free Via E-mail or Via RSS and follow me on StockTwits and Twitter.

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