In a previous post we talked about lack of a trading plan being one of the reasons traders lose money while trading.
In this post we’re going to talk about one of the other reasons; and that is the inability to trade profitably due to emotions such as fear and greed.
Reading Dean’s last post the other day reminded me of a story I heard some time back that I think is very relevant to the topic of why we trade, and how we choose to trade.
Then not long afterwards I read Sean Rasmussen’s post in the bullhunters blog which reminded me of it yet again, so I’m going to share the story with you now.
Really, what is it you want?
I received a disturbing email the other day from someone who was complaining about the number of stock market programmes he was receiving via email. His complaint was, ‘if they are so good, why aren’t the advisors all multi-millionaires and retired on the French Riviera?’
Let’s get something straight here; Trading is a business, like any other business. Bill Gates did not become a multi-millionaire overnight, nor did he achieve his incredible success all on his own without mentoring of some sort, and he especially didn’t do it from sitting on his back-side. Regardless of whether you’re a self-employed welder, mechanic, deli owner, real estate investor, or stock market trader, if you want to become a multi-millionaire and retire on the French Riviera you have to do more than just your trade; you have to build a business.
If you think that just because someone tells you in their sales page that he can show you how to make a five figure income per month trading, and all you have by way of capital is a few thousand dollars, and a couple of hours a month to devote to trading, then you are the fool!
I highly recommend a book called ‘The E-Myth Revisited’, by Michael Gerber; in this book he explains why over 80% of businesses fail. Briefly; to succeed in business, three elements of a business must succeed, and they are the technical side, the managerial side and the entrepreneurial side.
How do you choose the right trading system and market?
A lot of traders, especially those who have been trading a while without success, get trapped into thinking that if they change the market or the system they are trading it will change their results. This is not entirely true; however there is some merit to it that most don’t realize.
Every trader has their own specific resources. Resources are things like capital, time, skills, hardware, software, strengths etc. Because everyone is different, it is safe to assume that no two traders will have the same list of resources.
Those that succeed the quickest in trading are the ones that find the right system to matches their resources. Put another way, every system out there being traded has its own mechanics, and unless those mechanics match a traders resources, the two struggle to gel.
In his song “The Gambler”, Kenny Rogers sang; “You’ve got to know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run. You never count your money, while you’re sitting at the table, there’ll be time enough for counting when the dealings done“.
He could have been singing about trading, because I think those lyrics cover two of the main issues affecting trader’s success. They are… (more…)
If you hired a coach to help you build a trading business, and your coach asked you how much time a week could you devote to trading, what would your answer be?
Now is the heart breaker. Take your ROI% PA figure you are aiming for and write it down (if you haven’t read the previous post on determining if you need to trade, please click here and read it first). Now next to that, write down the number of hours you can allocate to trading. Now compare your results to the table below. Do they match up?
Trading and investing can mean different things to different people, so let me share with you the way I define these terms.
I’m sure the dictionary and tax office will have alternative definitions, but to me it’s about the involvement of the trader in actually trading.
Let’s start by looking at decision making.
To me, a trader is someone who… (more…)
Let’s first determine if you need to be trading at all.
So you’ve decided you want to get into the markets somehow and you are looking to become an active investor or trader. It is at this time that it is safe to assume you believe you can out-perform most of the fund managers out there. Before you go dismissing fund managers, do the following simple calculation.
Write down your starting capital, the amount you have included in your trading plan.
Next, write down monthly goal, i.e. the amount per month you want to be making from your trading. It could be an amount to replace your current income, or an amount you’d like to see your capital grow at (make sure it’s a money amount and not a %). It’s important that you at least have a figure in mind.
Once the decision was made to found The Elite Insiders Group; BJ Dibbins, Dean Whittington and myself (Sean Rasmussen) got into action to put this blog together along with The Elite Insiders Group membership forum. The first question we posed was of course: What are we going to do that is unique to the rest of the market?
Well, that was a good question and we put our heads together. It really didn’t take long at all to come up with the way we were going to help the average stock maket trading “beginner” to get established in their learning path to trading the market successfully.
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I began my journey into the trading world in 2004 after attending a 2 day work shop on mechanical system trading. I had never been exposed to trading or the markets before and so was attending the workshop as a complete beginner.
Probably only two hours in and I was hooked. I can’t remember if it was the Japanese candlesticks, the story of two men who drove down the price of Caltex just for a laugh, or the mystery surrounding the fact that less than 5% consistently make money from the markets; either way, I knew the financial markets was where I wanted to be, and it wasn’t just to make money.
My journey began shortly there after when I started trading CFD’s. I had only placed one stock trade before this, and this was due to my impatience while waiting for my CFD account to be processed. I just wanted to trade!
