I noticed many people searching for a holy grail of trading (or investing) and many fail. I was one of them a few years ago too. In fact, I was a loser even a year ago! And loser not by having losing or winning trades but a loser of how I was approaching the Market.
Just recently, I was browsing Amazon (Nasdaq: AMZN) bookstore to see what audible books abut trading I can purchase to listen to when traveling and one thing got my attention about one book: users’ comments.
I always read what other have to say, but this comment literally hit me:
“I’ve read tons of books on trading. There is nothing in this book… no insider secrets, no real strategies, just very, very basic info…“
Here is the point: There is no secret, no wonder strategies, no miraculous ways to become suddenly rich, no wonder oscillators, studies, predictions, insider secrets, or anything which will turn your unsuccessful trading into successful Money making machine! Sorry I had to break your day.
· Say Hello to a Loser
How do you tell that you are predestined to lose? Look at the list of trait of an unsuccessful trader or investor. If you find a single statement listed below that you personally do or think about then you need to work on your state of mind and break the bad habits. You must work on attaining the right mindset of a trader.
It is easy said than done because we are humans and we have emotions. And we also have certain beliefs and habits. And beliefs and habits are the hardest to change.
If you have any of the habits you are predestining yourself to lose and your trading will never be successful. I can say this with a 100% certainty although you may be successful now as a novice investor or trader. I have seen this happening with recent cryptocurrency mania where people who started investing into Bitcoin six months ago and considered themselves trading gurus. They started writing books on how to invest into Bitcoin and become millionaires. When other warned them that the markets do not work the way they think and the way the Bitcoin acted these people acted angrily or laughing at you. Today, I want to see what those who bought Bitcoin at $19,000 dollars per coin are doing and whether they are still laughing.
At some point a beginner’s luck will be replaced with a sober reality and not so rosy trading days and that will be the time where you can lose all your money. I was myself very successful but I also wiped out my account three times. The first time, when the beginner’s luck ended, the second time when I stubbornly believed I could manage my trades and fight the market. But trading and investing is about your mind! Only your mind. It is a psychology stuff. no secrets, no luck, no skills, no extraordinary knowledge. All you need is basic info of how options work, have a few simple but solid rules about trading and money management (remember Buffett’s rules – rule #1 don’t lose money, rule #2 don’t forget the rule #1) and execute them. It is psychology first, the rest is just mechanics.
You are a loser if you do the following:
- Constantly looking for new strategies and secret oscillators.
- Trying to predict the market next move.
- Asking people what they think about a certain stock, market, future.
- Not having a trading / investing plan.
- Not having a money management in place.
- Asking others to help you with a losing trade.
- Trading impulsively or under a sudden pressure caused by a fear of lost opportunity or losing trade.
- Panicking when the market goes against you.
- Being overly excited when the market goes in your favor.
- Adding to a losing trade.
- Closing winning trades too early.
- Blaming FED, market makers, big investors, corporations, high frequency traders, company management, or day traders for rigging and manipulating the market.
- Blaming stocks, market, other traders, company owners for your losing positions.
- Believing that you do not have enough knowledge to trade successfully.
- Believing that you need to have enough information to make a proper stock analysis and if a trade fails you blame the analysis.
- Not knowing your risk in a trade, possible outcomes of every trade an having no plan for those outcomes.
- The more you think you need to know and learn about the market the more successful you will be.
- Set your mind on a market or stock behavior and trend unable to change direction although you have a clear signal that the stock has reversed.
- Ignoring or not recognizing what the market does and tells you and failing to act upon it but rather fighting the market upon your trade conviction.
- You start feeling like the market, stocks, other traders, investors, market makers are always against you personally and their sole goal is to take your money.
- After suffering significant loses you hesitate putting on a new trade or invest again.
- Trading successfully requires luck, a lot of money, and special knowledge which others do not posses.
- Constantly feeling that you must trade all the time and over trade your account.
- Changing your attitude based on the market moves – when the trade goes in your favor you feel happy when it goes against you you are depressed.
- You have or had sleepless nights worrying about your money
- Not having your trading account separated (physically and mentally) from your other accounts/money/living expenses. Losing money gets you under a panic attack.
- You feel an urge to have a perfect trade before you place it, perfect analysis, and perfect market conditions.
- Placing a trade and then looking for posts, articles, and opinions on the website to confirm your trade decisions and views.
- Looking for reasons and wanting to know the “why” or “what’s going on” about a stock you trade.
The list goes on and on. But these are traits I personally suffered from myself before I realized that they many of my beliefs were all false and deceiving me to become a loser trader.
· Say Hello to a Winner
To become a winner is a hard work. Trading itself is simple and easy, but being a winner is hard. And that’s what makes trading hard because you are fighting the biggest enemy you ever had – you!
Once you realize that those traits are your enemy along with yourself due to believing to them you will get to a path of becoming a successful trader. And it takes time. I mentioned above that it is very hard to change people’s beliefs and habits. It really is very hard thing to do. You can see this in other people, right? How hard was it to convince your coworker or your friend, or a family member about something you argued about that you knew for 500% that they were wrong? And imagine that they had the same 500% conviction that you were wrong.
The same goes with the market and our trading. We have our own beliefs, views about a market or Stock, and our own convictions and we refuse to give them up. We search for more information everywhere to try to find on “what’s going on”.
It doesn’t work that way and it never will. To be a successful trade you must give up those believes and approach the market like a robot.
To trade, you do not need:
Any analysis is about anything what already happened in the past and it may have absolutely no relation to future nor predicting it. It is OK to investigate and see if the company makes money or it is all bogus, whether it pays dividends out of its cash flow or earnings or borrowing, try to assess whether a stock is undervalued or overvalued and that is pretty much all you need. Everything else is a noise. Ballast. BS. It is all past. It all happened and it may never happen again. Do not put your trust and money in believing otherwise.
Knowing what’s going on
Nope, you don’t need to know this. Once you find out what’s going on it is usually too late anyway. You can read and search for reasons as amusement but do not trade based on it. some traders trade news but you are not fast enough to find out before everyone else.
Run away from opinions of others. Their are biased towards their beliefs and not yours. They are bias towards their strategies and not yours. You can see this on Stocktwits all the time when a day trader fiercely argues about a stock with a position trader both completely ignoring a time frame they both trade in. One is looking at the next ten minutes, the other at the next 10 years.
Secret insight or magical oscillator
There is none. Stop wasting your time searching for one.
What you definitely need:
Yes you need a plan, a strategy. But there is no magical strategy, miraculous, secret way to riches. It doesn’t exist. But you need a plan to know what you will do. You do not need to know what the market or your stock will do next. You need to know what you will do next. Creating a plan is simple and you must keep it simple. When making a plan think on the following things – how to remove emotions and how to trade mechanically. The plan must look like a manual on assembling a furniture from IKEA. It must be like saying 1, 2, 3, 4, 5,… etc. If you know about programming a bit, then your plans must resemble a simple mathematical and or programming sentences “if then, and if else…”. If you need a guidance visit my Strategy page and read my strategy. It is all I need to know to execute my trades.
This should be a part of your trading strategy. A proper money management will tell you when to trade and how much to trade. There will be times when your trades will not go as planned and you will need to adjust a trade. And the worst thing which can happen to you is not having enough money to do the adjustment. What will you do when you need additional $2,000 dollars to make a trade adjustment and you do not have it because you opened too many trades? You will be closing at a loss.
Trading in your comfort zone
You shouldn’t be trading upon emotions so if you see that you do not feel comfortable for any reason such as you are afraid, confused, not sure about the trade, or any reason, do not trade. It can work the other way around too. If you are overly positive, feel extreme happiness about your trading, enthusiastic, and in euphoria of making money you should stay away too. Remember, making money in the market is a business, not your amusement park.
Work on your emotions and that you really do not need anything special to trade successfully. Learn the mechanics of options trading, how options make money or lose money, how you open a trade or close it and then set your rules and criteria to trade. The do it. First, trade in a paper account to practice, then trade small trades one at a time to gain confidence and learn how to trade in a comfort zone.
I recommend you to read a good book Trading in the Zone. It is not an easy read but it will help you to attain a proper mind set of a trader. Trust me. It helped me tremendously.