Survive Now, Prosper Later
If you are like most novice traders, you want to win big right now. You can't wait. Many people are motivated by greed. They dream about great wealth and how wealth can solve all their problems. Many novice traders are drawn to the action. Movies like "Wall Street" and "Trading Places" make trading look exciting and sexy. Unfortunately, most seasoned traders will tell you that winning in the markets is a matter of tediously looking for high probability, low risk setups and trading them. All that a quest for greed and excitement will do is distract you from learning how to master the markets.
It takes time to master the markets. Many seasoned professional traders have blown out their accounts more than once. In "Market Wizards," for example, Michael Marcus described how he wiped out his account balance several times before learning how to make millions trading the markets. Although he faced an unbroken string of losses, he didn't give up. As he said to Jack Schwager (p. 18), "I would sometimes think that maybe I ought to stop trading because it was very painful to keep losing. In 'Fiddler on the Roof,' there is a scene where the lead looks up and talks to God. I would look up and say, 'Am I really that stupid?' And I seemed to hear a clear answer saying, 'No, you are not stupid. You just have to keep at it.' So I did."
Trading takes years to learn. You have to take the time to learn to develop an intuitive feel for the markets. You can't just read books and take classes and think you can learn it all. These activities may be essential prerequisites, but real world experience counts too. As Brandon, a seasoned professional we interviewed put it, "Books mainly teach basic techniques and give you basic advice: the trend is your friend, buy double backs, buy breakouts, draw trendlines. But books don't talk about emotional experiences." You are a unique person with your own history with the markets and your own resources. You need to learn what it feels like to lose, or what it feels like to hold a position overnight. You have to learn to gauge your tolerance for risk. There's no one right way to trade. You have to learn what you prefer and develop an approach to trading that suits your talents. All this takes time and patience.
Many novice traders make the mistake, however, of trying to rush things. They make big trades rather than manage risk. Big trades are exciting and satisfy the need to make a lot of money as soon as possible. This approach usually fails, though. Novice traders who make big trades just end up wiping out their account balance before honing their skills.
If you are a novice trader learning to master the markets, it's vital to manage risk so that you can survive. Just like many seasoned traders, you will have many years of prosperous trading. What you must do right now, however, is to survive the learning curve. In addition to managing risks, it's useful to specialize on learning the movements of a few specific stocks. Learn to get a feel for support and resistance levels for that stock. You should know good buy points and sell points. With practice, you'll be an expert on a few stocks, and soon your intuitive skills can be applied to a variety of stocks and commodities. By starting out slow and building your skills over time, you can survive the learning curve and end up a seasoned, prosperous trader.
It takes time to master the markets. Many seasoned professional traders have blown out their accounts more than once. In "Market Wizards," for example, Michael Marcus described how he wiped out his account balance several times before learning how to make millions trading the markets. Although he faced an unbroken string of losses, he didn't give up. As he said to Jack Schwager (p. 18), "I would sometimes think that maybe I ought to stop trading because it was very painful to keep losing. In 'Fiddler on the Roof,' there is a scene where the lead looks up and talks to God. I would look up and say, 'Am I really that stupid?' And I seemed to hear a clear answer saying, 'No, you are not stupid. You just have to keep at it.' So I did."
Trading takes years to learn. You have to take the time to learn to develop an intuitive feel for the markets. You can't just read books and take classes and think you can learn it all. These activities may be essential prerequisites, but real world experience counts too. As Brandon, a seasoned professional we interviewed put it, "Books mainly teach basic techniques and give you basic advice: the trend is your friend, buy double backs, buy breakouts, draw trendlines. But books don't talk about emotional experiences." You are a unique person with your own history with the markets and your own resources. You need to learn what it feels like to lose, or what it feels like to hold a position overnight. You have to learn to gauge your tolerance for risk. There's no one right way to trade. You have to learn what you prefer and develop an approach to trading that suits your talents. All this takes time and patience.
Many novice traders make the mistake, however, of trying to rush things. They make big trades rather than manage risk. Big trades are exciting and satisfy the need to make a lot of money as soon as possible. This approach usually fails, though. Novice traders who make big trades just end up wiping out their account balance before honing their skills.
If you are a novice trader learning to master the markets, it's vital to manage risk so that you can survive. Just like many seasoned traders, you will have many years of prosperous trading. What you must do right now, however, is to survive the learning curve. In addition to managing risks, it's useful to specialize on learning the movements of a few specific stocks. Learn to get a feel for support and resistance levels for that stock. You should know good buy points and sell points. With practice, you'll be an expert on a few stocks, and soon your intuitive skills can be applied to a variety of stocks and commodities. By starting out slow and building your skills over time, you can survive the learning curve and end up a seasoned, prosperous trader.
posted by nomadhunter at 5:53 PM
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