So you think you’re doing everything right but STILL can’t boost your P&L?
It doesn’t matter how well you read charts, understand market trends, or how many newsletters you read, you’ll never be successful if you keep making these two mistakes.
When I started trading, I had to learn these things slowly, the hard way. Now I’m sharing them with you so YOU don’t have to.
In 2007, I quit my job and started trading full-time. That year, the market tanked and continued to be bearish for almost two years (this is probably the reason I like to short rather than play long).
To me, Radio Shack was the most obvious stock to short. I thought it was outdated and overpriced. For proof, I needed only look at my local Radio Shack, which was always empty. I thought this would be easy money.
The market didn’t agree with me:
No matter how bullish the stock looked, I thought it had to go down.
Eventually, in January 2014, the stock did turn bearish:
I went short at 80 cents, thinking the stock had to go to zero. Then — just a few weeks later — I saw the stock triple off the lows and I had to cover my position.
My preconceived beliefs about what should happen COST ME MONEY
You could be the smartest person in the world, but if you come to trading with preconceived ideas about what should and shouldn’t happen, you will lose your shirt.
This is especially true if you’re like me, coming to trading from a successful career in finance and thinking you understand market trends.
Look at all the people who got burned over the years shorting Tesla because the company was losing a million dollars per car. They thought there was no way Tesla could make it. Now, they’re the fifth largest company in the US.
The choices you make in the market should be based on what the market is telling you, regardless of your internal monologue.
To become a better trader, do away with notions of what should or shouldn’t happen.
Not Everyone should take the Same Strategies!
Too many new traders think that, to be successful, they just need to understand chart patterns.
Chart patterns are a dime a dozen. You can Google them for free.
Here are sixteen:
Your goal shouldn’t be to recognize these different patterns.
Your goal should be to recognize which of those patterns work best with your personality.
I talk about gaps, climactics, breakouts, pullbacks. These strategies make the most sense for me and my personality.
You need to discover which work best for you.
“In trading, as in archery, if there is effort, force, straining, struggling, or trying, it is wrong.” – Jack D. Schwager, Market Wizards
Jack Schwager started as a struggling trader who could never get his account above $100,000. So, he decided to interview the world’s best traders, assuming they all traded the same way. He came to realize that no two of them traded alike, but they all traded in line with their own personality.
The best traders in history play to their strengths.
Learn what kind of trading YOU like, what kind of trading YOU are good at. Do you like to day trade or swing trade? Trade with the trend or counter-trend? Do you like to scalp or hold all day?
It took me a long time to find out which strategies best suited me. Once I did, I never deviated from it.
You have to find a way of trading that suits you.