Friday, 8 June 2012

Why is Learning Trading one of the hardest business?

Dear Friends,

Trading is easy if you get it. It is like ATM machine at your desk. However LEARNING to trade the correct way is the hardest thing to do for the following humanistic reasons:

1) The act of disobeying RULES - 
We normally like to disobey rules, rules of money management or emotional control. We always think we are right. "We think that this stock will surely rise" "We think that we should put in all our money to buy."

In fact in trading 70% of the time we are wrong. Especially for beginners, who has not yet developed the intuition to trading. That is why we have money management rules, we have position sizing rules. All these rules are laid down by trading gurus because they have lost enough. We should just follow them instead of thinking we are always right!

2) The act of wanting to buy just because we do not like to waste time - 
In everyday life, we are taught to act immediately so as not to waste time. This is the one of the worst habit in trading. To enter just because we could not stand ourselves wasting time looking at the screen.

As a trader,we got to get use to a carefree life, a life where we do not need to rush into a trade, the act of waiting for the right time to come, the right day to come before acting. Think like a sniper, who can camp for days just for that one shot! That one shot (or trade) may be all it needs to earn 2 month's income.

3) The act of thinking that opportunities might be gone forever - 
We are also taught in life to grab hold of any opportunities. We always live a life of scarcity instead of abundance! We always think that once we miss the chance to buy APPLE, it is gone forever. This is the chance of a lifetime. It is my only chance to be rich.

Wrong thinking! Everyday or Every month there are chances in the market. There will be another Apple coming if you miss it. Live in the Law of Abundance. That will prevent you from going into a hasty trade and chasing new high.

4) The act of being afraid of Failure - 
Nobody likes to lose in life. Especially a beginner in trading. We are so afraid of losing money that we forget our stop loss. We hope that the stock will rise back, which only happens sometimes. We do not face up to failure or losses. When we lose money, we switch off the computer instead of studying the reasons behind the losses. We are too afraid to lose!

As a trader, we should like losses, adore losses and hug them. It seems an irony that I said it. But yes, after 10 years of trading, that is how I feel one should be. Lose MORE but SMALL. Win LESS but BIG.

5) The act of thinking the product is yours just by holding it in your hands-

In sales, we often have a term called puppy close. Meaning if a pet shop owner wants to sell a dog, the best way is to lend the dog to the customer to take home for a day.

This is one of the of the worst habits a trader should have. Thinking unrealised profit is PROFIT in the pocket even before closing your position just because you own it. A lot of us think that open positions in stocks with profits are already inside our bag which often is not the case. Open position means that the profit you have is still the market money unless you take it off the table.

Traders should take the money off the table before they think it is theirs. The first thing once a trader has some unrealised profit, is to put a stop loss at breakeven. When market suddenly swing against us, get out at breakeven. Only by thinking that unrealised profit is not profit yet, will we be able to have the heart to do it. Often times we are slow in getting out of profitable trades when market suddenly swings is because we hope to earn back the maximum profit that think we had.

958访谈9月21日:展望2017年股市与经济:美国联储局都不看好美国经济?

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