The story of a stock trader – Find you’re goal
Hi everyone, hope you have a great day !
When I started trading in 2008, I had almost no knowledge about the stock market. Yes I knew what was the TSX or the Nasdaq but almost no knowledge on how these complex machines were working and how the economy could impact them. I knew a minimum like being in a recession was impacting the stock market but there is a lot more involved under the hood. Another problem when you start trading is you think its easy after 1 or 2 gains and you become over confident and this can make a lot of damage when the market decide to turn around.
Looking back, I think the first thing I should have done is fixing a goal on what I would like to achieve with starting trading in the stock market. This seems easy but there is a lot involved behind this simple question.
1- How much money do I want to risk ?
2- What trading style my life style and my personal temper is the most suited for ?
3- What is the percentage of profit I would like to have in a year ( the maximum is not an answer 🙂 This question can be a little bit hard to answer because profit can be different year over year even if you use the same exact strategy as the market is not a static entity.
4- Do you have a strategy whit rules that reflect your trading style ? Did you test this strategy ?
5- Are you made for this ? Trading can be hard some times and play a lot with you’re emotions.
Write down you’re goal and start finding a good and proven strategy that fits them and most importantly you’re personality.
So going back to 2008 I started to trade stocks like most of us learned to do. You buy low and sell high. So I started to buy stocks I tough were at there low (Wow this is a great stock its down 30% I will be rich when it will go back up !) Ouch the market didn’t think the same thing, it went down and down again until my emotions said you have to sell you can’t continue to loose all that money. At this point I had no strategy at all, so I decided to buy the great Bill O’Neil book (How to make money in stock).
I started to read the book mostly on the train on my way to work and one day a guy sitting in front of me said “The only guy who will make money is the guy who wrote that book” I just smiled and continue reading. I was sure it was my way to become rich and famous lol 🙂 Ouf maybe not for now.
This book is very good and I would suggest to any person interested in the stock market to read it. The problem with me is that after reading the book I though I was the best trader. I really though I had the recipe for success. I started to apply some of the rules described in the book (buying patterns, buy on breakouts, 7-8% stop loss etc.) but it didn’t worked out so well because these rules are only working on specific market conditions that were not there in 2008. I was constantly hitting my stop losses which can impact a portfolio really hard in the long run. After a while you think, this strategy is not good and you look for something else and the story continues. It is for this reason I called this site best trader because at the moment you think you’re good the best trader ever and you are on you’re way to make a fortune in the next months, the market reminds you that a trend is only temporary and you have no way to be sure when it will end or not
The news, as a new stock trader we can really be influenced by the news or messages from other investors. Some are calling the end of the world and others can tell you the market will double in the next month. After a few month of downside and losses you’re mindset is pretty negative and you kind of believe the ones calling for the end of the world when you should start to be optimist and I felled in the negativity panel. I told myself I should start shorting the S&P with an ETF, The Fed started to talk about removing a little bit of easy money so I though the market will have another leg down. But the market started to go up, I was so sure about my theory and what I was reading that I didn’t even put a stop loss.
I would like to end this post with a great quote from Jesse Livermore.
“The human side of every person is the greatest enemy of the average investor or speculator”
Hope this post will help some of you in there journey.
Thanks,