Having traded the financial markets in my holidays, and having made a little over five figures in that time, I feel that not only have I found a gratifying pastime, but also that my knowledge about financial markets has been vastly increased, from many mornings spent watching Bloomberg on a TV screen. The gains have been marvellous, the losses not so much. My general knowledge of global events and their repercussions to the markets has also increased. Above all, however, the most salient thing is that a sound base of knowledge has been built for, hopefully, a lifetime of trading on the financial markets. Many lessons have been learnt from experience, incipiently to ignore the brunt of what the news says.
Herd behaviour is perhaps most ubiquitous in the world of financial markets. In a bull run, people can come up with a million and one reasons why the stock market will continue rising, and then even more reasons why it will fall the day later. From being burnt by listening to the scare mongering of prevalent financial writers early on in my journey, I have realised that the only thing which actually matters in trading is the price you buy at, and then the price which you sell at. Observing trends will be far more renumerative than simply trading based on the opinions of a few writers. Although I agree, obviously, that the market is situated on the behaviour of people, I am a strong proponent of the idea that market behaviour is cyclical, and to go long or short based on each different piece of news you hear is synonymous with financial suicide.
Positivity is also a trait which must be exercised when trading. To have negative energy bundled up inside you when you open up your computer means that your trades will not be placed to their optimum potential. When trading, I have discovered that it helps if you go in thinking “I’m going to make money today”, rather than “I don’t have a good feeling about today”. Whenever one is trying to make money, they need to have progressive, rather than regressive, thoughts. Regressivism will only cause a regression in the monetary potential of the trades, until, eventually, it could bleed you dry. Emotions can have positive or negative consequences, and when you think you are going to flourish in a day, you have a much greater probability of succeeding than someone who is consistently down in the dumps.
When trading, it is also inevitable that you will incur losses. The monetary value of those losses is not the most important thing; it is what you imbibe from it. Indubitably, if you have a losing trade, you were at least partially wrong, and, although you can never be perfect, methodically ironing out your losses is a great way to ensure that you continue progressing and do not stagnate your balance as a trader. At the beginning, I was reluctant to close trades at a loss, but in the long run, I realised that those losses can be easily recuperated and that we need to treat it as a sojourn, rather than dwell on our losses. Everyone has a losing streak; it’s natural to have one. However, what you learn from it will dictate your success as a trader more than the trades themselves.
Finally, I have learnt not to be too conservative with your stakes, when you have a strong feeling that you are right. As Edwin Lèfevre said in his famous book Reminiscences of a Stock Operator, “What’s the point of being right if I don’t make full use of it?” From delving deeply into the trades of a great number of successful traders, I have realised that they all have more losing than winning trades. However, their winning trades are the large ones and that is precisely how they make money. There is no point being conservative with how much of a stake you have, if your opinion is unequivocal. Otherwise, what is the point of being right? The most important thing, in my opinion, to trading is to give your opinion monetary justice, so that in the strong probability that you are right, you reap the financial rewards for it.
For this article, I chose only a small selection out of the plethora of lessons which I have learned, some others of which I will try to incorporate into later articles. I must stress that these are only the lessons which I have learnt, and applying them does not guarantee trading success for anyone else.