Saturday, February 23, 2008

Passion for Trading

I am convinced that one of the elements of successful trading is passion for the activity. I just got back from speaking at Traders Expo in New York and realize that whenever I attend an event like that I come back really pumped up about trading all over again. I am happy to report that my speech was very well attended (standing room only) and apparently well received since I was mobbed afterwards with requests about where the attendees could get "Trade Your Way to Wealth" (amazon.com).

Many of the presentations I attended were nothing short of excellent and I always come away with something valuable. One of the speakers was a well known trading coach who related many positive experiences with successful students but who does not trade herself. One of the attendees asked why she didn't trade herself if she was so good at it. Her answer was that it was not her passion. Her passion is helping traders get even better and she is well paid ($7,500 for a two day private session). Though she is a good trader she just doesn't enjoy it as much as she enjoys the coaching.

Tenacity and persistence were concepts frequently advanced as qualities of good traders. In my mind, a trader is unlikely to have either unless they are also passionate about their trading. Interestingly, the point was made again, as I have often preached, that good traders get their own education. They go out and get the books and do the reading and attend the classes and get the coaching because they want to learn.

Nearly every speaker advocated the need for a plan and for discipline in trading. One speaker was even selling the template for a plan for $120. (I include the ingredients for your own plan in "Trade Your Way to Wealth" at no extra charge, but the point, of course, is to have a plan). The old saying is: "plan your trade and trade your plan." Passion to succeed leads the good traders to follow that mantra.

Another exceptional speaker, Dr. Ari Kiev, a psychiatrist, advanced the importance of setting a goal. Those who set a goal have a much better chance of achieving success in their trading than those who don't. I suspect the efforts to attain the goal also serve to fuel the passion for trading and the passion, in turn, helps achieve the goal. Pretty nice circle to ride around, I'd say.

In my view, it all begins (and maybe ends well) with self-education and, without the passion, it seems that no one is likely to expend the effort necessary to get the education. I suspect that you, the reader, already do have some passion about trading or you would not have bothered to read this article in the first place. My best advice is to follow your passion, whether it be trading or something else. If you do, your chances of success are great.

On a related subject, I intend to write more over the next weeks concerning picking stocks and entries and exits. In order to do that, I expect I will include some articles on at least basic technical analysis. Technical analysis is not as mystical as some fear and it does provide a great method to discipline trades and money management as well as suggest entries and exits.

by Bill Kraft, Editor
Copyright 2008, Makin' Hay, Inc.
All Rights Reserved


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To comment on Bill's article click on the "comments" link below.

4 comments:

Don Robertson, The American Philosopher said...

Eric-

Sure. I've got a comment on Bill Kraft's article describing his trip to Traders Expo. I read these things when I have the temperament to put up with them, for occasionally there's some small bit of truth portrayed there. Bill can deliver.

Systems are fine. Knowing your limits too, can help define a personal system.

I just bought a gaggle of VZ. I bought it after a 6% decline in the stock, thinking, this'll give me a couple points back pretty easy.

VZ was trading in the high thirties when I caught this falling star at $36.12, and coupled with a 4.9% dividend return, everything met my criteria, safety.

VZ kept falling that day but within a calm parameter. It kept falling the next day too, and it didn't stop falling until it was 14.5% lower than the starting point from where I counted my encouraging 6% drop.

Every experienced trader knows the feeling.

On Friday three days after my purchase, VZ poked its head back up above where I bought it. And, I'm now holding on until I see at least the 2 points I thought were there when I bought it.

The VZ dividend ex-date comes early in April. And, at an expected $.43 I have enough of a safety net I could just wait it out and take that too.

I never buy a company just on fundamentals or some guru's recommendation. I only buy companies I can live with for a while, need be.

VZ met the criteria of my system. And even had I had to hold onto it through a recession of several quarters, in all likelihood, VZ would have continued to pay the dividend at a rate well above the rate of return I get for cash I have in the bank. As I currently only get 4.13% for the cash I have in the bank, and VZ is paying a dividend of 4.8%, a good strong safety net is there.

Of course these are stocks, and losses are possible if you buy high and sell low. Losses are even likely, if you don't know the company whose stock symbol you have entrusted with your money.

The best system is to think about what it is you're doing, to learn from your mistakes, and, note the confidence you draw from your well thought out decisions when the going gets a little dicey, even when these mistakes don't cost you a penny, and even make you some money.

That's what trading is about, making money. If you're not making money, you're not really trading. You're just fodder for those who are.

And, like a gambling addict you're just fooling yourself when you get lucky, or when you try and justify your losses.

There wouldn't be so many crooks in the equity industry, if their weren't so many gambling addicts. And the country's financial shape would be better too.

Don Robertson, The American Philosopher

Anonymous said...

In 1982, author Srully Blotnick published "Getting Rich Your Own Way", in which he surmises, the ONLY way to true wealth is through following your passions. Great reading...

Bill Kraft, MarketFN.com said...

Thanks, Anonymous, we're on the same page about the need for passion.
Bill Kraft

Anonymous said...

I am writing a book on trading for the very beginner... Most books are too long... There are a few simple things to know and follow...These are the basics and they work...