As usual I am absolutely slammed with all sorts of interesting projects so fortuntely some of mystudents have taken to writing guest posts for me…here’s a good one I received the other day
And I’m a big believer in newbie traders learning from those of us who are more experienced…my entire business model is all about being the mentor to people that I never had…you can learn everything I have over 15 years of trading, but if you learn from my 750+ video lessons, I can teach you everything I know in under a year, thus giving you an advantage over other traders sooner than later 🙂
That’s the idea behind http://profit.ly/gurus too
Here’s my student’s guest post, it’s good advice:
When it comes to things like the risk of drowning in a pool with a lifeguard or someone else watching you, then getting thrown into the deep end might seem like a good way to learn. However, when it is a cutthroat situation similar to a competition with real stakes it is probably better to have some training. Since it is your capital at stake its better to avoid trials by fire. You can risk your life under the watchful eye of a life guard all you want, but when it comes to money being under the tutelage of someone experienced is the way to go.
1. Learn Not to Trust the Public At Large
This one is going back to basics when it comes to penny stock promotions. Never believe anything in an email sent to you. Think about Awesome Penny Stocks and all their accidental releases that seem to be written and complete but with the wrong ticker. It is standard operating procedure for them to use real symbols as placeholder tickers, and to receive compensation for those tickers. You cannot even be sure that the stock they are promoting is the stock they are promoting.
The other thing is not to believe in any press releases from the company. Might seem tempting since we tend to think of our society as one with law, order, and regulation. However, you will most likely be disappointed if you rely on the statements a company makes about where it is going. Not in the statement itself, but in the ultimate veracity of the statement. Even if they are well intentioned the probability is against the company realizing its goals. So you cannot trust the promoters and you are better off not trusting, or at least believing, the company.
Moving into the slightly counter-intuitive, you really can’t trust other traders too. Rarely will a trader provide information about a stock that they do not have a stake in for free. Even if you are paying for the services the individual may not have your best interest in mind. This is true of those promoters that offer paid versions of their free. Since paying for something creates a baseline level of trust, the promoters might actually send a stock alert to those people later.
Download a PDF version of this post.
Now there are always some people out there that are seeking to help new traders, or just being helpful in general. Also, some people offer tidbits of information overtime that will increase your knowledge and skill. Normally, this is combined with a paid service, or setting the foundation for a paid service. Generally people who are teaching technical skills about trading are offering their advice to help. However, if a trader says that some penny stock is likely to do well always be suspicious.
For stocks on the major exchanges, their word will not have an effect on the price so their advice is probably a form of marketing. In the penny promotion arena, though look the gift horse in the mouth. There is no test drive here so start out suspicious if someone is trying to convince you of a penny stock that is about to take off. You are better off watching, waiting, and shorting if it does rise. It would be very surprising if someone just offered that advice and the stock took off and never came back down.
2. Skills are More Important than Systems
There is no singular system that will account for all situations. I think a lot of new traders don’t realize this until much later. They system hop. One system seems to work well for a bit, then you get returns that decline, and then they look for another one and the cycle repeats itself. Every system technically has its place. If you use broad characterizations then sure you can stick to one system. For example, I like to short promotions. That is a very broad description and it can be lucrative time and time again. A generalization like that is not particularly useful.
I do not use the same method to find every stock worth shorting. My inbox is bloated with promotional emails, and I am not going around shorting everything in there. So the goal is to pick up numerous systems and more importantly skills. Most systems discount the effect of instinct, which is kind of like internalized experience. You can read a book and learn about someone’s experience, but you might not get all the lessons contained in that experience. The reason is not because the person who wrote the book or article might not be aware of what they unconsciously learned. It is not nearly as magical as it sounds.
Investing and trading despite being grounded in data and numbers is like any other craft. Some may argue that it is a science, but them the same exact method with no variation would produce the same results. Perhaps it is a science but there are so many variables due to all the market participants, overall economy, and automated trading that there is no way to always account for every significant variable. What all that amounts to is that there is no single system that will always produce the same results across time, stocks, and situations. Experienced traders have these sometimes intangible insights that let them do better, but spending enough time around them and studying them can give you a nice leg up. No person is going to teach you everything. Eventually you have to stand on your own, but if you are properly equipped then you can respond to situations and at the least avoid common and devastating mistakes.
Gather skills to create your own systems that respond well to the way you see things. This is done by reading, listening, and trying for yourself. Sometimes joining a chat room that has some fantastic traders can open doors in your mind that you never would have expected. You can learn so much by just interacting with people who have been around for years, or who seem to have a talent for trading. There is no cookie cutter system someone can sell you that will do the same thing. At most they will give you knowledge and some skills that you have to hone and utilize, but those intangibles can be easier grasped through more direct interactions.