I’ve been a stock market trader for 25 years now, and one of the most persistent and recurring questions I get from my circle of fellow full-time traders is “why do you spend your time teaching? Doesn’t the market offer you everything you need?” Last night, I was at an investment seminar where one of my students gave a presentation and unexpectedly answered this question for me. I thought I’d use the experience to address my trading buddies’ queries as well as share with my readers what another individual investor feels are the key lessons he’s learned in the last 10 years from his own personal growth as well as from attending my college investing classes.
By way of background, this investor/student – let’s call him James – left a high tech management job to trade the markets, just about the same time that I began teaching college part-time nearly 14 years ago. In other words, we’ve been on the same bus for quite a few years. We are both investors who trade only our own accounts. Last night, James recapped the lessons he felt were key to his personal metamorphosis into a consistently profitable investor.
- Manage your emotions. Don’t be trading unless you do. Embrace the essence of the “Investor Self” and all that it entails.
- Pay attention to WHAT – not WHY! James talked about how crucial it was to know, understand and trust his tool kit of technical indicators, and he quoted William O’Neil who said “You don’t get your money back for knowing why the stock tanked.”
- Trade the NOW and eschew predictions. Markets are the product of human behavior, and history has shown us that recurring behavior is reflected in the charts and seldom changes. As Gerald Loeb once said, “The market does a better job predicting the news than the news does predicting the markets.”
- Most fundamentals involve opinions, projections and unreliable analyst prognostications. These are like fortune cookies and taro cards that have a random unpredictable effect.
- Being an individual investor gives you an edge. No boss, no investment committees, no clients, no quotas or politics. You set your own goals and are master over your fortunes.
- You need a well-honed junk filter, and you must learn to hold your nose with respect to sophisticated disinformation, manipulation and insider trading. There is lots of noise on the Internet so be skeptical. But James did suggest reading a number of classic investment books that I, too, have recommended in previous blogs.
- Scared is not an option. Markets do overreact. Review history from tulips to technology. Bubbles happen. Understand how to profit from them.
- Keep on going. One’s trading prowess will atrophy without use. It’s like personal fitness. You have to keep working on your trading methodology and staying abreast of all the changes around you.
Thank you, James! It was a special pleasure listening to your key lessons.
As I listened to him speak, James offered me some insights into why I’ve been teaching all these years. I realized that I get inspired and energized by getting to know other investors like James. The interpersonal interaction helps me be a more rounded person while the teaching still allows me to flex my irreverent attitudes and exercise my independent trading personality. Let’s face it. Trading the markets is not exactly a team sport. Teaching makes it more so.
Finally, I realized I am genetically programmed to be a life-long learner, and I benefit from the variety of investor/students that I cross paths with both as a teacher and as a learner myself. As William Butler Yeats proclaimed: “Education is not the filling of a pail, but the lighting of a fire.” I would add that the filling of the pail and the lighting of the fire happen to both sides of the educational program.
Trade well; trade with discipline!
-- Gatis Roze