Thoughts on growing into an effective trader

When I was a child I remember listing often to a song by Louis Amstrong “It’s a wonderful world”, one of my mom’s a favorite songs.  Is the world wonderful and rosy as in this song or should we adjust that optimistic, rosy world view? 

Let me start by staying that the world is wonderful if you have nice family, friends and pets to share and enjoy life. Also Nature in all its forms is beautiful. So yes, the world can be wonderful and rosy, no need to adjust that view here. 

Over to the next stage, to the real world outside the family and friends circle. Well, that is a different story… A good way to face the real world is to imagine that you step into a dark room,  with cockroaches around and obstacles on the floor. Every step you make , makes you stumble because you can’t see where the obstacles are. And you can’t see where the cockroaches are as you want to avoid cockroaches like hell as they are untrustworthy. The real world is often not so bright and kind. It’s a hard world, you have to learn to deal with it in order to survive. A ‘rosy beautiful world’ view isn’t helpful here. 

How do you survive in the dark room filled with obstacles and cockroaches? You have to find ways to shine light in the dark room to detect the obstacles and cockroaches that are in front of you. The issue is to realize is that if you want to become an effective trader, the first mistake is to focus on making money (I did). And chances are high that you’re looking for direct answers as what to buy, not learning how to detect buys and sells (I did).  

The problem is that you are looking for results without taking the learning into account that you are going thru. Remember that you’re in a dark room. And looking for direct results in a dark room may cause you to stumble over obstacles and face cockroaches. Cockroaches are attracted to people who want to make money. Have you ever realized that this makes you vulnerable for predatory types? Cockroaches can sense that perfectly. 

Who are those cockroaches exactly? It’s people who like to sell you their advice on which stocks to buy or to sell.  They sell you narratives on stocks that can make you rich in a one time hit, or some other version on this, as some new super technology, drug or some sort of trading loophole. Another category of cockroaches are claiming that they can time markets by some ‘magic’ priority, blackbox method which keeps you in the dark how they do it. Others are hiding behind technical analysis methods as Elliott Wave.

Cockroaches tell you exactly what you want to hear and you may think there’s finally some light in the dark room. But you forget that it ain’t gonna help you, because your are blinded by their light, aka sales pitch. They keep you in the dark to sell their stuff, you can’t see reality as it is and learn from it. You are not informed by them to face reality and deal with it, but misinformed to deny it.

Don’t get me wrong; not all parties that sell trading advice are bad, aka cockroaches. The art is to learn to distinguish reliable, valuable ones from the bad ones. In the last part of this post I elaborate on this. 

And there are obstacles as well in the dark room. This is about if you do know yourself good enough in a way to know what trading style and working scope suits you the most. For example, you can focus on very short term (day) trading as price scalping, longer term bigger move (swing) trading or picking stocks for a longer term (more than 6 months to several years). A second aspect to consider is focus. For example are you a ‘big picture’ person who likes to focus on several markets in relation to each other (stocks, bonds, forex, precious metals & commodities), or do you prefer to focus on a particular market or even particular type of stocks?  If you take these aspects into account, you are better prepared to see obstacles in front and deal with those. If you have been trying trading method after another one, jumping from newsletter to another, you should reflect. 

Everyone who trades, makes mistakes. They are part of a constant learning process. The question is how deal with them and use them to grow. Are you serious enough about trading for an income? Are you willing build skills that makes you able to shine your own light in the dark room and distinguish noise from relevant insights, avoiding the cockroaches gang?  By the way, cockroaches don’t like being spotted in bright light:-).

So, what to focus on? Focus on shaping a learning environment for yourself. A place where making money and getting rich is NOT the main focus. Rather focus on finding ways and methods that suits you to build understanding of markets. Learning to analyze markets, to create your own strategies and your own timing for what & when to buys and when to sells. If you shape your own trading process you will make enough mistakes, especially in timing is my experience. But it’s your trading process, you make you own decisions on where, when and what to buy. You gonna learn a lot as you also own your own mistakes. This way you can grow and improve. If you allow somebody else telling you what to do in detail, there is risk you will put the blame on him or her if things go different than expected. It ain’t gonna help you to get ahead. 

Last but not least a few suggestions what to focus on:

Cockroaches thrive in advice stuff to sell, they are absent in an educative role learning you skills to shape your own trading process.  This is an important distinction. Look for real teachers; people who are effective and experienced traders and have been analyzing, studying and dealing with markets for a long time.

All real teachers that I’ve spotted master some form of technical analysis and showcase their track record. They focus on analyzing markets, not on telling what to buy. That is important because you want to find somebody who doesn’t have a conflict of interest. Someone who tells you what to buy has, as it doesn’t allow analyzing markets from an independent viewpoint, nor doesn’t help you to learn to analyses markets yourself. 

2 thoughts on “Thoughts on growing into an effective trader

  1. Dear Irene,
    Can you recommend any of your masters that led you in the correct path of sound trading and investing? I am very interested in growing my wealth through investing.



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