The Stockmarket and Daytrading According to the Trading Cynic
This website is "Trading Critic" a website I set up specifically as a result of my cynicism of retail trading sales practices relating to trading the stockmarkets and of my general daytrading activities. This website is all about informing and educating novice traders and perhaps entertaining more experienced players in the trading game.
Trading isn't easy. If anyone claims it is, they are selling you DREAM. It certainly isn't for everyone and in my opinion it is people who have a knack for taking risks and understand probabilities excel in trading. The question is: Can Mathematicians Beat the Markets? Yes they are smart - and they know probability which is largely a mathematical exercise. As for taking risks that is the academic's fault - they can't take calculated risks like an entrepreneur.
Trading with an Insurance policy is an important concept of risk control and reduction. Think about insurance: do you have insurance on you house? possessions? travel? health? Then why be cheap in protecting your capital?
As a professional trader it is only commonsense to calculate the costs of holding a trading position. Know your expenses and the interest rates involved. Understand the fine print of your trading terms and conditions. Also be aware and learn from your own stupid trading mistakes. This is how a CMC Markets Margin call looks like.
Be aware of trading vendors, brokers and dealers or any financial entity claiming very unrealistic rates of returns. They are selling you a dream. It may be possible for a select few but it isn't a case for the majority. Don't be greedy and gullible, especially when you are attending one of those "free seminars", receiving sales materials or calls. Who knows, the company may even collapse. Also, don't let people like David Tweed fool you. Buyer beware!
There are plenty of reasons why you would like to trade. I find it very important to know why things are and in trading it is no different. Knowing why you want to trade will give you the foundational strength to carry on through tests and trials that the market will throw at you. Knowing this reason will prevent you from falling from the gambling trap. As share trading definitely is gambling. There are cowboy traders out there who want to take a punt on the markets depending largely on luck to deliver them a profit. You don't want to be one of them.
Watching a movie remake of "Italian Job" when one of the characters asked if they were fine and reminded him what FINE really meant... In the context of trading, FINE was a reality when I was first starting out (and still is - but to a smaller extent) - you can never rid yourself of these qualities as they are natural human emotions, but what is important is that you are aware of them.
Have you heard of a psychological concept called "the downward spiral"? It is also possible with trading when you get the losing mindset in your head whilst you are trading. Again be aware that it is happening and it will prevent disasterous mistakes.
When you are happily daytrading the stockmarket, there may come a time when you simply don't follow your rules (hey, no one is perfect) and when those trades turn against you, you feel an almighty knot in your stomach and that urge to vomit. If, or when you reach that stage, question yourself: What's more important: your money or your health?.
Here is a short reflection of a forex trade I did back in 2006 following some RBA comments and decision. Some thoughts about systematic and mechanised trading systems. About the Australian sharemarket game.
A suggestion I would make to traders who are just starting out to trade the stockmarkets or the forex markets is to simply watch market action. You will find that the market has a rhythm to it. Each stock having its own personality which is determined by the crowd trading that particular equity or security. You'll also notice the shares which have a habit of double and half regularly on the stockmarket. Some observations about religion, trading and politics.
Another thought would eventually (or should) arise after you have traded a few times... That is: the question of quality or quantity in your trading. Which means: should you take as many trades to extract small amounts from the markets at a time (in forex trading terms this style of daytrading is called scalping) or should you focus on getting quality trades with big profitable movements?
Here was a case in 2006 of a publicly listed and traded company on the Australian stock exchange being ordered by the supreme court to compensate investors and traders for their lack of disclosure of certain facts about their company.
When you start trading you will start to find you have your own trading style. This is typical of every profession, where everyone has they own modus operandi. In the sporting field, this is analogous to players being attuned to being a general "all-rounder" or more specialised to the offence or defence plays. There are many styles of daytrading the stockmarkets and they include: intra-day, inter-day, end of day, swing trading, trend trading, position trading...
It is entirely possible to attain financial freedom while trading forex. Although the concepts are broad - with the right attitude you too can succeed. In the end, success in daytrading forex and the stockmarkets is all about education. The same concept applies for futures options trading.
A part of trading is about controlling emotions. That's when it is critical for the trader to learn to be calm and relaxed while trading the markets. Keeping your head cool and collected allows you to make level-headed decisions at all times (even when the market is crashing or breaking records which play on the escalating emotions of fears or greed while trading) which is critical in trading success. A comment about the CFD dealer CMC Markets being down as well as CMC Markets PDS changes. Some notes about T3 Telstra and about trading with "baggage" - that is carrying a grudge against stocks - which may mean missing opportunities.
You may want to find great forex traders as a mentoring exercise or to ask for advice. Online, it may be hard to find qualified successful currency traders but offline, you can possibly meet genuine traders at conferences, seminars or trading associations and clubs.