This is the moment of truth. In this article I will tell you what you are getting into in the business of Trading in its entirety. It requires a lot of knowledge and activities intricately woven together –but don’t be scared, if girls can dress up to be “well-put together”, you can do this. It just requires careful, advance planning, something worthy of a “hot date”!
1. Start with preparation on your Self. Hot date or not, you owe it to yourself to know who you are and present yourself accordingly. In the same way, Trading requires Self-Mastery. You trade based upon your preferences, your limitations, then respect that by making sure you exercise self-control and not overdoing things. (Discussed this earlier in “It’s not Me, it’s YOU” ). Self-discovery may take you to a few journeys, as you Trade, you will learn more about yourself, so be patient, don’t expect too much anytime soon. I said before in “Lessons from a Trader Mom”… I started trading around 2001, but only learned to truly trade in a relaxed and profitable way — “as a mom” after my second child, when I had the miscarriage, that was 2008. (Everything in God’s perfect timing… yeah OK, I’m a late bloomer 🙂 )
2. Set Rules and Follow them – In dressing up, you would have “style rules” — do you dress conservatively? sexy ? casual ? In the same way this will make “decision-making” easy for you when you go Shopping, (like easily eliminating low-cut blouses if you are conservative), in Trading, you need these Rules, put together in a System as a shortcut to get into Trading opportunities. This would include :
- knowing what type of market is prevailing currently (bull/bear/chicken) and adopting strategy that will fit
- knowing the risk you can afford per trade (Position Sizing)
- what will pass as a suitable risk and when to get in (Entry criteria)
- set limit to when things don’t work out (Stop)
- when to get out with your profits (Exits)
I gave you an idea of these Rules in the articles First Things First, Why Trade?, discussed measuring Risk in “ The Right Foundation”, And Position Sizing in “Learn to Last : Part3 Financially” as well as the market conditions that you will encounter in “Buy 1 Take 1”
3. Practice – You wouldn’t debut a fake tan or a never-tried-before haircolor to a BIG event. First, it may not really flatter or go with your overall look, or you may not be confident enough yet, leading to poor results. Similarly, be careful not to plunge into Trading with untested System and Self-Mastery skills. Give yourself time — to craft how you will operate your business, practice using your System, and then evaluate your “performance”, plan for FAIL scenarios — just as having an “extra shoe” or accessory or powder and lipstick to touch-up — so that you are well-prepared for when things move against you. Girl, I can assure you, this preparation is essential and it’s better to lose “play money” than the real thing. Just think, you could have been shopping or going on vacation!
1. Get Clean
I hear this part of a song from my mom who came from an Ilocano region in the Philippines — “Nag-lipstick ka nga ag-lipstick di ka naman nag-brush your teeth”. It’s roughly translated as “what’s the point of putting lipstick on if you haven’t brushed your teeth? “. Eeeeeewwwww.
In Trading, you have to start every trade with a clean slate.
Ken Long from Tortoise Capital calls this being on “Zero State” – you are not excited, or frustrated so that you have a clear mind and see things as they are and only then are you able to make sound decisions in Trading. Therefore, it is essential that you renew yourself for trading everyday. Ken blogs at http://kansasreflections.wordpress.com
As in our everyday life, deciding about the length of your hair requires careful consideration. For example, I like to grow my hair long, but it is thick and got a bit of wave so I need to invest time to take care and groom it, but with 3 kids I don’t have much time! What to do?
Hair Length is like the Timeframe — As in Trading, the suitability to temperament and lifestyle is a major consideration.
- Short-term (Day Trading)– your transaction is quick, in and out on the same day, this would require constant watch when the trade is in progress.
- Medium term (Swing Trading) — transaction could be a few days to few months. You get more flexibility in what you can do or “strategy” – it would require checking the trade few times each day
- Long term (Long Term) – few months to years as long as your Stop is not breached. This would only require monitoring at the end of the day.
In terms of performance, not one is better than the other, success depends on the trader’s abilities. For baby traders, I recommend the Medium Term timeframe (Swing Trading) it just help that regular and constant monitoring of the market give you more knowledge and chance to develop your skills.
3. Foundation and Make-up
Present yourself well with good skin thanks to a good foundation – your “genie in a bottle” ! Getting this right is a combination of what you Want (for example – liquid / matte finish) and Have (oily skin / mature skin).
I devoted an entire article “The Right Foundation” to discuss what you can possibly WANT and HAVE that would form the foundation of your Trading. Here’s a rundown….
…what you WANT
- What are your Objectives? What kind of money do you want to make
- How you will operate the business, timeframe, are you taking clients
- What Market you want if you have specific interests
… what you HAVE
- Risk Tolerance
- Resources – Time, Money, Skills
- Market Beliefs
And what about Make-up? No use putting make-up on if it doesn’t make you look good right? Usually the best us of make-up is that which emphasize your best features. So like in Trading, you use makeup to play to your strengths and that which gives you an advantage. That includes what suits your timeframe, interest, temperament — and what your powers are!
- Protection and prevent unwanted exposure.
Achieve a certain mood (Oohhh La La….)
If you do choose to skip this, know the effects and consequences. The accepted norms of society favors having them on in public (remember the scandals on Britney Spears?) On a personal note, as a woman don’t you think it’s better to be mysterious than over-exposed?
In Trading, I would say this is of the same essence as Position Sizing — Never go without!
When you are starting, ensure risking small at 1-2% of your capital, this position size will help you to last long enough to Trade while still learning the concepts and self-mastery skills.
- On the other hand, George Soros was said to have recommended that when you have earned the right (e.g. 50% above your capital), you can be “bold” to risk a large amount for a trade to win big. This strategy is to be used sparingly, only at carefully considered BIG reward opportunities.
- Not having or not following a clear Position Sizing system would result to being over-exposed to risk and likely to end Trading venture or large losses. See the article “Learn to Last : Part 3 – Financially” for more on Position Sizing
This is the most noticeable part of your look – make sure you understand how to wear it and it shows your best or it suits you well. I again take a fashion tip from MissJ (who else?! –He’s the black gay judge in America’s Next Top Model and author of “Follow the Model”) – “the most important thing is to never, ever, subscribe to one that isn’t right for you”. Example : Skinny jeans are made for thin people and if you are not similarly proportioned, STEP AWAY from the craze. It may be the hot trend but if it does not make you look good then find other clothes you can rock!
This can be likened to Trading a Financial Instrument, Concept and Strategy to use. You have to understand these fully to effectively trade it. Warren Buffett was said to have missed out when the dotcoms fuelled a Bull market in the US from late 90’s to 2000 — he famously said he does not want to get involved in anything he does not understand – and he is proven right because the dotcoms went from boom to bust in just a few years.
From my experience, since I worked in IT, I tried to do some practice trades on Microsoft, however, I couldn’t make sense of what makes it move — knowing about the company’s financial health does not seem to be enough. Then the price of Oil was going upward and getting painful at the pump so I tried trading it. I found that I am able to understand Oil stocks more, able to follow what affects the movement e.g. supply and demand, geopolitical risks as well as correlation with currency trends particularly at the time that US Dollar (at which Oil is priced in the global markets ) is in a downward trend. In Trading concepts , I am more of a Band Trader– I just feel more comfortable in the belief that once a price had stretched very far, it would reverse to a more stable price level. I found this trading concept works well in a market that is going through a Sideways or consolidation phase.
With dresses as well as in Trading – I also mentioned that it would be wise to have a strategy in mind “doing much with little” — I used the Little Black Dress analogy or shopping for clothes that you can coordinate or wear differently to many occasions – to do so, (trade an) investment that have Protection, Income, Growth. I discussed this in “First Things First : Why Trade?”
This is not nearly as noticeable as the dress but I think you can agree with me that it is just as important. After all, this includes “high heels”, with instant inches gratifying our desire to achieve a “higher self” 🙂
I wouldn’t have as much fun writing this blog if not for Shoes. Yes indeed, many Trading lessons I share here have been compared to Shoes and here is a run down (from “Women are Natural Traders”) :
- Objective – We should know what we are after.
- Buy what is a good FIT – your timeframe, interests
- We buy a lot! So take care we don’t blow our budget –following this for Trading always have a prudent Position Sizing strategy
- Buy / Wear that is suitable to the conditions
- Buy what looks and feels good.
- As there is always another shoe, in Trading there is always another opportunity
I probably did not stress this as much before but actually with Trading you are in the path to achieving your Higher Self. We talked about Trading success being a fruit of Self-Mastery — when you are purposeful in your thoughts and actions and channel your energies to something you want to achieve.
A few inches, good posture and confidence from wearing high heels – priceless!
You check your reflection in the mirror every now and then to know if things are what you want it to be? The dress drape well and hide the flaws, or whether your eyeshadow is blended well… in Trading, the same “check the mirror” exercise is required. This where you would check how how good or bad you are doing.
- Did you follow your Rules for Trading? If not, that’s a mistake and you should make corrections. If you did follow your rules and still made a loss, that’s OK, that’s just a part of doing business.
- Are you monitoring your trades so that you know whether it is time to move your Stop or is the trade moving favourably and you want to make the most money by managing your profit-taking Exits
8. Jacket / Tights / Socks / Pantyhose
While these items of clothing are not always worn, it is a must-have for protection in tough weather conditions.
In the same way, when the financial markets is going up /down (sideways) too fast i.e. much more volatile, you want to be protected. It pays to be able to implement a strategy that will protect profits or value of your investment. As an example, I may use Options strategy like a Covered Call or Buy Put Option.
9. Accessories — Hat, Scarf , Bling ( Earrings / necklace / bracelet), Belt, Bag
They could all be simple, or have one that makes a statement and surely they can be many BUT must work together.
- Time Exit – I give my trade up to 2 months, if not profitable I will close it.
- Psychological – I determine when I will not be able to trade due to personal circumstances e.g. being on holiday
- Profit Target – the critical one, I target 3x my initial Risk
- Tighten – when profit target is reached but price still moving in my favour I let the move go on but tighten my hold on profit by setting a limit to when it reverses and I take profit at that point. Say profit target is $5 and move to $8 but reverses, I get out at $7.
Just before stepping out, you would reach for your favourite scent to give you an extra boost to conquer the day…
In Trading, it is important for you to feel good over a trade. If you are not confident you can cut short a profitable run because of fear. The way I do it, is I make sure I follow my Trading procedure, check that all System components / Rules have been followed, put myself in a relaxed state and have all the things I need ready. It also helps that I write down by hand in my little notebook what I am supposed to do in any move I can expect that day. I am then confident I am prepared and ready for the Trade. I of course spray on a fresh scent to get that confidence and energy!
Looking good has its tools — manicure set, hair dryer, straightener, curler etc.
Tools of the Trade for Trading include : calculator, computer, internet access, notebook and pen, filing materials and storage. Not essential but definitely helpful when on the move especially for easy monitoring at your online account — is a smartphone, otherwise, a normal phone will do for trading execution. Also for studying — books, CDs, newspapers for market developments. Online news sites are best because they get updated within the trading day.
Business as Usual
Apart from the Trading-specific knowledge and activities I’ve discussed – there is the usual Business components. Here’s a brief view :
1. Understand the nature of the business – know what you should expect and essence of the business. (e.g. restaurant = food+service). Trading is about “Riding the Waves”. Know your obstacles and opportunities.
2. Training and Education – Any business or job requires thorough education and skill, Trading is the same. Look for Trading programs that are comprehensive, not just focused on one thing or strategy. I recommend Van Tharp Institute for advancing Trading skills. They have a Basic Trader program as well as Super Trader program with all components of Trading we’ve been talking about here.
3. Procedure / Operation – What are the steps and tasks to do to make your business deliver results, i.e. produce product or service. McDonalds is legendary for how they operate their business. We want to endeavour to do the same thing which will give us predictable results and something that can be replicated, possibly by future business staff.
4. Documentation and Information Management — in essence, Record keeping which will tell you 1) how you are actually doing things ie. Trading Statements which tells what is the actual price you Bought and Sold , 2) provide you a way to trace what you did for self-improvement 3) compliance on Tax and Securities laws
5. Organization – While you don’t need staff for your Trading business at the start, it pays to know the other people that may be affected or involved when you are Trading. For me, I make sure my trading time frame is suitable for work or children’s schedule, teaching the kids literacy by letting them help me type in stock symbols, and communicating to family members that need to know about profits and losses etc.
6. Contingency Planning — Do you have backup for things go wrong? Like when you usually trade online and your computer is not working – have Phone trading numbers handy or smartphone or have somebody do it online for you. When I was about to give birth to my third child, I cut my active trades but let the long term one move along, I gave someone an orientation of how to monitor the stock price for me.
7. Business Structure and Taxation — At the start, you’d probably trade with personal funds. If you happen to have a company you can trade under company name too. As you get skilled you may want to trade / invest Retirement account Or funds in Trust or even a small group of other people who want you to manage their money. Whatever circumstances you have, you need a business structure for taxation and protection of assets.
8. Growing the business — Very important — this is where small business is differentiated from big business. With Trading – there is no global barriers, I have my online account here in Australia but I am able to monitor / execute some trades even when I am overseas – Singapore / Philippines or United States. You can generally open a trading account in any territory subject to their laws. To grow your trading business, you can put in additional capital, get a loan for leverage (Margin) or venturing into other markets for more opportunities, you can also attract capital from other investors and manage money for them earning management fee and or performance fees. Some of the biggest investment / trading funds are Soros Fund Management, Paulson & Co, PIMCO that are each worth billions of dollars. These are the big money guys that you could look up to and emulate.
These are the prime business considerations in Trading. It’s usual for any business.
Trading is full-on isnt it?
I mentioned before that despite all the studying that I needed to do, I think it’s still the easiest business I ever did. Think what you don’t need to do: Manufacturing, Quality Control, Billing and Collection,Inventory, Warehousing and Distribution, Sales and Marketing, Legal management, Security, Physical Plant, Property Management, Staffing and Human Resources, Disposal system, Government Relations etc. Arrrrgghhhhhh! I can think of more headaches in other businesses compared to Trading!
While it seems that Trading is such a complicated business, I hope you will still be able to think that you can do it.
We dress up in our daily lives already. Let’s get Dressed to Trade!
(Thanks to Via Uno Shoes and Tikma Photography livening up this blog post!)