I can’t seem to recall when I took my first elegant baby steps to buy shoes on my own. I do remember many shopping expeditions with my mother. So as I say, Trading is like Shopping, wisdom in Shopping is honed for years! So first lesson is that : Learning to Trade takes time. Don’t expect to learn Trading in 3 months! Not unless of course you’ve been reading this blog and if you are a savvy shopper, you’d definitely be able to trade profitably sooner than most. But don’t rush, OK?
I hope you started reading this blog from the beginning (see For Newbabes for content outline and introduction to concepts ). We’ve been saying “Trading –is basically Buying and Selling” – (will keep repeating this until you say it in your sleep) . Sounds simple, but hopefully you now know it’s not a business to sneeze at. To make it easier for some people (including me!), think that it’s like Shopping for Shoes. When do you think something is a “good buy”, a “bargain”, or a “steal”, or simply a “must have”? You have your own criteria, right? What influences your buying decision (is this the Hot trend or is it on Sale?), how much to spend, when do you need it, what you can wear it with (does it complement what you know you have), where are you buying it (market)? These are just some of the Trading concepts applicable that any self-respecting shopper understands. OK so, in the perfect world, you would window-shop, try on a few things, and buy following your criteria but sometimes,,,, you don’t. HEHEHE. Like, when you are already in a hurry, tired, stressed, too excited, broken up with someone (uh-oh) – your mind is clouded and forget your criteria and just buy whatever, vaguely aware of being able to exchange or refund (don’t forget to keep the receipt!). I’m sure you are familiar with that. Then you get home, get out the new purchase and walk it. If it’s perfect, you’re happy. If it pinches your feet, or hurt or does not quite work as well as you thought, you’re best to cut your loss and go back to the store to get another pair. Though there’s also a chance, you’d hang on to it too (yeah, different reasons, too lazy or love the brand, what the heck!). Everytime you’d walk past the shoe rack, you know there are probably too many in there, (but always have room for one more!) and a number of buys that didn’t really work out. (Ouch!) Lesson learned: you got to be a better shopper! Long story, but Trading, like Shopping, is a simple idea, needs some work, but well worth the effort for BEST results.
Previous articles have given you an overview of Trading. Here I’ve grouped them into task groups that I do in real life !
- Research and Education
- Developing Self-Mastery
- Business Planning
- Actual Trading
- Performance Monitoring
- Get Back to Trading / Improvement
Say Again? How does Trading relate to Shopping ?
Research / Education – is like learning Shopping 101
Girl, before you hit the Shops, there are a few points you should know before getting out into the world, or in our case the markets. People are out to make money in the markets. Know what you should know how to accomplish your Shopping mission. These are like the Trading concepts that I have explained in earlier articles (for those who are new to the site, pls go to For Newbabes for content outline). Trading concepts like:
- Market (where to get the best deal and one I am comfortable)
- Market Type and Strategies
- What Concepts to use – is there a Trend? Are there bargains?
- System (Rules) including Position Sizing (TM)
- What moves the markets?
- Market selection
- Other Market knowledge (this is not a complete list, I’m just giving examples)
This means, lay the groundwork for trading success! We’ve talked about Self-Mastery as the primary success factor for consistent trading! Self-Mastery means “doing when something needs to be done and NOT doing when it is not supposed to be done (self-control)”. This area in Trading is also called Psychology. Before you enter a trading position, remind yourself of the following:
- Risk Control : what’s your risk tolerance, when to take the risk, Low-Risk ideas
- Stress Management : stress will lower your performance, thus you need relax
- Attitudes and Beliefs > Are you aware of what’s driving or stopping you?
- Practice Trading – Window shopping – trade/shop with no money involved to learn and get comfortable
- Mental States – Is it a good idea to Trade or Shop when you are fuming mad? No need to answer that! Don’t even think of doing it! Best to Trade or Shop when you are in Zero State (not excited/frustrated from last trade), which will allow you to see the opportunities as they are and to just make your decisions according to your System / plan.
Business Plan – Mind Your Own Shopping
Yes, these are different for every person, and would be dependent on each one’s situation.
- Objectives : What is it you want? For trading this could be monthly income expected, how much you are willing to lose (e.g. 20%) and preserve (80%) etc.
- Spending Money : funds to commit and funds to risk
- Timeframe : long-term, short-term / swing, day trading
- Plan B – When things don’t go according to plan, what do you do?
It’s raining, it’s not raining, what am I gonna wear?
Actual Trading – Ready, Get set, Shop!
- Look for Opportunity
- Am I following the Rules (System)
- Open (Buy to Open or Sell to Open)
- Monitor the trade
- Close (Profit-taking Exits or Stop Loss)
- Documentation and Filing
Performance Monitoring – Hey does this Shopping make me lose weight?
How are you feeling about your trading?
- Are you able to work? sleep at night?
- Are you too excited?
- Are your Objectives being met?
- Are you following your System / Rules?
Get Back Up and Improve – Buyer’s Remorse and Recourse
- Mistakes? What mistakes ?
- How do you summon up the courage to get back in the market and trade?
We’ve talked about most of these points, questions, and concepts in previous articles. Review them. Plus, more detailed discussion in the next materials, promise!
You may notice that once you’ve acquired the knowledge on all 6 task groups and laid out your business plan, you only need to be doing the task groups of Self-Mastery, Actual Trading, Performance Monitoring and Improvement. On a per-trade basis, you will need to be doing Self-Mastery and the Actual Trading. Lay a solid foundation for the business, and it will be more fulfilling and profitable.
Meantime, keep thinking about your Shopping experiences, because “Trading is like Shopping” and as I said, will help you to learn to Trade. There is a saying, “What you hear, you forget. What you see, you remember. What you do, you understand.” Makes sense?
In the next articles, I will discuss how to weave Trading in to your life.
But before that, I leave you a Homework : Go hit the shops! (Enjoy, but shop responsibly!)
Thanks Via Uno for Walking with us in this journey!
Position Sizing (TM) is a trademark of Van Tharp Institute