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Stock Traders: Where Beginners Should Start
I am an active stock and options trader. There are relatively few days during the week that I do not initiate or close a position. I would consider myself more of a swing trader, but have day traded and also hold some positions as an investment.
At the time of this writing I am up 21% for the month and closed out last month with a 12% gain. While I know these numbers sound good let me also tell you that I have lost money many times. I tell you this to let you know that I am not writing this HUB by copying information out of a book. I am an active trader. I have probably spent more than $20,000.00 in education to hone my trading skills. If I could have read a HUB like this when I had first started I believe I could have saved a lot of money.
If you are considering taking the dive into the world of stocks and options I would definitely read this HUB from start to finish and take serious the things that I tell you.
The First Pitfall
One of the things that prompted me to write this HUB comes from a question asked during a trading webinar tonight. The question posed was, "How long does it take a person with $1,000 to become a millionaire trading stocks?"
The sad answer is that 99.9% won't especially if you are asking this question. One of the key components to trading successfully is getting your emotions out of your trading. Greed and fear are powerful forces, but what many don't realize is that those who market their training programs capitalize on your greed to get you to buy.
A few weeks ago I was asked the question about what percentage return a person can realistically make trading the markets? Well, there are a lot of variables to this but consider that Warren Buffet over his life as averaged 19% per year. Realistically if you average 19% per year you are doing extraordinarily well. Considering that think about the people out there telling you that you can make 10%, 15%, or even more per month! How realistic is that?
You may be thinking, "you just told me you made 12% last month and so far have made 21% this month." But what people don't consider is the times they are down - and there will be times you are down. So if a key to investing is being able to invest without emotions then start your trading education with this same powerful disposition!
Don't jump into a trading education program based on all the hype because many of these programs cost $10K, $20K or more. There are ways you can successfully learn how to trade at a fraction of the cost that I spent and I will show you how in this HUB.
First of all define why you are wanting to trade the markets. Most people would answer this question with the most obvious answer. They can make more money while keeping their current job. Okay, I can buy that but how much money do you want to make?
Let's say that you need to make an extra $1,000 per month AND you become a whiz kid investor and average a consistent 10% per year. That's about half of what the Oracle of Omaha has done. That sounds good until you consider that you need an account size of $120,000.00 to make that. My guess is, if you have $120,000.00 to open an account you wouldn't need an extra $1,000 per month.
So before you even begin to jump in you have determine what it is you are wanting in order to jump in correctly. There are two hurdles that you will probably have to overcome before trading becomes a viable income source for you:
- The first one is the learning curve. You may get some "beginners luck" and hit a few good trades, but more then likely you will have a pretty spotty trading record in the beginning. You will stay in losing trades too long and you will get out of winning trades too early. If you break even or have a modest gain during your first 6 months to a year you are doing very well.
- The second hurdle is that of growing your account. I doubt you are going to be able to start with $120K or even $50K (especially if you are reading this HUB). If you are an average working stiff like I was then you may be able to come up with an extra $1,000, $5,000, or maybe $15,000. If you've opened a $10K account and you do a whopping 3% your first month you have made $300. Your account is now worth $10,300.00. That is actually a great return, but my point here is that it is going to take some time to build the account large enough to withdrawal the amount you need consistently.
What was my experience? I was told that if you made less that 3% a month there was something wrong with you and that I should be able to make a consistent 10% per year. I carefully plotted out my money and opened an account with $10,000.00. I was diligent, I studied hard, and literally had put 2-3 hours a day in my learning. At the end of the first year I was trying to figure out how to keep going. Yes, the 10% a month that I experienced was to the negative side not the positive. Many people would have given up at this point, but I knew that I understood this and kept working out the kinks in my trading armor until I got the emotions out and developed a trading plan that worked for me.
Sure, there are stories out there of the superstar who became a billionaire in six month but that is similar to the guy who won the 200 million lottery. What people fail to see is the number of people who lost money for that one to make it.
Another key to trading is to "put the odds in your favor." Again, why not do that as you go into the trading game? Instead of falling for all the hype of people who can make you rich overnight and then becoming depressed because six months later all you are is frustrated and broke start putting the odds in your favor now.
Narrow the Odds
What does that mean? It's pretty easy, what type of trader do you want to be? First of all there are some questions you won't be able to answer until after you start understanding the dynamics of trading. The average person doesn't understand options at all, but when they read how leveraged they are and that for a fraction of the price you can make terrific gains people want to jump in with all they have. Well, personally I like options but options are not for everyone. You won't know this until you learn a bit about options.
What you can determine is what length of a trader you are going to be. Are you looking to trade within your IRA and you are wanting to focus on more long term holdings or do you think that you would like to more actively trade? Do you have the time that you can sit and stare at a computer screen for all or part of a day so that you can day trade.
By defining what type of trader you want to be you can then focus on educational products that teach what you are wanting to learn. If you don't have the emotional tolerance to day trade or you have a 9:00 to 5:00 job then day trading is not for you. I live in California and I'm not a morning person. I don't want to be up at 6:30 a.m. to catch the opening bell! Define what you can realistically do and then find a product that teaches along that line.
A Great Start
Through all the training that I have gone through I think that one of the most valuable training programs was Chris Rowe's Internal Strength System. Chris is not a professional teacher. It is evident as you want him, but it is what he is that is beneficial. This guy understands what makes the markets move. If you go through this system you will understand things that will make you a successful trader.
I think his program sells for about $3,000.00 but at times he has specials on it. Even at the $3,000 it is much cheaper then many training programs that I have gone through, yet much more thorough.
His company was called Tycoon University but has recently been renamed the Institute for Individual Investors. I am not going to put a link up for his site because he is currently offering this program for $995 and I don't know how long that link will be active. To find it just google "CRISS Internal Strength System."
For less than $1,000 (or even $3,000) you will obtain enough information that you will be able to determine the following:
- If trading is for you
- If you have the tolerance for it
- Whether looking at data, charts, and other information bores you
- What type of trader you want to be
A Very Important Summary
In closing let me tell you a couple of very important things. I make absolutely no money whatsoever if you order Chris Rowe's program! I am selling no information!
Why do I tell you this? The things I wrote in this HUB is what I wish I could have read prior to my journey of learning the stock/options markets. I've made a lot of expensive mistakes that I wish I had the money back because if I had that money my accounts would be larger thereby making my returns larger.
In looking back in retrospect I am not sure if I would have listened to the information that I have outlined here. I was so emotionally charged that I would be independently wealthy within the next 18 months I would have thought that logical information like I presented here would have come from some wet rag trying to put out my ambition.
However, I love trading. I look forward to the markets being open and it is something that is a phenomenal journey for me. I would never want to discourage anyone from such a great trip, but if you will listen to me you just may make it and you will definitely be a lot less frustrated.