Master Of Trading: When I studied the principles of investing in college, I was taught that the share price reflects the value of the company. With fundamental analysis, there are many methods to analyze financial statements of companies to determine whether an action is good or bad investment. You can perform the horizontal and vertical analysis of the homogenates annual statements, which are only strange terms to compare numbers. You can calculate certain financial ratios to get a better understanding of a company’s liquidity, capital management, its ability to stay in business in the long term, and profitability.
I applied these concepts when I started trading in the stock market. I soon realized that if I wanted to trade shares within a period of less than three months, decisions based on this analysis were not helpful. I did not want to buy shares only to receive dividends. I wanted to change actions to stop win the capital.
I was not satisfied with my knowledge, the tools and methods that had to operate in the markets. With my desire to negotiate in less than three months and my belief that emotions have a big impact on the trading deadline, I started looking for other approaches to buying and selling shares.
I returned to one of my textbooks in college. I wanted to know the other way to analyze markets. The passage I read, I learned that one can analyze the markets in one of two ways: fundamental analysis and technical analysis. One day I found an advertisement in the newspaper about a seminar of trading. When reading through the ad I saw the words: technical analysis. A skilled operator would speak on the subject I was interested in learning exactly. It was a free seminar and everybody was welcome to come. So I called a friend of mine and asked if I would be interested in assisting me to this seminar trade. He was.
The seminar was organized by trading courses: courses to instruct people on how to trading on the stock exchange. Upon arrival, we were taken to a small room. There were about thirty people. Apparently the greeter was a veteran trader who wrote two books on trading. Let’s call him Bauer for the purpose of this article. Bauer had a very strong presence. He was a big, tall man with a shaven head. I was in the front row seat trying to listen and understand every word of this man. Were his teachings that planted the seeds of those eventually grew as the operator in recent years. Many times, I heard his voice in my head, which reminded me of the lessons he learned from his books and the lessons I learned from him that day. I’ll try to list the lessons I learned from this man to help you and helped me.
This man had my attention from the first moment. “The stock market is a game where people try to steal money from other people. It is the goal of the game and it is legal, “he began. I wondered what Wall Street professionals have thought about that statement if they heard it. I smiled. I liked already.
He continued: “If you will join this game, you are essentially given permission to steal money from other people and, in return, also agrees with that steal your money. Some of the brightest people in the world are going to play with you. Therefore, if you are going to war to fight an enemy with real weapons, you better make sure you do not go there with a plastic gun. “
He said that people rush to markets to lose their money. It sounded ridiculous, but I guess that was the only conclusion that can be drawn from the fact that most people start to trading without sufficient preparation and education. Of course, most of us do not invest in the hope of losing our money; however, this is what we do when we do trading without proper preparation.
“They simply can not expect to lose your money. They do not bother to learn first on the market. They think it’s easy. Most people will know they need training before they can fly a plane or perform surgery, but do not know why they think it is easy to do trading, “he exclaimed. It was very emotional about it.
“Trade is hard,” he said. Only 5% of people know how to make it profitable. And so the chance of finding someone who knows what they are doing is very, very small. “Do not rely entirely on the advice of their brokers, their fund managers or whoever. His best hope for success is to educate yourself. As soon do it, it will go better. ” “When it comes to buying and selling shares, there is no such thing as investment. What people usually refers to me as investing means long-term trading. ” When people hold on to their investments for five or more years, with the intent to sell later, then all they do is the trading: only a longer time frame.
“Do not buy shares only to receive dividend payments. They offer a miserable reward, “he said. “You Hagan trading only for the purpose of making money from capital gains. Buy low, sell high and this is how you should do your benefit. ” At that time, I was vacillating between the concepts of trading short term or long term. I did not know if I was taking the right to try to make short-term gains focus. He made his stance on the issue strongly. He asked us if we knew what drives prices up or down. Remembering what my teacher said in college, he replied, “the price moves up and down near the intrinsic value of action.”
He turned his attention to me and asked, “What action do you do your trading?”
- “XYZ (I changed the name for the purpose of this article)”, I replied very happy. Maybe I could take a tip or two from him about the stock.
- “You know what is the intrinsic value of XYZ Company?” He asked.
- I nodded my head to one side and whispered, “no.”
- “I will tell you that is the value of XYZ: is zero!” He barked.
- I was surprised by his response. ¿Zero? So why we pay money to buy a stock? I thought. Then he clarified.
- “Price is only a perception – the perception of people about what, as they believe, is the price of a security.”
“The key to success in trading is psychology”, he continued. Psychology? I thought. How psychology involved in this? “The stock market is like an opinion poll. It is a measure of what people think is going to happen. If they think the price will go up, you’ll see it on the table an upward movement because there are more buyers and sellers increase their price because some buyers are willing to buy at higher prices, “he explained.
He then used an example to explain the behavior of a typical operator when it is trading without system. When he explained it, I realized my own behavior in his demonstration.
All this was a revelation to me. When I was going to buy and sell shares I wondered what kind of people were on the other side of trading, because collectively, they were pretty smart. Now I know. People like Bauer was on the other side of my transactions, doing exactly the opposite of what he was doing, using methods similar to those he used. They are watching the market with a philosophy and approach that were completely alien to me. Traders like him, did all the money and traders like me were lost.
I shook my head in disbelief that other people saw things that way. I was thrilled to learn that there was another alternative, another approach in analyzing markets.
“What is needed is to develop your own trading system.” He said everyone in the room. “Without a trading system, you will fail. I guarantee it. This system should be something that is right for you and you alone. Because even if I give my trading system, I’m sure it will stop making money, my system is not designed for you. It is designed for me. That’s why you need to learn to use the tools and acquire the skills needed to be an operator. ” I accepted his advice without fully understanding this concept of making a trading system tailored to the personality of the operator. He stayed in my mind for a long time. The wisdom of his advice became apparent to me as he learned more about the nature of trading.
Bauer directed our attention to the graphics on the screen projected from his laptop. All I saw were lines, curves, rectangular boxes and more squiggly lines. The tools of a professional trader: I thought. I showed the tools that my ‘opponents’ in market used to ‘hit’ me all the time. My heart began beating faster than usual. I was amazed. I wanted those tools.
I asked Bauer what program used to analyze the markets. He told me. I also asked how many indicators are used. I had read enough about technical analysis to then know that technical analysts use indicators to analyze stock prices. There are many indicators to choose, so I wanted to know how many of them are used by professional traders. He began to count on the fingers. “Seven,” he said.
I think many people there had not really read about technical analysis, but I had done my homework and then I was practically the only person in dialogue with him, asking him questions. I wanted to gain as much knowledge and wisdom that he was willing to give me. Then I heard one of the most important lessons I have learned that minimized my losses during my early years of trading :. “Make trading so small it is almost a waste of time. Assume the next trade will be the first of the thousand of others that you will make in your life. Although its profits are lower, their losses are smaller too. No need to rush. Do not worry about getting rich very fast. “
He suggests that novices like me, must negotiate with small sizes. Which means at first buy reduced number of shares. I was intrigued. I did not know that a person should negotiate that “change”.
Finally, the seminar concluded. I took the leaflets delivered by staff. In one of these pamphlets was the name of the program used. With courses offered also sold the software. I could not afford the whole package, but I knew I had to buy the same charting software Bauer used. I decided to learn everything I could about how to use charts and graphs to analyze the market. I needed to develop my own trading system. As for my friend, he told me I had a car loan to meet first. He was going to take a look at trading shares later to have a little more money in reserve.
A couple of days later, I received a call from the organizer of the seminar, saying that from the questions I had done that night, I was the kind of person who could most benefit from their education package. Bauer was asked to demonstrate the need for business education because it was trading in the markets. In the process, he was selling the courses well. Bauer seemed knowledgeable and experienced. It has enlightened me and probably others in this room how much there was to learn. I was sold. I could not afford the courses at once, but I loved them so much that I asked the sales person on the other side of the line if I could work for them in exchange for the courses.
I could not get, but I bought the software from a distributor other than a cheaper price. I also bought two books Bauer. I figured I could acquire the skills and wisdom through self-education. I learned a lot from those two books and software. Having the opportunity to attend aquelseminario was a “godsend” as far as I’m concerned. Wherever you are, Bauer, I thank you. You – and others like you – have made me recognize the value of the transfer of knowledge and experience for others to follow.