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Tuesday, October 25, 2011

A Memorable Beginning Before The End

A Memorable Start
It was more like15 minutes, but I will never forget it. I took a position in FKLI that opened higher by 10 points. It toyed with 15 for most of the morning and the early afternoon, and then. In the next few minutes, the FKLI bought in lots bigger than an elephant in a small room. My Level II quotes (profits target) were moving so fast that I at first thought something was wrong. The FKLI ran up past 30 points, and then settled back into the 25 range where it closed.

Wow! I made 15 points from my virgin trade and that was RM100 per points back then. The memories remain as vivid as unforgettable. But what follows were tragedies I don't want to remember .....

A Memorable Month
In my early days, I lost lots of money. I had no plan, no strategy, and no psychological foundation for trading. I saw trading as another way to take a risk, which is what I do. I am a risk taker, always have been. Anyway, I quickly tired of losing, so I did two smart things. I began a search for knowledge (Fundamentals), and I looked for a software package (Technicals) that would help me become successful. I found both, eventually. After reading a library of books that turned my head around, as well as learning to utilize my new trading software appropriately, I began to have small successes. I built on those and began trading some twenty trades per month. And then it all clicked, at least for one month. I made money on 17 of 20 trades, but that was not the best of it. The best of that month was not the "wins,"  It was the boost in confidence such success brings. As a personal record, I have not repeated that month, but I have come close on a few occasions.

A Memorable Mating
No, this is not about a loose night in my youth. This about gambling, which is what we all do when trading markets. I am a gambler by nature, as I have said, and my trading successes started coming just about the time I figured out that trading is extremely similar to serious gambling. Both games put money at risk, true, but the secret to success for both lies in understanding and acting on three concepts.

The first concept is to accept that you cannot win 100% of the time. Understand you will lose. In fact, you might only win 50% of the time. Your win/loss percentage, however, is not the measure of success. The bottom line is the true measure of success. How much have you made, and how much have you lost?

The second concept is two sides of the same coin, know when to hold them and know when to fold them for poker. Know when to get in and know when to get out in trading. Take profit cut losses. Trading, like playing serious poker, is a business and notions such as hope play no role in success, which leads me to my third concept.

The concept that most actualized success for me is the clarity that comes from controlling your emotions. If you cannot control your emotions in poker, you will have tells, and you will lose just when you think the big-chip scoop is coming your way. If you cannot control your emotions in trading, you are doomed. Successful trading is more about you and your emotions than it is the markets. Gambling and trading are two peas in the same pod, as far as I am concerned, and knowing this has made me a better trader. Don't fool yourself thinking otherwise.

A Memorable Mentor
If you haven't done it, find yourself a mentor. Mine taught me early on the rudiments of the markets. He never told me how to trade, rather he let me make choices and lose, and then he told me what I might have done differently. Don't do what I did, though, which is risk too much in the beginning. Start small and work your way up. Mentors can do a lot for you, but one thing a good mentor will do for you is give you at least one rule that if you forget, or do not apply, you will get hurt. Even though I forgot this one rule more than once, I have now learned it, CASH IS KING. 

A smaller profit is no mistake compared to a reversal in fortune. Afterall, you did end the day with more cash than you began. Learn this and your trading will be much safer and more rewarding.

A Memorable Motto
Remember, when the final bell rings and the markets shut down for good, do you want your life reflection to focus on the trades you made, or what you did with your precious time on this planet? 

Money is a tool, and only a tool. It is not the end; it is a means to an end. The important question is what do you want that end to look like?
Trade in the day; invest in your life.

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