Mistakes that can be made when Trading.
Mistakes that can be made when Trading.
There are always mistakes along the way. If anyone tells you there are no mistakes, you know they’re having a bit of a lender view. I’ve made mistakes and I guess we always will look back and regret things we’ve done. I certainly look back and think, “Why did you do that?”
1987
Let’s see, some of the ones that come to mind was the first biggie to me in 1987. I was working in a stock broking office at the time. This was going back in the day when settling of equity trades were done by paper, and posting a check in the mail. So there was a two-week window where you could buy a stock, and then settle it with cash, up to two weeks later. What we found back in those roaring days in the 80’s, was that people would buy stocks and realise they didn’t have any money to actually pay for them. The office was left holding a stock and had to turn it out. What we found was that there were so many positions, and you had two weeks to settle them and for some unknown reason we were able to put those trades into our own personal account. Back then, it was just like the tech boom. Every second of the day the stock was going up by 5% or 10% you couldn’t miss.
Trading Strategy
So that’s what I started doing. It was absolutely no skill. I was basically just picking the stocks that someone else had bought. I just held them for a week and that all went up. It was too easy, making money for jam. Of course, in that kind of situation you do it with ten thousand dollars and you think, “Well that’s pretty easy, I’ll do it with twenty thousand.”, and that was pretty easy. Then you just keep going up in the anti. Eventually it caught up with me. I think the day the market crashed, I was holding about fifty or sixty thousand dollars worth of stock, of which I didn’t have to outlay one cent. It’s probably even more than that. I remember losing about twenty-five thousand dollars, and when you’re eighteen or nineteen, and earning ten, eleven grand a year, it was a fairly hefty slap across the face for me.
Luckily my father bailed me out. Lesson learned. I wasn’t effectively using gearing. I didn’t have to fund anything whatsoever. That was the first lesson. I guess other lessons that we all take back –one of my biggest individual position losses was about thirty-eight thousand dollars back in the late 90’s.
Listening to Friends
A close friend of mine and confidant gave me a hot tip. He knew someone who was an insider of a company and he was dead set, convinced that this was a thing. Again, this was in the late 90’s just before the tech crashed and markets were going gangbusters. So I put on the old retirement trade, the one where you just put everything on red and spin the wheel, and it pays off and away you go. It was a retirement trade and what I did was even took it to an nth degree. I went and did it with options. It turns out that about three days after I put the trade on, the company went into a trading halt and stayed that way for about six to nine months, long enough for these options to expire.
I lost absolutely everything on that particular trade within a couple of days. There’s nothing I could do. I actually wrote a letter of complaint to the company and said, “Look, I’ve bought these options, you’ve gone into a trading halt and normally a trading halt was two or three days but we’re running months now. I’ve ran out of time on this option.”, and they basically said, “Well bad luck mate, that’s it”. They even had the tenacity to offer me some extra shares if I wanted to buy them. I was like, “You’re joking!” So there’s a couple of issues right there, it’s taking a tip from someone –we’ve all done that. Then it’s risking that whole wad on one position for the old retirement trade. A few lessons right there.
Trading Plan
I guess the other thing I looked back and regret –I mean those ones are more financial, it’s not so much of an issue, you can recover from those kinds of things, I guess. I guess the one thing that really over the years has been my little pain in the butt if you’d like, is deviating from a plan. It’s taking a little side route or testing something different, running with it for a little while and then realizing you’re doing the wrong thing and going back. That’s my little bug bearer over the years. Doing that, I have a natural inclination to tinker and play, and research. That’s pretty well all I do these days. You can sort of find what appears to be very good strategies and edges, and that kind of stuff. Historically I’ve deviated from the main journey, just for these little side roads, and I ran into a little bit of trouble.
I guess in today’s age that’s quite common. I talk about a thing called a beginner cycle, which is where people continually buy more and more books, continually attend more and more seminars, watch webinars, buy newsletters or whatever. They are looking for something that doesn’t exist. Once people truly understand how to make money in the markets eye, you create a positive expectancy, then they don’t to go and do all of this kind of stuff. All they have to do is go and trade the strategies.
Trading in the 80’s
When I learned to trade back in the 80’s I was very lucky because they didn’t have five million books on trading. They didn’t have three million courses, and there weren’t five million courses and spruikers trying to sell you the Holy Grail by next Monday morning. Back when I started trading in 1985, no bookstores in Australia had trading books. You had to order by mail. A little catalogue which would take three weeks to reach you, and then you’d choose a book and write back to them, which would take two weeks. Six months later the book would turn up at your doorstep, and that’s the way it worked back then –which was good because you had to teach yourself how to do everything, which is the chart paper and that kind of stuff I did by hand for years and years.
New Traders
Today I feel a little bit sorry for the new people in the market. There’s so much garbage out there and there’s so much information that is incorrect and useless. I recently had one lady who had done our two week trial and I invite clients to give me a call, have a chat about the situation, and how we can possibly help them. She had told me she had forty-two thousand dollars, and she’d just spent thirty-two thousand of that on two trading courses. I said to her, “What are you doing my trial for? You’ve done these two trading courses, you should know everything you need to know!”. She said, “I still don’t know how to trade.” I think the sad thing of that is she’s just been absolutely sucked in and spat out. Thirty-two thousand dollars is a lot of money in anyone’s book. The important lesson there is that she never learned anything of any use, but she had no capital left to really make a go of it now.
You’re not going to be overly successful with ten thousand dollars to start trading. I think that’s a pretty sad state of affairs, and that’s very unfortunate. I think a lot of people go through that same kind of situation in this day and age, where I didn’t have to do that. I’m a little bit lucky.
