Onward to my personal trading experiences off the floor. Perhaps I can share what I learnt and how it can benefit to any novice or expert stock trader as to why continuous improvement or kaizen is key to in profitable stock trading and investing.
Once I attended an investment seminar, after the 1997 bulls have died down, met this speaker called Ruby Leong. We were discussing, it was a huge trading room meant for lecturing of about 200 seats available but there were about 10 of us, I alone, another group of 5 members and another group of 3 and another alone just like me. We all came after we read the same newspaper advertisement, which wrote “Have you lost a fortune in the recent bear sell-off? Are you keen to learn why many failed in stock trading? Free lecture, 3 hours, 2pm-5pm, Empire Tower, Level 22 etc”. It was on a Saturday afternoon and there I was, knowing I was spending a considerable important hours of my life, just to learn why so many traders lost fortunes, went bankrupt and got blown out of the market, maybe forever.
He began by introducing himself as a former stock trader, who moved onto commodities trading as it allowed for greater profit, leveraging using a low capital but big rewards, ability to short-sell the market unlike in stock trading etc. He made a revelation, actually he made several. First he mentioned actually most of us are in trading stocks actually just to experience thrills, albeit expensive, and also, we wanted to “throw” our money away! The evidence is clear, he said, as proven here, he was, giving a free lecture on why we lost money trading and how to overcome this deficiency in our mind, methodology and bad habits. Yet only so few of the thousands of losers really cared about their money, except the 10 of us here, the rest is outside sulking or still in a daze and refused, yes, refused to learn and hence condemned to repeat the sin of uninformed trading or stopped trading completely. Failure to learn is our first stupid mistake.
He spoke on and told of the fortunes wasted when we don’t have a trading plan, why we are trading on rumors and how the initial wins made us bold and bolder and hence placed bigger and bigger bets and when the last one turned out false, we lost all that we won and also all our capital and then we blamed the market, the rumor starter but not our own self.
He also made another startling revelation that, you know in trading just like in life, the Italian mathematical Mr. Pareto, the advocate for 20:80 rule that postulated of 100 traders, only 20 will make money from the other 80. But applying the rule in the next cycle, 80% of the 20 winners, i.e., 16 will probably break even or won a little money. The balance winners, i.e. 4, traders will win 80% of the total money lost by the rest. Guess who are the 4 big winners? Believe me, 3 winners are the syndicates and insiders and the last 4th winner is the professional trader, the one who worked hard at perfecting his trading plan and system. Conclusion? If you are not that professional, you are probably in the 80+16 = 96% of the traders. Get it in your head, 96 out of 100 traders, will be broke, bankrupt or trading whilst going broke. Guess it is quite gloomy in the stock trading biz, isn’t it?
Hence the moral of the story is why do we bother to trade? If you don’t have a trading advantage or positive expectancy over the next trader on the exchange floor, why come and donate your money, time, sweat and blood to others? Better be smart and keep learning continuously and keep improving your know-how, skills and rules of your own profitable stock trading system.
Ruby covered several topics of high relevance to any stock trader; including the right steps towards profitable stock trading career, a free copy is available to anyone who writes in to firstname.lastname@example.org.