In the realm of trading and investing there’s certainly no shortage of venues that offer advice. This trading advice comes in many forms, some very specific in terms of what and when to buy, while other guidance is more broad-based in its approach. Because many in the general public feel they lack the knowledge, and or time to dedicate to trading and investing, they rely on others for advice in order to make their investing and trading decisions.
In my view, there are some real issues with making trading and investing decisions in this manner. For one, if you rely on someone else’s research, does that research provide on edge? Or, is it based on the same recycled information or technical patterns that everyone else uses? Moreover, does this trading advice provide low-risk, high probability opportunities that have been proven to work through different market cycles? If the answer is no, then is it worth paying for? Another issue with becoming reliant on someone else is the fact that you have to wean yourself off that advice when it’s no longer available, at which point you will have to rely on yourself or find another source. For some, this can be a scary proposition to be in. Another issue is accountability; it’s much easier to deflect personal responsibility “when it was their call” for those trades that didn’t work out.
The fact is nobody cares more about your money than you do. For that reason you have to take control of your finances, whether it’s trading to generate short-term income or managing your long-term wealth portfolio. Learn to be your own source for trading advice!
Independent thinking, I have found, is one of the hallmarks of great traders, and I highly encourage that when I teach. Please don’t mistake being an independent thinker with being isolated. Community is a great part of the learning process, but eventually every trader has to find his or her own way.
To this end, I approach teaching people how to trade in a similar fashion as I do when I teach my own kids about life’s lessons and personal responsibility. As those of you who have teenagers (my boys are 14 and 16) know too well, they can be masterful at getting you to do things for them, without any effort on their behalf. Many times we succumb to their requests, but is that in their best interest in the long term? We know that it’s not. In reality, they would be much better served if they continue to think critically and problem-solve for themselves. This will give them the tools to be leaders rather than followers as they move through life.
Similarly, a new trader has to learn by applying a low-risk strategy under the watchful eye of an experienced trader. I find as an instructor, that the trick to encouraging new traders is to let them think for themselves. Also, I encourage them to let go of the need to be “right”. In addition, I stress that the emphasis needs to be on the PROCESS of spotting and placing low-risk, high-probability trades. After all, it’s much easier for students to just be given the answers they’re looking for than it is to do the critical thinking that’s necessary for traders to become successful. So instead of answering a student’s question about a trade, I like to reply with another question such as, “What is your plan for this trade?” or, “Why are you taking this trade?”
The more opportunities a new trader has to think through and resolve in “real world trading scenarios”, the more confidence he or she will gain in their trading. Ultimately, it is up to the individual trader to make those decisions.
So, is there any trading advice that’s trustworthy? That’s for you to decide. At the end of the day, one of the greatest investments you can make is acquiring a skill that gives you control of your financial destiny. If done right, it can provide personal freedom.
Until next time, I hope everyone has a terrific week.