Lessons from the Pros


Is There Any Financial Advice That’s Trustworthy?

In the world of investing and trading there’s certainly no shortage of venues that offer up advice of all types. This advice comes in all 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 investing, they rely on some of this “paid” advice in order to make their investment decisions.

In my humble opinion there are some real issues with making trading and investing decisions in this manner. For one, if you rely on someone else’s research you have to make sure it has a proven track record and that it fits your temperament for risk, which in many cases it does not.   Another problem with this is that when you become reliant on someone or something, you have to almost wean yourself off when it’s no longer available. This means you have to become more reliant on yourself, or find another source. When this happens it can be a scary proposition for some.  Another issue is accountability: it’s much easier to deflect personal responsibility “when it was their call” for those trades  that don’t  work out.

The fact is nobody cares more about your money than you do, and for that reason you have to start thinking and managing your money on your own.  That’s of course after you learn a core strategy from someone who knows what she’s doing.  After that, you have to fine tune it to fit your personality and financial goals.

Independent thinking, I have found, is one of the hallmarks of a good trader, and I highly encourage that when teaching. 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 younger children (my boys are 10 and 12) know too well, they can be masterful at getting you to do things for them, and many times we succumb to their requests. In reality though, we know they will be better off if they continue learning how to think and problem-solve for themselves. This will make them leaders, rather than followers as they move through life.

Similarly, a new trader has to learn by doing under the watchful eye of an experienced trader. I find as an instructor that the trick to encouraging new traders to think on their own is to let go of the need to be “right” and put more emphasis on the process of putting on a low-risk, high-probability trade. After all, it’s much easier for the student to just ask you for the answer and have you give it to them, than it is to do the critical thinking.  So instead of answering a student’s question about a trade immediately, I like to reply with another question (which sometimes annoys students) such as, “What is your plan for this trade?”

The more opportunities a new trader has to think through and resolve “real world trading scenarios”, the more he or she will gain in their confidence.  Ultimately, it is up to the individual trader to make those decisions.

So, is there any financial advice that’s trustworthy?  You have to decide for yourselves, but remember that when it comes down to it, acquiring a skill that gives you control of your financial destiny and personal freedom is the greatest investment you can make.

Until next time, I hope everyone has a terrific week.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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