Lessons from the Pros


My Rough Start In Trading

As an instructor at Online Trading Academy, it is important that I share with my students my background, and experiences in the markets.  In my humble opinion, the whole point of teaching this skill of market speculation is to help students shorten their learning curve when they start trading. My experience has been that paying the market to learn on your own is far more expensive than being educated first. At Online Trading Academy we help to shorten that learning curve by conveying the mistakes which we have made throughout our time while trading, what we’ve learned from these errors, and stressing to students that they don’t have to repeat these some mistakes.

Personally, my start in the Financial markets had a rather inauspicious beginning in that it began shortly before the market crash of 1987. In retrospect, this was probably the best thing that happened to me and I’m grateful that it happened early on rather than later. Why do I say this, you might be asking? Well, simply because witnessing the Dow Jones Industrials lose close to a quarter of its value in one day was not only a shocking experience, but it also taught me about risk and the importance of managing risk in Bear markets.  In my experience, this is one of the biggest challenges traders and investors face when putting money in the markets.

Free Trading WorkshopThose traders that cut their teeth in the Super Bull market of the mid to late nineties didn’t have the benefit of understanding what type of devastation a bear market can exact on peoples’ accounts and psyche. Unfortunately, these traders had to learn the hard lesson of not having a risk management set of rules after the Nasdaq crashed in 2000 losing almost 85% of its value.  One of the issues that confronts most traders is the lack of planning. I understand we address this issue quite a bit in these newsletters, but it bears reminding that without a sound plan the odds of success are very slim.

Like most traders, I remember the first trade I ever made. I bought call options on a stock called Tenneco, which back then was involved in the Oil and Gas business.  Incidentally, the only reason I purchased options rather than buy the shares was because I couldn’t afford the stock, so the leverage of the options seemed appealing at the time. What I didn’t understand at the time was all the greeks in options.  Namely, the time decay, and the fact that because I didn’t have a lot of money I had to buy them far out of the money, thus giving very bad odds. So, as you might expect, the options expired worthless and I lost all my money on that trade.  I was devastated, because at the time it was money I couldn’t afford to lose.  Lesson learned.

My first foray into the Futures market come in 1994 when I became a Futures Broker.  I begun by trading the grain markets and did OK for a while until one weekend when I left a short position on in wheat.  Over the weekend it rained for two days in the Mid-West. The market gapped up taking 3 months worth of profits with the stop out. I never hold Futures trades over the weekend now. Lesson learned.

There are so many more war stories I can relate, however, the message is that it’s important to learn from the mistakes of someone that’s been on the front-line so that the mistakes are minimized.  That’s what education does for you. So for more on learning this skill of market speculation, check out more of the resources available at Online Trading Academy.

So until next time, I hope everyone has a great 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.