Here’s one of the most frequent questions I hear…
“What is required to be successful trading the markets?”
It has always been an interesting topic for me to try and answer succinctly.
In my younger days, I went at the question with great fervor. I would go into considerable detail to explain all the difficulties faced by one who simply wants a shortcut to success.
One time a neighbor called me during trading hours. He wanted advice about a stock he was considering buying.
My treasurer Aldo was sitting next to me on the spot USD/DEM desk (That was the Deutsch Mark for you young travelers.)
As I was going through a litany of Technical Analysis for him, Aldo snapped at me, “Why go through this with him? Tom, it’s bloody trading hours, get off the phone with that moron!”
I quickly ended the call. I asked Aldo how he would answer the question if a novice asked, “What is needed to successfully trade the markets?”
I wanted to avoid the snare of the question in the future. His reply was brilliant. Here is what he said…
“Trading requires 3 components:”
Brains: You need the ability to learn the language of the instrument or market you are trading.
Markets are very much like individuals; they have character and personality. Some are Nervous, high-strung, and jumpy. Others can be direct, or logical.
You must only immerse yourself in trading them. No Bull$hit, no halfway study.
Only study their character and then you can understand when they are not performing to character. Surround yourself with successful traders, extract information to learn.
That’s when your technical analysis can be used as a surgical strike.
Money: You need capital to trade with, and NEVER EVER THINK OF THE MONEY!
You cannot be fearful. In order to be courageous you need to have a basis for your trade. If your decision is sound the market will reward you relatively quickly.
You must have the courage of your convictions, yet still recognize when you are wrong and escape to protect your capital.
(Although this was not in the conversation, I will state it here; You can only trade with money that does not AFFECT YOU, it must be money if lost has no effect on what your mortgage is, or what you have for dinner!)
Guts: You need to have the Guts to implement your trading plan.
Be able to buy when there is blood in the streets and it’s like trying to catch daggers. Be strong enough to sell in the height of Euphoria when it seems insane to do so, all according to your trading campaign.”
And there it was; the Simple BMG, Brains- Money -Guts.
So from that point on if anyone asked the question “What is needed to successfully trade the markets?”
My Reply BMG, Brains Money and guts!
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