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Stock Trading - Daddy, Why Aren't We Rich?
By: Tony Spann
One Saturday morning, while he was sitting at his computer studying the market,
David's 7 year old daughter came up, tugged at his shirt sleeve, and said,
"Daddy, why aren't we rich?" He looked his child in the eye, and thought to
himself, what a great question - Why aren't we rich?
As she stood there expectantly waiting for an answer, he struggled to come to
terms with the realization that, although he had focused his complete attention
on trying to create wealth for more than 10 years, he had never actually made
any real headway.
He had bought and sold many Stocks and several properties over those years, but
had never made any real money.
He looked at his daughter, and asked, 'What makes you think we aren't rich,
darling?'
She looked at him and said, 'Because you said that if we were rich, you and mom
wouldn't have to go to work any more, and you both still work all the time. You
said we could live at the beach and play in the sand every day. I want to know
what you are doing about that. When can we go and live at the beach?'
Nothing like a child to cut straight to the heart of the problem - and what was
he doing about it?
'We're not rich because daddy made some mistakes,' he finally answered. 'What
kind of mistakes, daddy,' she asked. 'Well, I bought some shares that were going
down and then didn't sell them soon enough. Then I bought some houses but sold
them again.' 'Why?' she asked.
He had to think about that. He had no reason to buy those shares in the first
place. He had no reason to hold on to them when they kept going down. He had no
reason to sell the properties either. Her logic was flawless - why?
He had to change his strategy.
He owed it to himself and his family to finally get his act together and make
some changes - that was the day the pain of not living up to his potential made
him sit down and write out his trading plan and his goals...his strategy and
rules - his life raft.
He started by writing out his vision - what he wanted his life to look like when
he became a successful trader and investor, then worked backwards from there -
through the details of how he was going to achieve his dream.
He saw in his mind the 4 bedroom apartment on the beach, the red Ferrari 360
Modena, the plasma screen computer monitor in an office overlooking the surf
beach 7 floors below, the family holidays in the Greek islands, the significant
donations to worthwhile causes and children's charities.
He visualized all the tremendous benefits of becoming a successful trader.
He realized that he was afraid of losing, and that fear was just too expensive
to let it control his life any longer!
He decided that he would no longer accept anything less than full compliance
with his trading plan.
He decided that he would take every trade entry signal and follow his trading
plan as if his life depended on it.
As if, after each trade was closed out, he had to stand in front of a Panel of
his trading Mentors, and explain his actions to them - why he entered where he
did, where he placed his stop losses, why he exited when he did.
And if they weren't convinced he followed the rules of successful trading, he
would be taken out and shot!
This certainly focused his attention on only trading strong trends - trends
where the price bars were trading above their respective moving averages for
long trades, or below for short trades, and the Stock price was moving strongly
in one direction.
He pretended that if he couldn't justify his trading decisions to his trading
Mentors, he was dead...
That was the day he resolved to study his selected group of Stocks, the ones
that had a track record of trending strongly, every day. He would then take
every trade his system produced, put his stop loss orders in the market as he
entered each trade it a place where the trend had to change to take him out of
the trade, and he would hold every position until the trend changed.
He would act 'as if' he was a great trader, even though his record up to that
point had been less than inspiring...
That innocent question from a child turned out to be the start of David's
successful trading career.
He started to trade profitably and consistently for the first time in his life.
He thought he was doing well, and indeed he was making money.
He knew from his wealthy mentors that rich people are different; they make
rational decisions based on facts, not emotions. They understand the value of
money - they respect it as a tool for building a better world. They buy well for
logical reasons and hold until there is a valid reason to sell.
Then one day, he closed out a trade, and excitedly told his daughter, 'Daddy
made a big profit in the market today darling, come and look and see what I
did.'
His daughter came over to the computer and looked at the screen as he excitedly
showed her where he had bought a Stock and then sold for a $3000 profit. She
looked at him and said, 'But daddy, it's still going up, why did you sell it?'
His smile faded as the power of that question sunk in...why had he sold it? What
was he doing getting out of such a strongly trending Stock just to take a
profit? What would his trading Mentors say?
She was right...the market was still open, so he bought back in again. He had
never been able to bring himself to do that before - he was becoming a great
trader!
The rally continued and he kept buying more as it rallied. The trend finally
changed, but his profit on that trade, when he eventually got a valid sell
signal, was $14500!
His daughter's question 2 weeks earlier was worth over $11000!
That was the last time he ever got out of a trade based on his emotions. His
fear of the market was gone - thanks to some simple questions from a 7 year
old...
So now, it's your turn. Whenever you are preparing to place a trade, find a
small child, even if you have to borrow one, and ask them what the trend is.
Then don't trade the other way!
If your trading isn't as great as you know it could be, decide to create a
trading plan now that will become your life raft.
Remember, fear is just too expensive.
If you are afraid of losing money, reduce your position size until your fear
goes away.
Once you have made a series of small profits, you will be trading with the
markets money and you can increase you position size according to your growing
confidence and account balance.
If you have a series of losses, reduce your position size again until you get
back on the right track. Stick to your trading plan - whether it's the one that
Peter outlines for you on the website or something else you have tested by paper
trading until you are confident that it works.
Then, just do it!
To Your Trading Success,
Tony Spann and the Team
(c) 2005 Stock Trading Review - All Rights Reserved.
About the Author:
Stock Trading Review is dedicated to helping you succeed as a trader by sharing
with you simple and easy to follow tips and techniques. Discover more insider
secrets and the exact proven strategies to trade stocks profitably: http://www.stocktradingreview.com/stock-trading.htm |
