This article is by our guest contributor and trader Goncalo Botelho.
When I usually mention to people I’m a trader, it doesn’t take long until they throw out the word “play” somewhere into the conversation and it hits me every single time. This notion that trading is somehow a casino game brings a lot of misconceptions about the activity itself.
Trading is a business, much like any other and it is crucial that you have a well thought plan, to be able to achieve success.
For those who like to refer to trading as gambling, we can compare trading to the most common decisions people take in our society, and by doing that we can clearly see that trading isn’t the biggest “gamble” they could be taking.
Take for instance, the average working man taking up a mortgage to pay his house, when the future of his job/company is unknown and workers within the company are being laid off. Or take the example of the graduate university student who took a loan of about 30k or more for his education, only to find himself having a job behind the counter of an average retail shop earning the minimum wage.
In that view, we can generalise and say that every decision you make in life is a “gamble” in the same way you are considering trading to be. Even the eggs you buy at the store pose a risk to your health if they are infected with salmonella, yet you always ignore that risk and end up buying the eggs in what could become the largest gamble of your life.
Trading is more a matter of risk management rather than gambling.
If you’re looking to be successful at trading then you need to take trading seriously, like a business. And this will require your effort to invest in what matters.
- Education: The web has lots of resources regarding trading from the very basics to the advanced levels of mastery. Attend webinars and look for good minded experienced traders who are willing to mentor you on your way up. There is nothing better than anyone who has been in your shoes to provide you with some guidance and prevent you from making classic mistakes.
- Observation: An active observer does not necessarily have less experience than the ones acting. You can learn a lot just by actively focusing and observing the markets.
- Practice: There is something known as the “10,000 hour rule”, which is essentially a theory which claims that success can be achievable through repeating the same activity over a period of 10,000 hours. This can be obviously relative depending on your background and education. But the point of this rule is that you can achieve success by forcing yourself to focus and gather the experience you’ll need in order to thrive in whatever you’re doing. You can’t win until you lose.
- Developing a System: Once you feel comfortable with what you’ve learned, develop a system that will work out for you in order to meet your demands. There is no point for a busy doctor to have a short-term scalping system. Develop a system that matches you and your lifestyle. By that time you’ll gain a greater appreciation for trading and hopefully, you’ll know what you’re doing.
- Planning: Always plan ahead before setting a trade. Know what your limits are and what to expect. Remember to manage your funds accordingly to match the risk of that particular trade and look to the big picture because after all, you’re a trader, so don’t get too attached to a single view. Markets change all the time, and so will your opinions to match the markets. The more scenarios you’re aware of, the better prepared you will be to trade them.
You can connect with Goncalo Botelho on Facebook.