Perhaps you have had the experience of attending a workshop conducted by an investment expert who explains his success secrets. Perhaps you also had a mentoring session with me, and you still can't seem to get the results I've shown you are possible.
What probably happened is something like this:
a) you were impressed while you were doing the mentoring session/workshop you attended, by the expert’s presence and skills;
b) you finished the session/workshop full of confidence;
c) you quickly opened your trading platform looking for the same setups;
d) you also quickly discovered that you weren’t much wiser than you were before the workshop.
Something didn’t work or somehow you just couldn’t apply what you had learned. Why does this occur? There are actually a series of issues I discuss during my mentoring sessions, to help people overcome the "technical" issues such as:
a) "looking" for the same situations --> this would mean you're not being mindful and trading what's in front of you; instead you're "forcing" things, actively seeking setups which may mean nothing.
b) failing to be disciplined --> this is all about delayed gratification and one way to overcome this issue is to commit. Lose weight! Do 10 minuted of meditation each morning! Save 5% more of your income....if you can be disciplined and consistent in some other aspect of your life, then you can apply the same mindset to your trading and overcome this issue.
c) messing up with position size --> if you start betting 5% per trade, no matter how good the system is, you'll end up with a sizeable drawdown at some point, which you might not recover from.
d) lying to yourself (and/or to me) about your personal situation: if you don't have the money or the time to trade, and yet you insist on doing so, you will be under a tremendous amount of pressure that will ultimately lure you into error.
2. Think Alike --> Be Alike --> Do Alike
Source: dreamstime.com
The issue I cannot solve for most people is the thought process. I cannot force you to think like I think. When I teach how I approach the markets, the chances are my students will only superficially understand what I do, because they will tend to be looking for practical answers like:
- setups
- setups
- setups....
Now I believe that it takes no more than 1 hour to explain what I do. So if you find that after the session you still don't "get it", you were probably not paying attention to everything I said.
There's a reason why I go through the 4 steps of my trading in a certain sequence.
There's a reason why I show you my weekend/weekday routines.
There's a reason why I describe the background components first, and the actual setups at the end.
I am attempting to get you to "think" like I think. So that you can actually have a chance at replicating my method successfully and see the world as I see it. I believe talent can be taught!
I believe that if at least two people can do something well, then that skill can be taught to most other
people.
3. The psychological component everyone ignores
Pressure: it will kill your performance
Most people I've had the opportunity to meet and speak to, seem to think that all their problems will go away if/when they're able to trade well. Then they can just sit back, click the buy/sell button and watch as their finances shoot through the roof.
Unfortunately, this is the biggest lie out there. There is a reason why money tends to flow towards those who already have a lot, and money tends to flow away from people that don't have enough. People that have a lot of money may not have happiness, but they do have:
- time (to educate themselves, to learn how to trade, to test their ideas, to search for a mentor, etc.)
- options (they are relaxed because they know that if trading doesn't work, they can do something else or go back to school and learn something new, etc.)
- risk capital (therefore they are not even in the same ballpark as most people, and do not have to consider certain constraints)
If you want to have a shot at trading well, you need to be in the right personal and financial situation to do so:
a) you should have time to follow the markets during the right hours (for example, in FX this would mean being able to trade the first 4-5 hours of the London Session);
b) you should have time to read/study the markets
c) you should not have to count on your trading performance to pay your bills - ever.
4. How to generate enough money to actually have a chance
The objection I most often receive is "with my current job I'll never have enough money to trade for a living". I say this: you might not even like trading full time. But that's another matter. In any case, where there's a will there's a way. So here's a potential plan (which was used in a similar manner by Van Tharp, Tony Robbins, Alpha Architect, and other well regarded planners/coaches):
Source: FCN.com
First things first: you need to save more and spend less. Only if you save, can you have money to invest and compound.
Secondly, compound interest is what you're looking to use as a tool. Interest on interest, over many years. Let your money work for you while you sleep.
Finally, you should look to gain a certain amount of wealth, that can then feed you proceeds for the rest of your life like an annuity or a perpetual bond.
What are the steps to accomplish all this?
1. Plan everything: plan your weekly shopping; plan your monthly house expenses; plan your Christmas/Easter/Summer holiday expenses...Know what your expenses are and reduce any expenses that are not necessary for your standard of living. Resist the temptation to buy things now, so you can buy your financial freedom in the future.
2. Reduce your debt, if you have any. Repaying your debt should be a priority because it will eat into the amount of savings you can achieve.
3. Reduce your taxes. Active trading has a very high tax rate in some countries; capital gains have a high tax rate; bonds typically have a lower tax rate; some insurance products (Fixed Indexed Annuities for example) are even better. Worst come worst, you can consider moving to another country where the tax rate is low.
4. Determine what your currents assets produce in terms of rate of return and then
find something better. Cash sitting in a deposit account is doing nothing at all. So even investing in something that pays 4% per year (like common FIAs do) is much better. DIY asset allocation might be an option, depending on your net worth.
5. When you get your monthly salary, immediately transfer your savings into a separate account. That way, you can resist the temptation to spend instead of save.
6. What's your objective? Some people think they would need 10 Mln USD to live the life they want. Realistically speaking, it takes much less to live a comfortable and stress free life. Do the math. Be realistic. What would it take for you to be happy (not rich)?
Happiness is a mental state, not something tied to money. Money helps relieve stress and confront uncertainty. It gives you time and options. So to me personally, the important things would be:
- a low maintenance house (not a mansion - I'd have to pay a lot to keep it clean and tidy)
- a low maintenance car (like my current Mazda 3 which I've had since 2006...it went on Diesel and Oil for 8 years and only in the past 2 years has it given me a few issues)
- no debt (i currently have none anyhow)
- a life insurance policy
- a FIA/pension plan
- the possibility to pay for all living expenses without fretting
- the possibility to pay for routine visits to dentist/barber/personal care specialists without fretting
- the possibility to have some cash left over for gifts and/or surprizes
- the possibility to travel a few times a year
And all of this, for 2 people, in a modest place in Italy, boils down to 2500 Euros/month. That's 30.000 Euros/year net. Of course if you're working a full-time job, where 50% of your pay is eaten in taxes, you'd need a 60.000 Euro/yr salary which can be difficult to obtain. But if you can reach your number, in more tax-efficient ways, you can reduce the gross number even by 30-40%.
Food for thought, I hope.
7. Earn passive income: write a book, create a new product or service, buy to let...something that will allow you to receive periodical payments without actively working for them.
Good Luck!
Sources:
1. Tony Robbins has written a few books on the matter, of which the last is "Money: Master the Game"
2. Dr. Van Tharp has also confronted this theme in many of his books like Trade your way to Financial Freedom.
3. Alpha Architect has great resources and tools on their website
Nessun commento:
Posta un commento