How to lose $5000
I asked my colleagues a question this week. “How do you lose $5,000 in the stockmarket?” You might be interested in the many replies. Here are some of the more sensible ones.
- Start with $10,000.
- Try to make $5,000 quickly.
- Trade Forex from the comfort of your own kitchen.
- Trade CFDs without understanding leverage.
- Trade a lot.
- Trade with confidence.
- Trade intraday.
- Trade on ‘inside information’.
- Buy stocks that fall.
- Back your brother-in-law’s tip.
- Set and Forget (emphasis on ‘forget’).
- Buy a stock that is up 20% on the day.
- Buy a stock that is down 20% on the day.
- Don’t take any losses.
- Don’t take any profits.
- Buy GameStop.
And finally, this old chestnut – Pay for a $5,000 course called “Learn how to trade and make money like a Pro!”
Instant way to lose a few grand. Let’s focus on that a minute.
There are a lot of ways to receive a share trading education these days, so many places to put in your credit card number and receive instant share market gratification. The bar for successful stock market teachers it seems is a lot lower than the bar for successful stock market traders and for the uninitiated it is a minefield of heroes and charlatans. So to guide you on your way I have put together a list of things you might like to consider before forking out for guaranteed trading success:
- Trading success cannot be “delivered”, packaged, achieved with a credit card or achieved in quick time. You may think you are buying a solution but you are not. You are buying an introduction to a lot of work.
- Without “purpose” you will not last as a trader. It is like joining a gym. You’ll likely try it for a month and stop. Enter the trading marathon without enthusiasm, interest, passion and a purpose and you will join the many ranks of people who have wasted their money and time. You need purpose and that means having a very specific goal to inspire you. Without that can you seriously make trading a part of your life?
- You need risk capital. To make that clear. You need capital you can risk. Come to the trading game out of financial necessity, with capital you can’t afford to risk and your ‘loss aversion’ will doom you to failure.
- Most people come into trading with a get rich quick expectation. It’s a guaranteed way to get poor quick. Trading is often about exploiting a small small edge over a long long period. That takes maturity, discipline, method and patience. Do you have that?
- Some courses have a hidden agenda. Selling you a software package, selling you a data feed, up-selling you to another product, snagging you as a customer of their trading platform (CFD providers guilty). This alter purpose is why there are so many “Free” seminars. Because they’re a forum for hot leads and that’s how they see you.
- The more you pay does not mean the more you get. There is no standard pricing. Some prices are dictated by the size of the balls of the people selling it to you, not the product. Check what you get.
- The more people you put in a room the longer it takes. Many courses take an extraordinarily long time to cover basic principles, principles that could be read in a book in half the time.
- There is a huge difference between “Learning to Trade” and “Technical analysis”. Many courses sell technical analysis which is not necessarily what you need as an introduction. You need to learn to trade. It’s very different.
Finally here are a few simple questions before you sign up or anything:
- What am I buying? What’s the experience. Is it mentoring with a human or am I just buying 20 PDFs as a book dressed up as a course.
- Can I find the “cancel your subscription” button. Some very well-known educators don’t have one. Check first. They say you can cancel, but can you?
- What will I get? Anything physical, anything valuable, anything personal, anything more than words.
- What is their motive? To get me trading, to get me as a subscriber, to get money, or to actually educate me.
- Who are the people behind it. I need names and faces and addresses in Australia. Not an unlicensed faceless entity with and address in New York.
- Could I read it in a book? If so, read the book. You don’t have to pay to have someone read the book for you.
- Am I really interested? Do I really have the time? Do I have any passion? Or am I just trying to solve my financial ambitions by spending money on my credit card?
Do I really want to be a trader all day every day? Because if you want to succeed at it, that’s what it will take.
Here is an email I got from one very well-known software provider:
A very timely article on Trading Courses and caused me to reflect on my experience on attending one such course. Early 2010 I attended a course on CFDs. Instructor led us through a spiel, fed us well and basically, follow his lead after signing up. I signed up with $10K required. Money was no issue for me at the time. I was doing well with a well paid job and my investment into what I called my 10% club, an investment portfolio. The CFD “investment” Went well for a while until I found the times to be attentive did not suit my times, due to work and other social and domestic schedule. There were changes to the platform and providers and I was advised to try currencies in my own time. That went well also. 2 years later I was up. The $10K was up Just short of $15K. Yes, I thought, “how easy is this”. 2 years down the track, the bank balance was less than $1K . The platform was not taking my trades. After some weeks I rang the provider up and requested my funds be returned to my nominated Bank Account. After some discussion with the support team member, he wanted to know why I want to stop trading. I advised him you are not taking my trades, I want what’s left of my money. He advised, my “bets” were to large. That was to news to me. He explained that I should be “betting “ the mini. What the hell is that? Don’t know how to do that. After explaining how to use the platform and set up the mini I realised I was up against the ”big boys/girls”. Yep betting $100,000K a pop. What made it worse was I was not using stops, did not know how to place them. So overnight I got cleaned out. I was coaxed to to give it a try, so I did and used it like having a punt on the horses. In my opinion, I believe, they just want to keep your money. In the meantime there was a change of provider again. I managed to get the account up to $2700 over the next 6 years and got sick of it. With the new platform the other week was able to close the account and transfer the funds into my share account.
The trend is your friend, but it will end