Originally published by Chamber of Merchants
Before I discuss 3 important factors for a Merchant’s success, bear with me for a moment while I discuss Success.
Success: it’s the inspiration and incentive for many of us to work, succeed, invest and profit. Different people measure success differently. Personally I consider success to be far more than an account balance or material wealth. Success, to me, is a combination of exhibiting good character while building up those around you: leaving those around you and those you come into contact in a better condition than when you found them. For me, most of it boils down to the quality of my relationships, regardless of my salary, earning or acquired wealth.
The Merchant Method promotes success in all aspects of one’s life and the lessons we share will often spill over to our relationships, making them more successful: that’s because a Merchant is determined to exhibit self-control and ascended thinking.
I had to start off with that perspective to help you understand that there is more to success than money. Just like a Merchant’s portfolio, a Merchant’s measure of self worth and sense of success should be spread over all aspects of life: your role as a partner, your role as a parent, your support as a friend, your care and attention as a family member, your attitude as a work colleague. You are the sum of your interactions, so don’t forget that next time you success or fail in a trade. You’ll be successful, but measure your success in the wider sense. You certainly can’t trade successfully, if you don’t think successfully. So start thinking better.
3 of many Factors for Successful Trading | Merchant’s Insight
These are just some brief thoughts I wish to share. This is not an exhaustive list by any means.
But I understand that in an ocean of opinions and advice, it is important to share some thoughts on what I wish I knew from the beginning of my trading career to be more successful.
1. A Merchant Has a Trading System
As a human being you are filled with emotions. Those emotions are necessary in daily life, but in stock trading, it’s a main reason why I used to fail repeatedly. I did not know how to feel at any given time during a share price rise, fall or stagnation. Therefore I also did not know what decisions to make, because in normal life our decisions are intertwined with our emotions. We think something, then we process how it makes us feel and then we react accordingly. This is the bane of most traders, their achilles’ heel, a weakness shared by many traders, myself included initially.
So how does one compensate for this very human nature which undeniably leads to so much account destruction?
You need a system. Now this is easier said than done, granted. Most people visualise a neat box with a label that says ” Trading System”, which when opened, will reveal the 10 steps to making money.
Of course, these systems are available, but how much wealth they’ve created is dubious. I’ve been through many trading systems, indicator courses etc. but honestly, nothing made sense until I could see it in practice by following other traders who could successfully apply their own trading systems.
That’s why Chamber of Merchant’s exists: it’s an opportunity for you to be exposed to a mindset other than your own, seeing a system in action by a real trader. A system is essential, because it takes away the emotion and allows you to enter and exit transactions without feeling your way through it.
2. A Merchant Has a Thesis
This is one of the most important aspects of my trading foundations. I need to have a thesis, that is, an overall idea or story about the direction of the market. For instance, if I notice that all economic growth numbers around the globe are slowing down, that manufacturing is production is decreasing then I would consider that Crude Oil will be used less than in a good growth environment.
In that regard my thesis would be: Crude Oil is not a high probability trade until either a) Demand for oil increases b) Supply for oil becomes disrupted. This will stop me from trading oil as it rallies on a rumour, because the probability of a failed trend is higher near a higher price, because fundamentals are not driving it. P.S Check out my previous post on crude’s price limits which turned out to be pretty darn accurate if I don’t say so myself, which I do.
A thesis based on sound economics and logic allows me to sleep at night. Note that my thesis usually starts on a global level, then permeates down to an industry then to individual companies.
3. A Merchant is Passionate About Trading
If you’re passionate about gaining knowledge, about understanding the bigger picture and truly interested in the assets in your portfolio then you will be driven to research, discuss and learn without fatigue or despondence setting in. If you are passionate for long enough, I believe that the light bulb will switch and you’ll say “I see!”.
Without passion for this thing called trading you will never gain enough hours of exposure to the topics and conversations that would make you successful. I used to spend hundreds of hours watching share price depth, course of sales in real-time etc. In doing this I learnt the behaviour of various shares. I observed, like David Attenborough, quietly commenting as the shares would test their supports and resistances. I reached a point where I would know if price action was irregular, which would foreshadow a rally or dip.
I don’t do that anymore, because I realised that fluctuations in price are inevitable and that shares will move within the boundaries set by the overall trend of the commodity.
Conclusion
A thesis, a system and passion. There are many more factors which contribute to trading success which I will post on in the future. But if these 3 are lacking, I suggest you do some serious homework. Success does not arrive on the back of luck.
Consistent and sustainable success is derived from dedication and time spend honing your mind and gaining experience.
See you around the ASX.