The Three Secrets To Overcoming New Trader Mindset
I got an interesting request from a subscriber of mine to go over the most rookie mistakes new traders make. I don’t want to really call them mistakes. How about we call them learning opportunities? Here are my top three new trader learning opportunities.
1. BELIEVING IN HYPE
The very first thing that I see a lot of rookie traders do is believe in hype. New traders will see gurus or retail educators promoting with Lamborghinis or traveling and they fall in love with the dream of becoming just like them. When you are new to the trading scene it is easy to believe these gurus or retail educators are actually trading and live this lifestyle but a lot are not. 99% of them are just using this black hat marketing technique to sell you on the dream. If you fall into that trap it’s because you want to be sold on it at some level. In reality trading takes a lot of work, time, and studying. Unfortunately, when you tell people that it doesn’t sell. So, don’t fall in love with the hype of trading. If you are not prepared to do the work, then do not trade.
2. NOT THINKING CRITICALLY
The next rookie mistake is not thinking critically. A lot of rookie traders fall hard for the dream, they fall for the hype and then they believe their guru is a real trader. Think critically about those you chose to follow, research the verification sites they use. Ask for account statements from a recent year of trading. Also, some traders have two accounts, one that goes long and the other that goes short so they can always post a winning trade. You want a middle verification area where people have to type in their username and password for their brokerage account and it verifies it third party. Then the computer goes in and pulls that information. One verification site that implements this exact strategy is Kinfo.com. I talk more about verification sites in this video
Once you verify the person is credible and successful, research the educators trading methodology. Think critically about what you hear and see from these educators and in your own research, question everything and dive deep. Come out the other end with a unique strategy of your own. This is all I ask of my students.
3. NOT HAVING AN EDGE BEFORE TRADING
A rookie trader often comes into the market, focuses too much on technical analysis and news. Although these techniques can be useful, they are not where you should stop in your education. A lot of new traders think they can get by with just technical analysis but for the vast majority of traders, this is not true. You need to have a quantifiable, tangible, edge. Learn how to code, program and then test everything that you hear or see.
Then if your strategy works you can put real money behind it and trade. It is really that simple. Ideally, it needs to be autonomous, meaning it trades automatically with no human intervention. In my courses students go from the basics to creating their own autonomous systems.
Now in some markets like penny stocks news matters a little bit more, but that would just be icing on the cake of your already quantifiable strategy. Have a strategy that washes out, weird volume, and then base your system’s entry and sell short decisions on that. Take away the emotion of sitting there buying dips, buying breakouts or selling into whatever fangled thing these idiot penny stock educations talk about.
Remember the 90/90/90 rule. 90% of traders lose 90% of their money in 90 days because those people do not have an edge, especially people that get sucked into the dream selling in the retail industry.