In my current and previous roles as CEO of some of the largest brokerages in the world, I’ve had the great fortune of standing side by side with thousands of professionals working diligently to serve the needs of millions of traders. My role has taken me across the world and allowed me to meet clients of all backgrounds, ages, race, gender and experience. Regardless of where I am, very often I observe new traders making the same, common mistake… and with the phenomenal numbers of traders entering these incredibly exciting markets for the first time, it’s time to highlight this for awareness.
First time traders and investors must find the right balance with patience. They make the mistake of not having any when its desperately needed- and showing too much when they shouldn’t. This is such an easy thing to be aware of, but what does it mean in reality? Let me break this down further.
Patience with learning
Most people want to be the best at whatever they try immediately, and investing is no different. If you are serious about anything in life, I would argue that you need to study and practice. It’s the same with trading. You should read great books, attend seminars/webinars, listen to podcasts and practice trading both with live and demo accounts. Access to this help is literally at your fingertips through your phone- so go and find it and get learning.
There is a tendency at present to not learn for yourself, but instead follow social media influencers promising 100% returns per month. Try to avoid believing in these short cuts.
Why Gaining experience Matters for the Trader
One recent study showed that 53% of new traders exit the market within a year. This is something that has always hit me hard because it means that these people have most likely given up thinking about financial freedom. The experience they received in that first year has impacted their futures negatively, rather than seeing it as foundational. The same study showed that an incredible 85% of these experienced traders then claim to make constant gains if they stick the course past 4 years. This tells you one thing- have patience, get experience and you’ll be on the right path to wealth.
The Stock Markets
Warren Buffet maintains “The stock market is a device for transferring money from the impatient to the patient”. This is a lesson that repeats time and time again for long-term investors, the latest being in March of last year. Those that sold their equities positions due to the downturn brought about by Coronavirus tearing through the world (and then sat on the sidelines), missed one of the biggest bull-runs in living memory… and it’s still going! It is most often the case that the biggest stock market rallies follow the worst downturns, but you must still be in your positions to benefit. No one is that good they can call the top and bottom of the markets every time. If you planted a seed to grow into a tree, you wouldn’t keep pulling it out of the ground to see its progress. You want your investments to compound your returns over time, so if you are investing for the long-term, take your position, step back, expect corrections and be patient.
Patience in day trading
If you are a day trader/ speculator, you must be able to balance your patience. One of the worst mistakes I see new traders make with markets such as foreign exchange (fx) and commodities is showing too much patience with losing trades (wishing they come back to profit) and not showing enough patience with winning trades (cutting profits short). The best traders assess their risk appetite, take a position and enter a stop loss and take profit and step back. This removes the natural human tendency to show too little or not enough patience.
In my opinion, getting a great relationship with patience is a fundamental part of becoming wealthy. Hopefully, there is value here for you, especially if you are starting your journey.
Follow me @BJMyersUK for more help along the way.