How Do I tell My Wife?

8/30/2015

Dr. Michael McCauley

8/30/2015 11:51:11 am

Hi Brian,

I am asking Des to forward this email to you for me, because upon seeing your story, my first thought was “I’ve been there done that, on a larger scale with the same results, and more than once.”

It is my hope that what follows will help.

Des gave good advice, of course, regarding the decision to stop trading or go on. If you decide to go on, I would offer your this.

It goes without saying that you must get training.
I have tried others before finding Grok Trade, and Grok Trade training is by far superior to and cheaper than the others I tried. The 101 and 201 courses are thorough and are the absolute minimum before trading, even in the simulator. They are the foundation for live mentoring, which is a necessity for success.

---------As a beginner one needs certain specific guidelines besides getting training. You have to be patient with yourself, training takes time and there are no shortcuts.---------

I wish I had learned these steps at the beginning, (which was before I found Grok Trade),and I wish that I had followed similar advice of others even after finding Grok Trade. .

What follows is what has worked for me

1. STOP TRADING REAL MONEY RIGHT NOW
STOP TRADING REAL MONEY RIGHT NOW
STOP TRADING REAL MONEY RIGHT NOW

2. Trade stocks with a Simulator Account until you can show acceptable monthly gains for 3 months in a row.

3. Only after 3 successful months in a row, go back to real money but with a trade size of no more than $2,000 per trade. Increase lot size in increments after each positive month. If a month is negative, go back to the previous month’s lot size.

Why stop trading real money:

Real money conjures up emotions, wishful thinking, gotta-get-it-back disease, woulda-coulda-shoulda, and other built-in internal mechanisms in us that result in poor judgement.

People, by our built in nature, tend to focus on what we can gain, not what we could lose. We have to learn to see both, and minimize our losses.

After training and experience, (successful experience, not losing experience, losing experience does not count toward success), then when we trade real money, we are more likely to duplicate what resulted in success in the simulator.

Suddenly going to full lot size will trigger those internal mechanisms, even after success in the simulator. We have to desensitize ourselves to the fact we are trading real money. This is done by starting with amounts so small, that neither a loss nor a gain will trigger those mechanisms. By gradually increasing dollar amounts, we get used to trading real money up to our full lot size, without triggering those mechanisms. (Eventually, you will reach a lot size that always triggers those, then you step back one size and stay there. Once you reach this lot-size-threshold, you can retest it at 6 months intervals if you wish, but not sooner.)

Why stocks, not options:

Options are enticing because it looks like you can make a lot more money for money risked. Actually over time you will probably make more money for money risked with stocks. An option can become worthless over night with sudden changes in stock price, whereas stocks usually do not. An option has many factors affecting its value besides the price of the stock. Options look like you can grow your account in a hurry, but remember that the risk is that you can shrink your account to nothing in a hurry also. And an inexperienced trader is almost certainly bound to do the latter.

Certain stocks are riskier than others and could lose up to 50% or more of their value overnight, while the market is closed. In that case, you could lose far more than with an option. The solution is to avoid those stocks in swing trades, especially as a beginner.

Pharmaceutical stocks that are working on a breakthrough drug are an example. An FDA ruling, or clinical trial report, after the market close can cause these to open down 10,20, even 50%, and continue down.

After training and experience you might reconsider options trading, but I would get the advice of and training from experienced traders who have a long track record of success at options before trying it again.

Which broker:
I have traded with Schwab, E-Trade, Think-or-Swim and Interactive Brokers.

I.B. has much lower fees, and makes it possible to trade the small lot sizes that you need to use at first, without being eaten up by commissions. The platform is versatile and tracking your trade results is better organized and easier to see than in T.O.S.

T.O.S. has great charts, and lots of trading community type features, but most of those will not help much. Trading on TOS is fine for swing trading but too cumbersome for intra-day trading.

I use TOS for certain charts, but use I.B. for trading.

Use a simulator account with Interactive Brokers or Think-or-Swim, or the broker you are using if and only if they have a simulator account identical to your real account.

Mike

8/31/2015 03:09:53 pm

Hope this helps.

Mike

9/1/2015 01:11:31 am

The bottom line is this: Be patient, get training, and do not trade real money until you are successful in a simulator account.

Des Woodruff (aka d-seven)

Des is a visionary who spots future market trends and started several ventures considered first-to-market.

As a serial entrepreneur with a propensity for strategic innovation, Des owns an array of businesses across diverse sectors.

In the financial industry, Des is the President and Founder of FreeTradingVideos.com, Inc., operating under the names GrokTrade and FreeOnlineTradingEducation.com and a fund manager at his quant fund which uses trading algos.

Des publishes regular articles on various topics on investing, the emergence of AI in trading, and digital currency

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"The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty."

Proverbs 21:5

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