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BookingAlpha Option Trading Advisory

Wednesday, August 24, 2016

Do it yourself

I remember the first time I grabbed a book about trading as if it was yesterday. Somewhere in the year 2007 while in the middle of my plans to emigrate to Canada, an ex-girlfriend gave it to me (I have many ex-girlfriends but none as productive as this one). We had broken up about 3 years before, but stayed good friends. So, she had a boyfriend who was living in Mexico and bought her this book about the Stock market, for her to study while still in the island, and she thought I'd find it interesting.

Of course, I still remember the title of the book: "Como hacerse Millonario en la Bolsa" (How to become a millionaire in the stock market). It was written in Spanish, and yes, you guessed, by two Cubans. I mean, I look back and can't help the laughter. Everything looks so funny and shady now: the title, the language, the writers, the hype.....but it was the first introduction and I was totally hooked.

I then proceeded to spend the rest of my days in the island: two more years dreaming about investments and option contracts as the world was suffering the worst economic crisis since 1929, which in Cuban national television looked even worst. They seemed to really enjoy showing the global failure of the capitalist system, and therefore the moral superiority of Communism. It was truly the end of the world, everywhere, except in Cuba of course, according to national TV.

When I arrived in Canada in May of 2009, I started trading in no time. My first couple of salaries, and boom, I went, on my way to instant millionaire status, or so I thought.....

Up to that point my friends, it had been lovely. The first stage of my long-term marriage with the markets: the honeymoon phase, lasted since 2007 to somewhere in late 2009 before I placed my first trade. It was heavenly, beautiful. Plenty of illusions. No harm to be found anywhere. Just like any new romantic relationship. Little did I know the second phase had just started. With it, the pain and the disappointment.

I started off with Forex, discretionary, directional trading and lost 3.5 grand in less than the blink of an eye. I purchased a couple of crappy, curve-fitted robots, and got burned big time (another 3.5K in less than a month). At the same time, the situation of mom and dad, unemployed in the US and needing my help, started to add some pressure. I ditched the crappy robots and started to follow FX trading signal providers, who proved to be a big pile of garbage. I had lost about 14K in less than 5 or 6 months, which at the time, was a fortune.

I already new about options, but Forex trapped me first because of the small capital required to trade. In FX you can literally open an account with 200 bucks and trade with 500:1 leverage. Not in the US though, but I felt blessed for living outside of such an oppressive system that wouldn't allow its citizens to trade with greater than 50:1 leverage. Still, reality was harsh: my account was a failure. Spot Forex seemed to be a much tougher game than originally anticipated and it was time to look elsewhere.

I looked at the banks,........actually my bank (The Royal Bank of Canada back then) looked at me,...and one good day they offered me to invest some savings in their mutual funds. A simple questionnaire was completed in order to rate my risk tolerance. I was labeled a "High Risk taker". Got placed in some Energy mutual funds, and a Precious Metals fund right away. This was the first time, ever, that I made some money. However, it really annoyed me to see that my money didn't grow remotely as much as Gold or mining companies were going up, and not as much as Energy indexes were going up. That really pissed me off. So, despite the fact these mutual funds made some gains, I took the money 8 months later or so.

In the meantime, at some point in the middle of the Forex debacle, I had started to look at stocks, penny stocks and options again, and of course I wanted to pay someone for their ideas. This would release me from the responsibility. However, it seemed that every-single-place I looked at, was full of lies, hype and manipulation. Honest reviews had always something terrible to say about my new found gem, and the few reviews that were good, were usually just fake affiliate reviews.

This second stage of my marriage with the markets was less than desirable. I started to realize it was a world of piranhas: Broker fees, Mutual Fund's management fees, early redemption fees and deferred sales charges; under-performing trading newsletters that always seemed to lose its mojo as soon as one joined them; Forex trading scams; overpriced educational materials; and it all really started to annoy me. Seeing the same 4 or 5 Twitter legends that somehow, always magically avoided every loss and nailed every major market turn. Yeah, I started to get really pissed off about the Financial media, both the big outlets and several independent bloggers too. It is at this point that most traders quit, and leave the game with accumulated eternal hatred.

99% of everything out there is bullshit. It is very beneficial to always operate under that assumption by default. Even if this site falls under that umbrella of BS, I'm happy as long as it saves you from all the other garbage that pollutes the Internet.

Once you internalize that everything is BS, it becomes much easier from then on. In addition, once you understand that not wanting to take responsibility for your own trading decisions is the reason why you always end up frustrated and blaming others, then you are on your way to closing the second stage of your marriage with the markets and about to begin the third and most rewarding phase. A new stage where you understand what you are doing and you take your brain and creativity back: you do it yourself. You don't waste dozens of hours a week anymore searching for the next guru or martingale FX robot that will take you to the promised land. You clearly understand what is realistically achievable and you trade accordingly. You just can't be deceived anymore, lured like the calf who always ends up in the slaughterhouse. You deeply understand the game and learn to love it and accept it with its defects.

The whole point of this article today is to, first, make new readers feel identified: we all have losses and fall victim to scams and furus at the beginning. Lamentablemente, they are a dime a dozen. You are not alone. Second, to defend the necessity of investing/trading. Despite all the charlatans and BS out there, you'd better trade and/or invest. I don't regret learning about trading and investing for one second, in spite of the initial losses and frustrations. With central bankers printing money like mad cows around the world, the purchasing power of your savings will inevitably erode over time. It needs to grow at least 2% - 3% every year to keep up with inflation, and no bank savings account gives you those rates anymore in the free world. Not in North America and I'm pretty sure let alone in Europe. This necessity of trading/investing, leads me to the third point: You have to do it yourself. Even if you decide to end up as a passive index follower, which I'm not totally against, then at that point your approach has become so simple that, why pay someone else for doing it?

It's a necessity. The real danger is not losing money on a given year, but running out of it in life due to inflation and the constant avoidance of the most minimal risks.

Trade, invest. Do both if you want and own the responsibility: do it yourself.

Related Articles:
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How to spot paid/affiliate reviews
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The Guru
Cons of Index funds: The case against passive Index Investing

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