You’ve seen the ubiquitous websites touting: “Get rich in the stock market,” “Learn the secrets Wall St. doesn’t want you to know,” “Guaranteed gazillion% returns in days,” “Beat the market system,” etc.
The electronic Tower of Babel is replete with slick hooks designed to grab the gambler, the lazy, the ignorant, and even the well-intentioned novice into a world where experienced money preys on uneducated money. The hooks are designed for those who think, consciously or unconsciously, in contradictory terms of a no-risk can’t lose way of paying for a new Benz with little more than the overdue mortgage money left in his or her checking account. All this within a risk environment.
Whether or not someone has decided to play with money they can ill afford to lose or whether they’re playing with a windfall, why would a sane person make an impetuous decision to buy into that hype?
The quick answer is greed. Everyone wants to make money the easy way. You, me, everyone loves this possibility. Maybe everyone needs to pay more attention to the other “P” words, probability and preparation.
The more subtle rationale why some folks nibble on the hype and others are just gaffed onboard, in my opinion, is: what may have once been legitimate curiosity and interest in trading (regardless of personality type) collided with peak frustration as those wannabe traders surfed the trillion web pages dedicated to the stock market. Of course the more impatient ones get hooked first.
After weeks of surfing the web for stock market trading information, not unlike a night’s end at the roulette wheel where any number will do, any website will do. Click. Gotcha!
Newbies to trading the stock market have such an intimidating mountain of information to overcome that had Sir Edmund Hillary had the itch to trade, his skeleton would have been found at his base camp. Ultimately, Sir Hillary succeeded due to one reason only, he prepared. The mountain before him was his opportunity. Preparation meets opportunity… seems to work every time.
The market offers opportunity every minute of every day. Newbies have not yet learned that preparation can and will capitalize on those opportunities. The gambler, the lazy, the ignorant, and even a level-headed novice will often fall prey to the come-on websites suggesting a can’t lose opportunity. Human nature just has a way of making some people do things they might not ordinarily do. We want the easy way in all things if possible.
My nonprofessional judgment on that behavior suggest that it falls under the mightiest of all motivators, especially when it comes to money – fear and greed, the very yin and yang of Wall Street life at any level. To underestimate those primal emotions, no matter one’s motivation to participate in the market, is a grave mistake.
A grave mistake? “Is there any other kind?” said Jack Nickelson’s character in “A Few Good Men.” No, there is no other kind, Jack, you’re right.
Here is the poster child example of someone looking for a lotto win in trading without preparation. The opportunity was there, like Sir Hillary’s mountain, but clearly this trader’s preparation was nothing more than hope as a strategy to get rich quick. Pretty remarkable as it is pathetic and sad, isn’t it?
Now the fear I mentioned may be fear of losing, but it may also be fear of winning believe it or not, which is why some traders will unconsiously sabotage their own trading to stay in their comfort zone. Winning takes them out of that comfort zone like a golfer playing well below par on the front nine chokes on the back nine because he just knew he was playing beyond his ability. The back nine debacle convinces him he’s where he belongs. In trading, maybe it’s fear of getting into or out of a trade too early or too late, or just fear of losing money, or even just fear of not being right forget the money. Whichever it is, fear is a powerful motivator.
The flip side, greed, is equally powerful but for opposite reasoning. Traders spend the winnings mentally before actually having won. They ignore the opposite side of the trade. In fact they ignore just about everything that might suggest this is not a good thing to do at this time. Everything is cast aside including technical analysis, fundamental analysis, timing, and money management. It reminds me of the roulette wheel player picking a number simply because he/she has a feeling about that number.
When I was a young stock broker, back before the earth’s crust cooled, a veteran broker had a hardback book about a half an inch thick or so titled, “Everything I Know About The Stock Market,” conspicuously displayed on his expansive highly polished cherry wood desk. During my first visit with him I picked it up promptly thumbing through the pages knowing I’d find a few nuggets of wisdom. The pages, all of them, were totally blank. Not one word, not one letter on any page… nothing.
In fact, in retrospect that book actually spoke volumes about the task at hand in appreciating and understanding the day-to-day machinations of an illogical market as a result of millions of logical players making trading decisions for their own self-interest the net results of which may or may not be in the best interest of your current trade or position.
Such is the challenge of the stock market on any given day. The more subtle challenge is survival and consistency, neither of which is achieved without preparation and education. Playing for what traders call a lotto win, small (or large) amount at risk with lotto type odds, is for the gambler, the lazy, the ignorant, and the naïve.