Singer Bob Dylan famously wrote that ‘times are a changing’ and while this may be true, as economies and markets rise and fall, we’re not seeing this in human behaviour.
For decades, I have been asked how do you trade the stock market or FX, CFDs and the list goes on. Over this same period, I have watched individuals repeat similar patterns when learning to trade, as those who have come before them, which means while times change, people don’t.
The interesting point is that those asking the questions expect the answers to be different over time. And while the questions may vary slightly, the answer is always the same regardless of the market or economic conditions. Being a trader or investor is all about who you become because where you place your money is simply a vehicle to achieve the goals you want.
The steps to becoming a trader or investor don’t change. The first step is to establish clear goals as to what you hope to achieve by trading the markets, whether it's generating supplemental income or long-term wealth accumulation. Without clear goals, the trader embarks on a very long journey of discovery that has many obstacles, as they play the trial-and-error game hoping to find something that works.
The next step is to educate yourself. It is crucial to gain a solid understanding of the fundamentals and skills needed to become successful as a trader. Therefore, regardless of the market you decide to trade, you need to understand the various forms of analysis, how to manage risk and, most importantly, how to manage your emotions.
Before you decide to invest in the stock market, you need to develop a trading plan that will enable you to practice, evaluate and adjust your trading strategy, as required. In theory, the tools and analysis required to trade are the same regardless of the market, although the combination of rules you use may differ slightly between these markets.
It’s important to remember, that the market will always be there but you may not if you decide to trade using the ‘hope and pray’ methodology.
If you desire a better outcome, then you must change the way you look at the stock market.
Dale Gillham is chief analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online at www.wealthwithin.com.au