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Thursday, December 20, 2007

Internet Stock Trading – The Reality

The fact that you have clicked to this page indicates that you have either decided that you would like to learn how to trade stocks on the Internet, or that you have started to trade and are still pursuing a better way to trade. If you are new to internet stock trading then I am glad you came here because there are a lot of misconceptions out there.

The first question I would like you to ask yourself is why you decided that you wanted to trade stocks in the first place?

Was it the dream of working at home and earning loads of money?

Was it the thought that you could beat the markets?

Was it the images of what you have seen on T.V and the excitement of trading?

I ask these questions because for the vast majority of professional traders life is nothing like what it is perceived to be.

The early stages of your trading career can be frustrating, sole destroying and financially unrewarding.


90% Of Traders Go Bust
Believe me when I tell you that 90% is a conservative estimate. Some sources have it as high as 99% of traders losing their initial starting capital and I have also read that not only do over 90% of them lose their money but also 10% actually go bankrupt.


Why is it that so many internet stock traders fail? It is not because they are stupid. In fact statistics show that the majority of stock traders are well educated, have above average incomes and are generally highly motivated.

So why do so many fail?

Lack Of Trading Education
By education, I don't just mean learning how RSI works or drawing lines on a chart. I mean thoroughly educating yourself in all aspect of your chosen profession. Educating yourself on the correct psychological approach to the market! Educating yourself in the correct money management techniques relative to your account size. Educating yourself in the correct entry and exit methods for the trading style that suits you.

This friend is where I hope to be of some help. I don't have all the answers nor do I profess to be some kind of guru, but I will do my best to point you in the right direction.

Common Misconceptions Of New Traders
They think they can trade consistently with an 80% accuracy.
They think they can turn $1000 into $100,000 in six months.
They think they can predict turning points in their given market to within minutes.
They think they can buy a system that is 100% accurate.
They think they will quit their jobs and make a living full time after a few months of internet stock trading.

What's the reason that so many new traders believe that trading is an easy way to make money? Propaganda!

We are continually bombarded in magazines, emails and the general media by claims of making astronomical amounts of money by just applying the vendor's latest method or system.

Fundamentals Of Internet Stock Trading
Internet Stock Trading is not an exact science. You can't do X and get Y every time. It is as much an art as it is anything else. There is no magic formula.

Stock Trading is all about probability. It is the art of correctly applying a set of carefully thought out rules and allocating the probability of that event to result in success.

Each trade is an independent event. The market does not remember if you lost or made money the last time you traded.

The way you approach the market psychologically has as much to do with your success as any trading plan.

Money management is crucial if you want to have any hope of becoming a successful trader.

Matching a method of trading with your personality is the only way you will ever feel comfortable in the markets.

An adequately funded account is necessary not only to be able to take the trades you want, but also so you don't feel every trade is a live or die situation.

The journey to the road of successful trading will make you confront your deepest fears. Your armour on this journey will be confidence, knowledge and believing that you can achieve your dreams.

Never, never equate your success or failure in the markets with who you are as a person!

The Flaw In Our Emotions
As humans we have a natural tendency to try and influence our surroundings and events we take part in. This is one reason as a species we have succeeded but it is also one of the fundamental flaws we all have when trying to achieve success as a trader.

As stock traders we have to realize we have no control over the market and if we accept that then we have to accept that we can not influence the direction of the market.

The problem of course is we have a tendency to try and succeed and when inevitable losses come it is easy to let those losses effect us emotionally. Becoming euphoric when you hit a winning streak is almost as detrimental as becoming depressed when you have a string of losses.

We traders have to try to achieve a state of impartiality. We have to accept that we will have losses as readily as we will gains. Reaching a stage where you can comfortably accept losses, in the knowledge that your method of stock trading will produce profits in the longer term, is the state we have to aspire to.

Internet Stock Trading is not an exact science.
No matter what anyone tells you,stock trading is not, nor has it ever been, an exact science.

Trading Stocks is an art. To date there has never been an institution or individual who can guarantee you will beat the market every time you trade.

Just think about it, if anyone one had an exact method that always won, they would have all the money in the world, given enough time.

Big institutions with all their expertise still only chug out 10% a year in a good year. Am I saying that you can’t make money in the markets? Absolutely not. You can make money in the markets and quite often a lot more than the institutions.


The point is, be wary of anyone telling you how great they are and how their method will make you rich. Would you sell something that made you rich?

If someone is trying to sell you a system or method ask him or her for their audited accounts. Any trader with a half-decent track record will be more than happy to show you his records.

One other reason some people don’t make it in the trading game and probably the hardest for some people to own up to is, some people are just not meant to be stock traders.

Just like we are all not meant to be doctors or priests some people are not cut out for trading.

Once you finish this book take some time to ask yourself if this is really what you want to do. It might be a decision that could save you thousands of dollars. As I said at the beginning of the book, I am trying to give you an overview of trading, the pros and the cons.

Here’s the good news! Once mastered trading can be a rewarding profession both financially and emotionally. It can give the financial independence to never work for a boss again and you will learn a lot about yourself as a person on they way to becoming a stock trader.

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