CMU: To be a successful trader, don’t be like this guy

By Jani Ziedins | Free CMU

Sep 05

Cracked.Market University

Put yourself out there long enough and inevitably you run into the angry cynics that try to knock everyone down to their level. Rather than learn from the people who are more successful, these people criticize everyone doing a better job. That is their natural ego defense. When they cannot do something, they automatically assume everyone else doing it successfully must be a cheater and fraud.

I’ve had more than my share of hecklers over the years and I learned to ignore them a long time ago. But the comments I got the other day are great examples of the wrong way to approach the market. I wanted to share this with other readers so they could learn from them and avoid making the same mistakes:

This guy is a 100% jackass. A few months ago he was encouraging to “take profits” and now he’s saying “told you so”. Complete blowhard, waste of space. People like this need to disappear.

I will call you out again. Your blog is horseshit, always has been. Here you say “take profits” and previous blog “we are going much much higher”. This way you’ve covered both your bases..if it goes up, you say I told you so, if it goes down, you remind to take profits. Utter bullshit and this is what i would expect from a paid service. A self important blowhard who speaks from both sides of the mouth without committing to one or the other. Please, go into a cave and save us the trouble from reading this garbage.

The first thing I want to acknowledge is I have complete control over this blog and could easily delete negative comments like these. But that’s not who I am and I definitely don’t shy away from criticism. Instead, I embrace it. I leave these critical comments for everyone to see, even when I disagree. Recognizing a difference of opinion is always useful when trying to understand how other people think about the market. This is a zero-sum game and my profits come out of someone else’s pockets, just as his profits come out of mine. Understanding how the other participants think is a very valuable tool when figuring out what to trade next.

I don’t know who this guy is and I don’t care. I’m not going to cyber-stalk him and I don’t want anyone else to either. We’re traders, not bullies. In fact, we should thank him for giving us these great examples to learn from. Even though I don’t know anything about him, there are quite a few things we can learn by analyzing his comments.

This guy is definitely angry. Between the swear words and personal attacks, he is directing a lot of negative energy toward me. If there is one thing I noticed in all my years of trading, people who are making money are in a good mood. They don’t kick their dog and attack random people on the internet. If anything, people having a good year are far more likely to brag obnoxiously about their good fortunes than criticize other people. (A great topic for a future CMU post. Subscribe to Free Email Alerts so you don’t miss it.)

If this guy is angry, it is safe to assume he is losing money and he is looking for someone to blame. He mentioned what I wrote a few months ago, so it appears he has been reading my free blog for a while. That also tells me he is relatively inexperienced since most professionals come up with their own trading ideas, they don’t browse the free educational blogs.

Last week the stock market made all-time highs and everyone invested in this market is loving the ride. What that tells me is my heckler sold this strong market months ago and is bitter because it left him behind. And if it wasn’t already obvious, he made it clear when he criticized me for suggesting traders “take profits” during one of the market’s numerous up-waves this spring and summer.

I’ve seen this often enough to know exactly what happened. This guy was cynical about the market and was looking for an excuse to sell. He read my blog post suggesting people take profits and that is all the encouragement he needed to bailout. Unfortunatly for him, that is only half the story.

I’ve been buying weakness and selling strength all year. While the market is up a very respectable 10%, I’m up a lot more than that selling each surge higher and buying the inevitable dip that happens a few weeks later. Do that with leveraged ETFs and a good year becomes a great year.

The problem is this guy followed my advice to take profits, but that is where he stopped listening. Rather than buy the next dip, his bearish bias took over and he refused to jump back in. He missed the rebound and the higher the market went, the more bitter he became. But rather than acknowledge and correct his mistake, he decided he wanted to blame someone else. This time it happened to be me.

I don’t mind. It is been a good year for me and I’m definitely one of the traders that is in a good mood. There isn’t anything he can say that bothers me. The only reason I even acknowledged his unjustified accusations is to share his story so the rest of my readers could learn from his mistakes.

First lesson: Never get emotional about the market. Losses are a part of this game and are no different than inventory expense for a retailer. As long as we make more money than we lose, everything is good.

Second lesson: When things don’t go well, be honest with yourself and don’t blame other people. If you lost money, it isn’t Trump’s fault. It isn’t some CEO’s fault. It isn’t the Fed’s fault. Or some blogger on the internet. You and only you made that decision to place a trade. Own up to it and take responsibility. Sometimes things don’t work out and that is just the way it is. Learn from your mistake and move on.

Third lesson: Respect and learn from everyone around us. There are traders with a lot of experience willing to share their knowledge with others. Hecklers stroking their fragile ego by putting down other people will never get better. (But to be brutally honest, I don’t mind. My profits need to come from somewhere, so it might as well be their pockets.)

And just to remove any doubt about this heckler’s accusations, I charted the various calls I made this year. How did I do? (Subscribe to Free Email Alerts so you don’t miss any more calls like these.)

January 25th: “Enjoy this rally higher over the near-term, but stay alert and keep close to the exits.”

January 27th: “there always comes a point where we run out of buyers. And it looks like we reached that point last Friday”

February 5th: “For those of us that took risk off the table during this run-up and have cash to spend, this dip is extremely attractive.”

February 9th: “Risk is a function of height and this is the least risky point in several months. Traders should be embracing these discounts, not running from them.”

March 6th: “we should expect a lot more volatility over the near-term as the trade war rhetoric ramps up. We will likely see further weakness over the next week.”

April 3rd: “Even though prices could slip a little further, this is still a very attractive place to be buying. We were asking for a dip and the market gave it to us. Don’t lose your nerve now just because everyone else is freaked out.”

April 24th: “If this market was going to crash, there have been more than enough excuses to send us tumbling a long time ago. Instead of selling these bearish headlines, confident owners are holding for higher prices. When owners don’t sell bad news, it stops mattering.”

June 12th: “Things still look good for our medium-term stock positions and long-term investments and we should leave them alone, but for short-term swing-trades, this is a better place to be taking profits than adding new money.”

June 28th: “Two-weeks ago we should have taken profits into that strength and this week we should be buying the subsequent dip. Everyone knows markets move in waves, so get with the program and trade the waves!”

August 9th: “The risk/reward has shifted against us and this is now a better place to be taking profits than adding new money…..we cannot buy the next dip if we don’t have any cash. Buy weakness, sell strength, and repeat until a good year becomes a great year.”

August 14th: “While it already looks like the Turkish selloff is dead, we need to hold this bounce for a few more days to be certain. There is a chance this bounce could fizzle and we continue slipping back to 2,800 support. If that happens, that will be a far more attractive entry point.”

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.