“I’m just going to throw in fifty dollars and see if I have any success.”
This is the approach that encompasses the minds of many first time investors, myself included. And of course, one of two results will occur…
- Getting Lucky: Let’s say you make $10 that first week. Naturally, as conceited as humans are, the juvenile trader attributes this success to their own mental superiority, self assigning themselves as a Natural to the game.
- Immediate Failure: This was me, and will be most people with a casual approach, losing 20% in our first week, cutting our losses and saying to ourselves “This is really hard and not for me, I’m out of here!”
Now, let’s take a step back and see where the First Big Mistake really occurred. It did not occur in our immediate self-labeling as a Gifted Talent or an Incapable Loser. No, it occurred even before that.
Our First Big Mistake happened when we casually approached trading with no plan. This was because we are scared of failure and didn’t want to fully commit.
When trying something new, like skydiving, we research and make a plan that we can stick to. We also make a backup plan in case something doesn’t go as planned. So ask yourself, why should trading be any different?
In closing, I’ll remind you of the old adage we’ve all heard time and time again…
“If it was easy, everyone would do it!”
Have a good one and may all of your wildest trading dreams come true!
Z. Rowe Price