STOCK MARKETING TRADING: MARKETS DON'T MOVE BECAUSE THEY WANT TO . . . THEY MOVE BECAUSE THEY HAVE TO

AVERAGE STOCK MARKET TRADING TRADER PROFILE: THE WRONG SKILLS IN THE WRONG PLACE AT THE WRONG TIME

Individual stock market traders live in a state of constant flux, stuck between two worlds that combine the best and worst that stock market trading has to offer. On the one hand, they can move in and out of stock markets with an ease and efficiency large funds can only dream of. Stock Market traders have the freedom to carve out specific niches for themselves that the manager of a pension plan could never achieve or duplicate, and in so doing have the opportunity to create an independent life, free from the hassles of the Average Joe. These perks are extremely appealing and impossible to duplicate in any other profession other than stock market trading.

Reasons for stock market trading full or part time are many, and can range from wanting a career change, a wish to be more independent, the desire to escape the responsibilities of running a large corporate division or individual business, or choosing to be a stay at home parent. Stock market trading is a "job" that offers the chance to make a very nice living, and it's a lot more interesting and fun than any other profession . . . except being a rock star, of course. But if sharing the stage alongside U2 seems slightly out of reach, then stock market trading is a good alternative.

It can be done from anywhere that has reliable Internet access. There are no bosses spewing forth inane, ever-changing contradictory orders as they struggle within a system that has promoted them right up to--and through--their level of competence. Employees are not necessary. Those of us that have survived the corporate world can find nothing on this earth that equates to the freedom and beauty that comes from no longer having to manage a large group of dispassionate human beings. Stock market trading startup costs are minimal thanks to leasing programs from companies like Dell. Stock market trading in your robe or nothing at all is perfectly fine. Best of all, a stock market trader can choose his or her own working hours. Some examples of schedules from successful stock market traders I work with include: Trading actively October through April and then taking the remaining 5 months off. Stock market trading only the first two hours of the market open and taking the rest of the day off. Stock market trading until they make 50% on their capital and then taking the rest of the year off. The list goes on and on. With so much to offer, it is no wonder that tens of thousands of people toss their hat into the ring, trying to make a go at this most appealing of professions. It truly represents the American Dream.

However, with so much freedom comes a cruel price. Simply put, the stock markets cannot protect a trader from him or herself. An individual stock market trader, unlike a fund manager, is unsupervised and has the freedom to act unchecked in any way that they choose. And for some stock market traders this means acting like a 7 year old child who has just been dropped off at a Toys-R-Us after chugging two cans of Mountain Dew. Unfortunately, this kind of freedom reinforces bad habits, and the net result is a stock market that moves and thrives in such a way as to prevent as many people as possible from consistently making money. Why is this common in stock market trading? It has to do with stock market traders being the best salespeople in the world.

Although used car salesmen are saddled with reputations as being pushy and dishonest, they don't hold a candle when compared to the average stock market trader. A stock market trader, once in a position, can deceive himself or herself into believing anything that helps to reinforce the notion that they are right while stock market trading.

When faced with a loss, Joe Stock Market Trader will look at a chart and tell whomever is within spitting distance, "The stock market is acting as if a reversal is about to happen." Net result: He does not exit the position, and his losses mount. When faced with a profit, Joanne Stock Market Trader hesitates to pull the trigger, telling her cat, "The stock market is acting great. It would be premature to sell at these levels." Net result: She does not exit the stock trade, and it turns into a loser. The mistake these stock market traders are making is a common, yet fatal affliction found in most traders who are stock market trading. They are unaware of how the stock market naturally programs their reactions so that they will lose. And they are unaware of the key factors that really move the stock markets that I discussed in the introduction. The net result of one who is stock market trading is a trader who "eats like a sparrow, and defecates like an elephant." This is a situation, of course, that no account can withstand. Worse, this cycle of emotional slavery will never end until it's met head on. Unfortunately, professional traders who are stock market trading understand this all too well, and they are setting up their stock trade parameters to take advantage of these situations.

IT'S ALL ABOUT PAIN AND SUFFERING

The problem is simple and twofold. First, although a stock market trading trader certainly knows that not all stock trades are going to work out--he does get a distinct feeling right after placing every stock trade that this trade is going to work out. A study done by a pair of Canadian Psychologists documented this fascinating aspect of human behavior. Just after placing a bet at the racetrack, people are much more confident about their horse's chance of winning than they were immediately before laying down the bet. Obviously, there is nothing about the horse that changes, but in the minds of those bettors, its prospects improved significantly once they placed their bet and got their ticket. Without getting into a large psychological treatise on why humans behave like this, it has to do with a strong, underlying social influence to appear consistent with our choices. Once we make a choice, we respond to external and internal pressures in such a way as to justify our earlier decisions. If we made a good choice, then this process works out very well for us, as we will continue to build upon our good choice. However, if we made a bad choice, whether it is regarding a stock trade, a job, or a boyfriend, then this process will take this bad choice and make it emphatically worse. We will simply refuse to let go and move on, being more concerned about trying to act consistent in regards to our earlier decision. What a waste!

Second, many traders who are stock market trading feel they can rely on their judgment while in a stock trade. On paper, this makes a lot of sense. After all, before a stock trade is placed, a stock trader is at his most objective. However, once the stock trade is on, the degree of objectivity in stock market trading diminishes immediately and in direct proportion to the number of shares or contracts being traded relative to the account size. Think of it this way: If one stock market trader is long 10 Emini S&Ps in a $10,000 account, and another stock market trader is long 1 Emini S&P in a $50,000 account, who is going to be sweating bullets over each tick? Not only does the first guy already have the feeling that "this stock market trading is going to work out," but now he is trapped with the additional pressure of having to manage a position that causes huge equity percentage swings with every tick. A stock trader relying on their judgment while in a position that is churning their brain with extreme emotions is like trying to row a boat upstream with a piece of Swiss cheese--it simply does not work.

These factors perpetuates a vicious cycle, with the end result being a stock trader who, like a bad used car salesman, is consistently selling himself a faulty collection of beliefs that sets himself up for slaughter while stock market trading. Instead of following a trading system with which to exit a position, the stock market trader in this situation spends his time justifying why he is right in his stock market trading, and will only end up closing a trading position for one of two reasons. First, the pain of holding becomes so great he cannot "take it" any longer. Once he reaches this "uncle" point, he starts frantically banging his keyboard to sell (or cover) "at the market" in order to relieve the pain of stock market trading. Second, his stock market broker politely offers to help him out by giving him a phone call, gently letting him know that he should exit his position. This is also called getting a margin call in stock market trading. This trade is also placed "at the market." In these situations, there is no plan, no thought, and no objectivity. Just a batch of forced sell orders, or, in the case of someone who is short, a batch of forced covering. This act of capitulation, stock traders exiting a position because they have to, not because they want to, is emotions-based stock market trading at its finest, and this is what moves the stock market. Whether it is a sustained multi-month move to the downside due to continuous capitulation selling, or a quick 10 minute rally due to shorts being forced to cover, these acts are responsible for the major moves in all markets, on all time frames in stock market trading. In the end, stock markets don't move because they want to. They move because they have to.

The pressure of a stock market trading trader trying to act "consistent with their original choice" combined with a stock market trading trader who is trading way too big for their account, leads to more disasters in stock market trading than anything else. Disasters for most people, that is. For every ten to twenty stock market trading traders that are blowing up their account, there are typically one or two stock market traders that are making a mint. After all, the money doesn't just disappear. It simply flows into another account . . . an stock market trading account that utilizes setups that specifically take advantage of human nature. That is the nature of stock market trading.