Ep 157: Stock Trading Coaching w/ Kirsten | Chat w/ Traders
October 19, 2017I actually have for you is a coaching student that we’ve discussed and talked about just like I do with my other coaching students and we recorded a live session.
The way that I picked this person was we just started to email back and forth a little bit and answering our questions because I always try to solve everybody’s problem even though it takes me sometimes a couple of weeks or even months to get back to everybody also if it’s on YouTube comments and so forth.
If you have a question and you sent it in, I always try to get back to you. But in this case, we went back and forth, and it just seemed like things were a little unclear or there were only questions that just kept coming in.
In either case, what I wanted to do with her permission was to post this coaching session. I’ve trimmed it down just a little bit so that way you go ahead and see what it is that we do on a coaching session or maybe you can relate to some personal advice and some insight of what you could do with your money.
This isn’t advice directly for you, but it just gives you some perspective on things to think about. If you’re in a similar situation, what is it that could happen to you if you have a similar amount of capital that you want to invest in. Then what is it that you could do with that money, or if you’re in the same stage of life, what is it that you could be doing should be doing or just thinking about before getting into trading investing or doing something with your money.
How dedicated do you want to be in trading?
Sasha: Meaning, how much time do you want to spend on it? Do you want to spend the one day a week trading, three days a week? What’s your time frame when it comes to trading?
Kirsten: Pretty much full-time. I have a job right now, but it’s only three days a week. The good thing about that job is that half of the time I am free to read or watch videos or do whatever. My kids are also pretty independent now so I can dedicate easily. I would say thirty-five hours of study time per week.
I’m aware that it’s a challenging field and then I won’t just start trading next week. I’m aware that it will take me years to get educated. I’m willing to put in that time.
How much capital did you say you’re looking to start?
Kirsten: I have a little bit over 20,000 and then a few thought maybe 3,000 or so for a course and computer setup.
Is there any specific type of trading that resonates or fits for you a little bit more than others? What’s attracting you towards a particular type of trading style, trading method? Give me some more insight on that. You’ve watched a lot of videos, so I imagine there are a few things that maybe you feel more connected with.
Kirsten: That was the big question in the beginning. I didn’t know stocks or Forex. I don’t have any emotional bonds to any stocks. A lot of companies, for example, but it seems to me I would like to learn what is not as risky. Where, maybe, the volatility is not as high. Right now. I’m going more to stocks.
Looking at this as far as you said
Six months to study. We are going to look at finding a personal strategy for you.
In the beginning, you said you want to do things less risky. That’s natural because we want to dip our toe in.
Now, you have to remember in trading. Volatility is your breath in the market. This is like your air. It’s your life. Without volatility, you have no opportunity. You have no money that can be made.
I always stress that you want volatility, you want pullbacks, you want stocks to sell off. It sounds like you’re against investing or the stock market. But if you’re active, you want the movement.
With a lot of traders as they start, they want low VIX – low volatility. This is the wrong mindset because you have no opportunity. When you have a low-volatility environment stocks, barely go up they go up only a tad bit.
When you have more volatility, they can move very quickly. That also means very soon to the downside which allows you to either buy the dip and then it whips up to the upside, allowing you to churn okay or turn over the trades more frequently.
This goes into pulling you into day trading versus swing trading
This is going to depend on market conditions as well as your personality type.
If you have kind of an A-type personality where you want to ride rollercoasters, you’re chasing money – all those kinds of things, you’re going to want to be more of a day trader. It’s not always the best situation to be a day trader because remember you need volatility, and you need a movement of the market to be able to day trade.
Can you day trade in a low-volatility environment? Absolutely.
Is it always beneficial? Not necessarily because in a low-volatility environment, it’s more difficult to day trade. Like what we’ve had, if you’ve been watching the market, with a VIX of like under ten, it’s way tougher to do day trading. It’s much more difficult simply because the opportunities are not there. There are no dips. There are a lot of fewer sell-offs. The movements are smaller to the upside. You don’t see that massive movement to the upside as quick.
You need to be flexible a little bit depending on your style and strategy but also to market conditions.
Your style and strategy
I did talk about that. You don’t want to copy someone precisely exactly necessarily.
In the beginning, trying different people’s strategy helps you open up to new ways of trading. It helps you see different variations, but you need to understand why people choose the trades.
You don’t want to do it blindly that’s my main point is is that you don’t want to go into someone and copy them utterly blind if you do that’s really where the trouble is
Can you go ahead and try one strategy and see how it performs and see if it works for you and then make tweaks with it? Absolutely. I mean that’s just part of the process of learning and discovering, but you don’t want to go on a listing website or alert system. This is the stock to buy, and that’s what you need to buy. You need to understand why people are choosing the stocks and their decision making behind it.
How much do you risk?
How long do we study? Where do we open an account? Where do we start paper trading and then maybe real trading? All of these really will depend on you.
Can these things overlap a bit? Absolutely. You can have a continuous study. If we have a study time frame, and this could continue to evolve depending on how far you want to go.
If you want to trade stocks, you could stop at a certain point. If you’re going to trade, you know let’s say options, and you decide that you love to study and you want to really get more into it, then that study timeframe can continue moving forward.
As you’re getting into this study timeframe, this will start to overlap. As it overlaps, you’ll start getting into this part of opening an account. It doesn’t mean you can’t have an account just sitting there with cash. There’s nothing wrong with having an open bank account sitting with money.
The same thing with paper trading, once you have an account open here, you can paper trade. As you do some paper trading, then you can also do some real trading. You can see how this starts to overlap one over the next, and you’re still studying. You still have your open account, and you can continue to paper trade like you’re trading stocks and you’re trading stocks in a real way, but you’re still paper trading the options side of things.
Depending on how far you want to get into the education part of it.
How much time do you devote to this?
It depends where you’re at and how quick you’re getting and picking things up. I always say once you have some basic knowledge, get into an opening that accounts reasonably quickly, and start paper trading reasonably immediately. It’s just a fear thing that people automatically begin losing money, but it’s the case of just opening an account. So get an account open, and at least you’ll have a paper platform.
The study part you’re going to continue to study for quite a while on that side of things so at least I would say put one, two, three months as a general guideline into studying. In the beginning, that’ll give you the right amount of knowledge to be able to start paper trading.
If you’re worried, you talked about getting into the losses, and you said you don’t want to risk too much and you don’t want to lose your full account because there’s not going to be another account. You can always trade one, two three shares. There’s nothing wrong with that.
If you do three shares of stock, let’s say you’re trading Apple at $150 or whatever stock at $150, that gives you an opportunity as things move higher. You can take one off into strengths, so you sell one and you still have two left over, or you could get in with three get out with three. That’s why I usually say two or three shares is good because you could take one off into strengths.
If you want to do your calculations, you can multiply that times a thousand if you’re going to see the real figure or maybe a higher figure or the potential.
The reality is there’s a risk. You lose a bit on commissions, but even if Apple drops to let’s say to $100 a share, you’re only risking about a $150 from three shares rather than $5,000 or $10,000 that many people do right at the beginning.
That’s a nice starting point at the beginning to get your feet wet. There’s nothing in the rule book that says you have to trade with 30 shares or 300 shares or 3000 shares. There’s nothing that means you need to put on that amount.
You have commissions but you know I would much rather see people lose let’s say $20 on commissions each time than a five or 10,000 dollar drop for not knowing what they’re doing.
This is an experience, and you can’t buy experience. You can’t walk into a store and say can I buy five years of experience. So if this makes sense, you still want to get into the active side of trading. But you can do it with a limited amount of lower risk without killing your account. Without getting into some significant damage and cutting your mind in half. That’s really where a lot of people struggle is that they go too big too fast too soon. It’s like giving a 16-year old kid a Mercedes or a Ferrari at the beginning. It just doesn’t make sense at the beginning because they’re new to driving.
There’s a couple of factors that are involved
Number one is your awareness of yourself. I would say that’s probably the biggest thing that I see most people not focusing enough on, is how well do you see yourself from an outside perspective? For many people, they think I got it, and this is easy. The market keeps heading higher and then it’s that one or two weeks that you get a market turn in the other direction and all of a sudden they lose half of their account. All things completely changed, so that’s one thing that can help speed up your learning process.
It becomes a combination of your learning process. I would say doing coaching sessions is probably the fastest way to get there because you’re focused on you, but it’s also the most expensive.
The cheapest or cost-effective method is just free videos online. Can you get there that way? Absolutely, but it just may take you longer because now you have to put the puzzle pieces together and experiment and that kind of thing.
If I go back to the drawing board
Am I willing if I had a twenty thousand dollar account and I wanted to go ahead, and I’m ready to spend ten thousand dollars of this on books, courses, coaching, seminars, anything that I need to do to be able to get there quicker?
On the flip side, some people may say hey I have this $20,000 account, but I only want to spend you know $1,000 on the same material. If in this case it takes you seven years to get there and in this case, it makes you three years to get there, which one is better? That one’s going to be a personal preference and a personal matter again.
For some people, they value more the financial additional – $9000 over here, because they think they want to trade with that. For other people, they want to shed this additional four years of time and headache. It’s a balancing effect. You can’t make any promises for anyone specifically of what’s going to happen one way or the other. It’s just more of you personally going with your studies, putting in the time – actually doing the trading screen time, and where that balance is.
I thought that the options are for later. As a beginner, I would start with stocks and not with options.
It’s a stepping stone. But then, you want to know how far you want to take it. For some people in their mindset, they already say I don’t want to do options at all 100%. They know that.
When you say that you know it limits you because now you’re not open-minded, how far do I want to go? How much knowledge do I want to put in? The most significant factors for learning I know, and I disagree.
If you can be open and you can say hey I’m willing to take it as far as I need to, take it but that also depends on the kind of lifestyle you have.
So, you said you want to do some replacements of your income, with a $20,000 account. That also comes down to how much are you looking to make on this.
What is it for you? What are you looking to do?
Kirsten: Short-term goal, which is three to five years, is $1000 per month or more if that’s realistic. I don’t know how realistic that is for my account. That would be enough for me to have a minimalistic lifestyle.
But long-term, of course, I would like it to grow long term. I would also like to afford a small piece of land one day and put a tiny house on it or something. But that’s not in discussion right now.
A thousand a month. You’re looking at about 5%.
Sasha: Let’s take a look so here when we do this and we go into it uh with a $20,000 account at 5% that’s kind that’s where you’re looking at $1,000 a month okay 5% is a reasonably healthy I would say more intermediate to advanced trading already at that point or people with higher risk
It’s a little bit higher risk. It’s a little bit more advanced because the typical standard market percentage is 8% or 8% is the average growth. So if you’re looking at 5% a month, that’s a lot quicker on growth.
The other thing you have to take into consideration on this is that typically you’re not going to trade your full account balance. Even if you trade only half your account balance, let’s say 10,000 dollars, that all of a sudden shoots this number much higher.
That’s one thing to keep in mind because you need to take into consideration the losses. You need to take into consideration any adjustments, just capitals to fix things and capital on the sidelines for investing and taking opportunities.
Usually, in the beginning, you only risk about 50% on any given month at most. A lot of people say 2% is this common standard because then you’re less worried about it. For me, as I get into more coaching students, I find that even 50% is excellent because if you’re more active and watching things, it’s not as big of a deal. If you’re watching things and if things make a turn, you can always get out of those positions, especially on a lower account.
But in this case, you’re still looking at trading with half that account size. This forces you to make a much higher return on that.
You have to either raise your capital mount or that also means raising your rate of return.
The more capital you have, the less risk you can take. The world is set up in a big way to cater to the wealthy and the rich. It’s like when you go into a bank, and you get a safety deposit box. If you only have a thousand dollars in there, you’re going to pay for that safety deposit box. If you have a million dollars in that bank account, you’ll have a free safety deposit box, free cheques, and many other things.
Those are some things that you’ll want to consider as well as you start looking to trade or hit those targets.
I’m not saying you can’t do it. I’m just saying at your age. You’ll want to be more conservative. Watch the risk, especially as you’re new. You’ll want to watch the risk. You’ll probably start with making half a percent, maybe then getting that to three quarters, perhaps then one percent. If you’re looking to get into five percent right away, it’s a little more complicated and tougher. Not saying it’s not possible, I’m just saying that have that concept in mind. Also, you’ll probably want to trade with perhaps only half your capital to start with simply because you’ll want to use that additional capital for other investments as the trade ends.
As you take profits, you’ll have that other capital to use for what you need.
Kirsten: I was thinking about this number of $1,000 per month rather after three or four years of training. I’m aware that this is not a beginner’s number definitely and the good thing right now for me is I don’t have to make a profit within the first two or three years. It’s all about learning and experiencing.
Sasha: That’s a good starting point and a good mindset. You have to work out a plan and work out the material in the courses how you want to get there, a lot of strategies to try and get a broker.
Many things on the checklist to get there but if you have kind of a target in mind, that’s a good starting point. But I would say an excellent next step is to say these are the things I want to learn. These are the things I’d like to try, a couple of books I want to read – all those kinds of situations and layout kind of a little plan.
It doesn’t have to be that specific because plans will change, but it just gives you an idea.
Is there any way that people make the same mistake over and over again in trading and they can’t figure out what they are doing wrong or will you eventually learn from your mistakes?
Sasha: That’s what we talked about on the awareness part. It depends if you can look in the mirror and say hey I messed up. Which if you look at politicians or many other people, they usually try to brush it off. This is the right thing to do. The idea is with trading, and you can’t do that. You have to be quick and say hey I screwed up, that was bad, I was wrong. You need to be very quick at that.
Can you learn from those mistakes? Yeah. Most people don’t, and that is because most people are not self-aware. Most people don’t look in the mirror and say hey I screwed up, and it was my fault. Most people think they’re the most significant drivers. They cut in and out. It’s the nature of humans. We don’t want to say we are wrong, we have flaws. What’re our weaknesses? It’s a natural defense and protective mechanism.
Can you learn from them? Yeah. If you’re more aware. If you’re more developed, maybe you can film yourself. Sometimes, having a coach helps as well, but otherwise, it may just take a lot longer. If you do it on your own, if you’re less aware, if you’re more informed, you can maybe catch it right away within a second.
It depends on how deep the issue is or the problem. Self-control, emotions – that’s a big thing that many people don’t focus on. It’s that inner game because it takes the two parts as I always talk about the inner game. The outer game that you have is the charts. The actual trading, that’s what most people want to focus on.
Final Word
Very few people focus on themselves, the emotions. They don’t invest in themselves as much of how do I deal with this. How do I compensate for a losing trade? They might try to say how do I fix a trade but not how do I clear my mind to go against the grain.
I would say that’s just as important. It’s not more important than the books, on the external factors or the actual trading part. It’s almost like reading the psychology books which are not even trading related, but they’ll help you understand yourself.