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Hey, this is Sasha Evdakov. I want to share with you some wisdom or insight of who should not trade or invest in the stock market. Or invest at least actively.
You should be aware of some of these things because if you're doing some of these things or you don't have the right skill sets, and probably you shouldn't be trading.
Key Things to Look at and Be Aware of
It's essential that you're self-aware to be able to understand if you're doing these things.
I'll give you some fun little insight stories that have happened over the past traders I've talked to. I know that some people should take a step back. Those people have to focus on their education or skill sets before getting into the market.
Be Comfortable Making a Phone Call
The first one here is picking up the phone and making a phone call. What's interesting about this is if you're not willing to pick up the phone and make a phone call you probably should not be trading.
Many people send me emails. They might write a comment and what happens is they'll ask me something like this:
- Can I do this in my broker?
- My broker allows me to do this.
- Do you know how I can do this on this platform?
I get a lot of questions regarding these kinds of things. The other thing is that I don't have a brokerage platform that I own. And you're not going in, and you don't have an account with my brokerage platform.
For you to contact me to explain to you how their brokerage platform works - it doesn't make sense. You're putting in another barrier in between the goal that you're trying to get.
This is a better approach: Make a phone call to your broker and get the direct answer that you need. The main reason is that I don't know your account situation. I don't know how you have your account set up.
I don't know if you're able to trade options if you're asking me options questions. And why you can't trade certain option contracts. If you're not willing to pick up the phone and call you're probably not willing to do the homework.
Maybe you think that I know everything and that's not always the case. Pick up the phone, call your broker if you have a broker related question.
That's all about doing your homework and not to mention you get a direct path to your question. You get a straightforward solution to someone that knows precisely what your account looks like.
Picking up the phone is one of the things that you should be able to do to get those questions answered. Of course regarding your account on within your broker.
Do You Think That Trading is Equal to Gambling?
If you think trading is like gambling that can be a problem as well.
Maybe you already made up your mind that stock trading is like gambling you probably shouldn't be trading. This usually tells me that you don't have enough experience or education to understand what's going on.
I've done an episode on this on trading and how it relates to gambling in the psychology of it. If you assume that trading is like gambling, this is because you think trading is throwing money. You're not looking at investing or at the strategies of an investor or a stock trader.
Instead, you're looking to have a crapshoot, see what happens, makes money. Maybe you lose some money, but there's no consistency behind it.
The thing is if you already have this mindset approach to it you probably should:
- do something else
- invest more in your education
When you have more education, then you can go back to it and understand that business. Otherwise, you could also think like real estate investing is also like gambling. Especially if you're ten years old if you don't know it and you don't understand it. Of course, you're not going to know what you're doing.
It takes education and experience to understand what's happening. Then you can become successful. Look at some of the successful traders and investors - Warren Buffett. He probably didn't think it was like gambling.
In either case, if you think of it as gambling, then you need to stop trading. Go back, do more education, and get some more experience. Then move forward after that.
Are You Patient Enough?
Imagine you're going shopping and you're waiting in line. Let's say there's like seven people in front of you. They're pushing the cart. You have your cart, and you have a basket full of groceries. There's a bunch of people in front of you.
Then they're going through the checkout line, and they're going relatively slowly. Now the question is: Are you mad? How is your patience?
What that tells me is are you patient. Are you willing to wait in line without getting frustrated?
And if you aren't then you probably aren't going to be patient enough to get into the stock that you need to get into at the right price. You probably want to jump into things. You think: Let's get this done. Let's get the quick money. This is an interesting little test that you should watch out for yourself and be self-aware.
Ask yourself these quick questions:
- Am I mad?
- Am I frustrated?
- Do you want things to hurry up?
We usually do want things to pick up. The thing is how are you dealing with that behavior. How are you dealing with your internal battle that's going on?
A lot better approach when it comes to stock trading is to wait until things clear out. That's a better approach when it comes to investing as well.
If you're getting frustrated probably, you shouldn't trade. Then you'll be trading as a frustrated person. You might be mad or worried. It's crucial that you look at your patients to being able to wait for the right opportunities when they present themselves.
Do that little test and see. Otherwise, if you're anxious, maybe you should hold off trading for a little bit. Build up that patience mentality.
Do You Get In Love With a Certain Product?
Here's another neat little test - The Love Test.
Ask yourself this: Do you get in love with a specific product or service?
Many people fall in love with Apple phones and Apple products. They love the product. And since they like the product they usually make the investment based on the love that you have for something.
That's how a lot of people approach purchasing and their products.
It's okay to say:
- Hey, I love my phone. It does a lot of great things for me as far as my business goes.
- Hey, I love the camera that I'm using. It creates and produces a great video shot and outstanding quality.
But it's not to the point where when I see something at the store, and I have to make that purchase.
These things you will see:
- you HAVE to
- you NEED to
- you WANT to
All of a sudden these things creep up as you're at the store. Then this can be a problem for a person that's looking to get into stock trading.
Catch yourself if you're doing this. Then you're probably not ready to trade. You probably should not be trading, and this is because you get emotionally tied to a specific stock.
You get attached to a stock emotionally because, for example, you love Apple's products. In that case, you'll invest in the stock.
This might be the case as well: I love the lawn mowers that John Deere is producing. I'm going to get into it this. This is what happens with people when they do a GoPro, the Groupon, Twitter, and Snapchat.
The thing to remember: If you love a specific thing there's nothing wrong with enjoying a product. But if you're saying this often it may have the same effect when it comes to stocks. Be very careful.
Do You Have Advanced Computer Skills?
If you don't have excellent computer skills or technical skills, you probably shouldn't trade. When I used to do a lot more password resetting people would call me up. People would struggle to reset their password.
It told me a lot about people on how technical savvy they were. Sometimes when I would listen to people about the way that they explain things that told me that they weren't computer ready.
They were struggling with that. And they lack technical skills to trade. If you're the person that struggles with a password reset on:
- a Capital One
- a Bank of America or
- a popular website
Maybe you're the type of person that doesn't know how to minimize or maximize your browser. Or you don't even know what a browser is. If you struggle to check your email, then these are some vital signs where you probably should not trade.
Your end goal right now should be to build the computer skills.
You build your skill set up first, and then you get back into trading. I'm not bothering you if you don't know this because we all start somewhere.
It's perfectly okay if you don't know how to:
- reset a password
- how to check your email
- how to minimize or maximize the browser
- have multiple windows open
But you have to develop those skills.
When you get into trading, you'll go into this very complicated trade panel. It's going to have a lot of windows, options, and features.
You'll probably need to detach specific panels or click certain things. There's a lot of icons and if you click the wrong thing or you hold the Ctrl key, and you can make an enormous mistake. You can get into a $50,000 trade by accident. That becomes a problem if you are not skilled enough.
Don't get me wrong. It's not that you can't get there. You need to build your computer skillsets first. Then get into trading because you don't want to make a hugely expensive mistake.
Are You Ready to Invest in Yourself?
Here's another good one for you. It's all about investing in yourself. Investing in a $15 book to learn about investing or stock trading is always a smart decision. If you're not willing to spend $15 to get a book that will help you, you're not ready.
You need to invest the effort, time and energy into it. If you're not willing to do that, then you probably shouldn't trade or invest in the stock market.
This might be the scenario: You can spend $200 on books (even $500) and eventually you'll be trading with $10,000. As your account grows, you might end up trading with a more substantial amount. So spending that amount on books isn't that bad.
You might be starting at $500,000. Everybody's at a different point. The thing is that some people even at a high degree level of income they didn't want to spend $50 or $200 on some books and education.
Some people have a $500,000 account, and they don't want to invest in education. They think they knew better because this was their IRA or retirement account or 401k whatever the account is and that account went back down to $100,000.
That happens because they didn't understand what's going on and what's happening.
There're only two reasons:
- they were too cheap not to buy the books
- they didn't want to invest the time and energy
That cost them a lot of their retirement savings and a lot of their income level for the future. This happens to multiple people. This is not one single case.
Pro Tip: Take the time, invest in your education, and invest the energy. You'll be much better off in the long run. Or at least you'll be somewhat prepared.
If you took $10,000 and that went down to $7,000 you could have bought $3,000 worth of books, courses, and personal private coaching sessions.
Think about that.
Don't be hesitant to spend $15 on a book and spend time and energy on reading and studying about your investments. If you are, then you probably should not trade.
Are You The Person That Follow The Crowd?
The final point I'd like to make is following the herd or a crowd. If you're the person that's always moving towards the crowd and following other people, this is not the best approach. It's not good for trading.
I mean often you want to move with the trend and when it comes to stocks. If you get news and use a story that breaks out and then you follow based on that news, then this is probably not the best approach. It could be due to gossip. Somebody's talking about gossip, and then you believe that rather than going and doing your homework.
If you believe every single thing that I say then you probably shouldn't be trading. Instead which you need to do is take these theories and concepts and evaluate them. Go and do your homework and your research.
I try to make most of my material as useful as possible, but you still need to do your homework. The main reason is the way that I think is different than the way that you think. And the way that I make decisions might be different than the way you make trading or investing decisions.
The Google Effect:
This is what that means. People research on Google and they say if it's on Google, it is the truth. It doesn't mean that is the truth.
The same thing happens with reviews of books. The competition might buy these books and does terrible reviews. Or mediocre ones so that way it creates doubt in your mind for that product. And then it pushes you to other products which could be that competition.
You may not realize that this is happening, but that's the way the game is played. That's the same thing in the news, gossip, and trading. If you're the type of person that's not doing your due diligence, then you need to pause on your trading.
Take a step back; don't trade. And then as you start building your self-awareness, then you can get back into trading.
I hope that gives you some insights on if you should or should not trade. Or some key things to test and be aware of within yourself on maybe you shouldn't be trading. To follow these guidelines you need to be aware of yourself. Look at yourself from that outside perspective honestly and see if any of those things come up.
These are not the only reasons why you shouldn't trade. There's a lot of others. For example, there're money factors, psychological factors, and risk tolerance factors.
This is a quick list for you to look at some things. Use this list as a guide to see more clearly. Invest in yourself, do your homework and then you will be ready for trading.