The 2 Most Important Secrets Or Principals In The Stock Market

stock market secrets

 

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Everyone wants to learn the “secrets” about trading the stock market. What are the “secret” indicators or the “secret” formulas? For most traders, predicting the behavior of the stock market is just like trying to train a tiger to walk on a leash – it’s virtually impossible! (unless your are this idiot)

The North American Securities Administrators Association did a study and found that 11.5% of traders were profitable, 18.5% were breaking even, and 70% lost money. These are pretty incredible numbers and show just how big of a difference there is between the profitable traders and the losing traders.

How To Not Become The 70%

Now I’m NOT telling you all these numbers to scare you at all. This is the reality of trading for a living and you have to know the numbers to know what NOT to do right. I mean if I said that 70% of people driving blindfolded backwards eventually crashed, would you drive blindfolded backwards? Probably not right! So let’s figure out why most traders fail or lose money.

Keep These 2 Things In The Back Of Your Head

The truth is that successful traders are aware of the two fundamental principles that are the pre-requisites of entering the stock market. All traders should understand them and incorporate them into their trading psychology. The 2 secrets or principals are:

1) There is no way on earth to ever, ever, ever guaranteed profits or returns. The markets are fluid and evolving each day. This forces traders to change and adapt their strategies to the every changing market conditions. Therefore, you must realize that trading is about the numbers. Focusing on odds trading and risk/reward vs. hunches and feelings can lay the foundation for a very long and successful career.

2) You will become successful if you are determined to stick around long enough. As you read more research you will find that more than 75% of all traders quit within the first 3 months. After 6 months, more than 90% are out of the market. Even with these basic numbers you can see that if you stick around at least 6 months you are already more than 90% likely to become profitable. So my advice is always to take it slow, learn as much as possible, don't try to "get rich quick", and the rest will handle itself.

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Ignorance Will Get You Absolutley Nowhere

The stock market does not care about your feelings or wants. And really you shouldn’t care where the market is going so long as you are making money. These two major principles above are the biggest contributors to the losses realized in the stock market today.

As I continue to preach and promote – have a trading plan, know your risk tolerance, and trade the consistent strategies. If you just focus on these 2 things I promise that you will be trading longer than 1 year (possibly for many years going forward). Options trading for me has been wonderful and very rewarding. Sure I’ve had my ups and downs like anyone else, but each day I’m improving and getting better and more consistent.

Can You Share 2 ‘Secrets’ You Have Learned?

Whether you are a beginner or one of the more seasoned traders here, I’m sure you can provide some useful insights into at least 2 ‘Secrets’ that you have learned as a trader over the course of your career. Add your comments below and help someone else stay away from the pitfalls.

About The Author

Kirk Du Plessis

Kirk founded Option Alpha in early 2007 and currently serves as the Head Trader. In 2018, Option Alpha hit the Inc. 500 list at #215 as one of the fastest growing private companies in the US. Formerly an Investment Banker in the Mergers and Acquisitions Group for Deutsche Bank in New York and REIT Analyst for BB&T Capital Markets in Washington D.C., he's a Full-time Options Trader and Real Estate Investor. He's been interviewed on dozens of investing websites/podcasts and he's been seen in Barron’s Magazine, SmartMoney, and various other financial publications. Kirk currently lives in Pennsylvania (USA) with his beautiful wife and three children.