The Responsible Trader

Responsible Trading, my Advocacy, means Practicing Self Discipline, Continuously Educating Yourself, Protecting your Capital at all Times and Taking Full Responsibility for your Trading Results.

I envision an improved Philippine Stock Market where every trader is empowered , properly educated and properly protected.

As I have posted on the thread “Spyfrat’s Call” on www.stockmarketpilipinas.com, where my idea was first conceptualized:

NEWBIE TRADER + EDUCATION + CORRECT INFORMATION = RESPONSIBLE TRADER

RESPONSIBLE TRADERS + VERY VIGILANT *CMIC = IMPROVED PHIL. STOCKMARKET

* CMIC – Capital Markets Integrity Corporation

I believe that an empowered Trader becomes a Responsible Trader.  By being a Responsible Trader you stop trading recklessly, doing trading just for the sake of trading and speculating to the point of gambling.

The following are the elements of my advocacy:

1. Practicing Self Discipline.

Self-discipline has been defined in several ways such as perseverance, restraint, endurance, thinking before acting, finishing what you start doing, and the ability to carry out one’s decisions and plans, in spite of inconvenience, hardships or obstacles.

Self-discipline also means self-control, the ability to avoid unhealthy excess of anything that could lead to negative consequences. It also refers to the ability to forgo instant gratification and pleasure in favor of some greater gain or more satisfying results.

When applied to trading this means telling yourself to sit down to prepare a trading plan before entering a trade instead of watching your favorite TV show or doing your favorite activity.   Entering a trade without a trading plan is often the cause of miseries of a lot of traders.

2. Continuously Educating Yourself.

Learning is a continuous process. Especially now with the exponential expansion of knowledge due to constant improvements in cutting-edge technology, I feel that learning is like rowing upstream in raging waters. If you do not keep abreast with current developments, you are going to fall downstream and left behind.

In my case, this requires a lot of reading, watching relevant videos, applying what I learned, learning from my mistakes and repeating the whole process. I also like conducting seminars when I have the time because this leads to mastery of the subject matter.  In a similar manner, I also like to attend seminars conducted by others so I can learn from them.

3. Protecting Your Capital at All Times

Although Money comes only as third in my hierarchy of personal values (God first, family second)  I still realize the importance of Money. If you burn your Trading Capital, which happens to most traders during their first year, you won’t be able to continue your trading activities.

Actually, in my opinion, the first lesson to be learned in Trading should be Money Management before you even start to learn Fundamental or Technical Analysis. In my case, Money Management came last and it was only after a year of trading that I took my first loss even after my Speculative Portfolio had almost been burned to the ground. Of course I thank God and I am just happy that I had the sense to start my trading  with the decision to have 80% of my Portfolio in Blue Chips and only 20% in Speculative Stocks.

4. Taking Full Responsibility for your Trading Results

You and you alone should be responsible for your trading results. No excuses. You cannot blame anybody for your trading losses.

I started my trading  with only Fundamental Analysis on hand and I picked 80% of my Portfoilio on this basis. For the 20%, I visited Forums to pick  tips from gurus. I am sorry to say that almost all of the tips  turned out to be wrong.

The problem with getting a tip is that you tend to shift the burden of responsibility to the person from whom you took the tip whether it is just a post from a forum or a personal advice. Then I remembered the concept of delegation during my days in the corporate world.

You can delegate authority to your subordinate to make a decision but you still have full accountability and responsibility for whatever results achieved. In the same manner, even if you have delegated the act of making a decision on what stock to trade to the tip you got either from a post or personal advice, you cannot avoid taking full responsibility and accountability and this will eventually be reflected in your trading account.

This is the reason why, no matter how insistent the person is from getting my advice, I will never tell or advise anybody when to BUY, HOLD, or SELL.  It is my policy that when I post charts, I will always state the positive and the negative points based on my analysis.  This way I will be able to maintain my credibility and integrity to differentiate myself from others who TELL when they are ready to SELL.

Once we have Responsible Traders then we will have less traders entering trades recklessly avoiding stocks that ruin a trader’s account. In my opinion, these stocks survive mainly because there are still a lot of gullible traders looking for instant jackpots in the stock market. Once these stocks and their ilk no longer have any traders to patronize them, then they will all fall like rocks on the wayside.

I know that I am not a lonely voice in the wilderness in my advocacy. I know a lot will join me soon.