The Responsible Trader

Responsible Trading – What is the Opposite?

Some things are better defined by stating what they are not. This way, a better appreciation and understanding is achieved through comparison and contrast.

So what is the opposite of Responsible Trading?  Is it Irresponsible Trading or Gambling?
I don’t think so.  I always want to think  in positive terms. For me, the opposite of Responsible Trading is Misguided Trading. I believe everyone wants to be a Responsible Trader especially when it comes to doing our trading activities not only for ourselves but  for our families. The only problem is we did not have anyone before to show us the proper way.

An Irresponsible Trader or Gambler on the other hand has access to proper information and knowledge but disregards them for one reason or another.

A Misguided Trader became so because he did not have access to proper knowledge and proper guidance. For the Misguided Trader, it is a case of circumstance, not deliberate intent.

 
The Signs of Misguided Trading

I think most of us  became attracted to the stock market because of the promise of instant gains. I am no exception. We were also drawn by the excitement of  trading – the adrenalin rush in making instant decisions. .

The common signs of Misguided Trading are the following:

1. Portfolio composition. Eighty per cent (80%) or more of a Misguided Trader’s portfolio are in speculative stocks (or bazuras as we commonly call them) and he is still holding them. The original intention was to daytrade when the stock was bought. However, for one reason or another, the position was not closed as intended and the trader shifted to investor mode.

2. Revenge trading. The Misguided Trader incurred losses in his previous position before and the only reason for entering the trade again is to get even. I could not help but smile when some  members of Stock Market Pilipinas called themselves “The Avengers” apparently to get even with a certain stock that caused them to lose substantial amount of their capital.   After several months, I have never heard from them anymore.  It’s either they got their revenge or got wiped out never to trade again.

Emotions have no place in trading. A trade should only be entered because there is a high probability of having a high reward . Whether you win or lose, you must move on.

3. Impulse trading. The Misguided Trader does not have a Trading Plan and buys the first stock that moves with the highest gain during the day. He does not know when to take profits nor when to cut his losses. He either gets out too early too soon or gets out too late.

4. Trading based on tips. The Misguided Trader would rather spend his time scouring the latest posts in all the Forums and Facebook Trading Groups in the hope of picking up tips instead of doing his own analysis and preparing a Trading Plan.

One reason why I do not want to make any recommendation (I WILL NEVER TELL WHAT OR WHEN to BUY, HOLD or SELL)  is because each trader is unique. We have different profit objectives, different time frames and most of all different risk appetites.  The decision to buy is simple and easy.  The decision to sell whether to take profit or cut losses is twice as difficult.

The Aim of Responsible Trading

Responsible Trading is aimed at these Misguided Traders to show them the proper way to trade. At  this point, after sharing the 7 Lessons on the Master’s Certificate on Technical Analysis plus my TRT-POV, most of  the Misguided Traders are expected to have moved from the darkness of Misguided Trading to the light of Responsible Trading.   If they really studied and absorbed the lessons very well, they are now equipped with the proper knowledge to determine whether a stock being recommended by the so-called gurus is well worth trading or just hyped without proper basis.  They should be able to determine whether their current positions have good prospects or dropped for better opportunities.  The present conditions existing in the Philippine stock market is a very good training ground to put everything learned into practice.

I will continue sharing the rest of the MCTA lessons next year. Hopefully, all the lessons learned will be put to good use when the market takes a turn for the better.

I wish everyone a blessed Christmas and a Prosperous New Year.