Stock Trading Process (4)

Warning: TRADING IS NOT INVESTING!

The traditional value-investment process requires high levels of dedication but is easier to master. Trading is an entirely different animal and takes a significantly longer time and commitment to master.

What is the difference between a trader and an investor?

Investors only sell if their investment thesis has changed. They are not swayed by price fluctuations; if their initial investment drops 70%, they see it as a discount and buy more. Traders dump their shares as soon as momentum changes.

You could be both an investor AND trader at the same time!

An imperfect analogy would be Bob and Joe. Bob and Joe both play football.

When Bob's team is struggling, Bob dedicates even more time and effort to supporting and moralizing the team.

When Joe's team is struggling, Joe ditches his team and joins Bob's team.

While it seems that Joe is dishonorable, in the stock market, it is perfectly acceptable and is the correct thing to do AS A TRADER!

Stocks don't care about you or your feelings; worshipping and praying to Papa Musk will not make Tesla shares climb higher.

Attachments to particular stocks are one of the WORST mistakes a trader could make!

In addition to the dangers of stock fluctuations and trading mistakes, there are often trading rules associated with brokerage accounts. Wash sales, Good Faith Violations, Margin Calls, Freeriding Violations, etc., are a massive pain.

Delay opening a brokerage account until you understand all these violations clearly!

YOUR BROKERAGE ACCOUNT WILL NOT EDUCATE YOU ON THESE RULES UNTIL AFTER YOU STEP ON THE LAND MINE!

Unknowingly making one of these mistakes with large position sizes would be incredibly costly.

The 3 videos below are advanced; they discuss some basic trading rules and tools. It's important to revisit this later.

If trading is so dangerous, why do people still do it?

The Professional: A good trader eats steak and lobster if there is volatility in the stock market (which is very often). The making money process is significantly faster than regular investing, and they understand it. They manage position size, use stop losses, etc.
The Average Degenerate WallStreetBets member: They watched one YouTube video about how performing a 3X leveraged short on a small biotech company before clinical trials is a good idea and proceeded to gain 1,304%. This person then loses his gains and his grandma's pension on the next trade because he has no idea what he is doing.

This video is talking about OPTIONS TRADING, NOT regular trading. However, it shows the principles of trading and volatility.

Options trading is just regular trading on extreme heroin. This is generally irresponsible investing/trading (WallStreetBets style) and, thus, should not be performed. Trust me, don't turn on options trading because you will somehow manage to lose your tuition and your family in the process.

This channel is worth checking out; the vast majority of content is satire (but pretty funny), so don't expect to be learning anything informative. Most people who do these trades are from r/WallStreetBets which will be covered on another page.

If you are not daunted by the dangers of trading, have already mastered investing, are financially literate, and are ready to lose money, we will start the learning process!

Our man Richard has us covered with another basic introduction to trading.

This fine young man here is Ricky. He is one of the best day traders out there, and he explains things well. He is always humble and really knows his material.

However, he IS A TRADER, NOT AN INVESTOR!

His trading is on point, but some things he says about investing are plain wrong. He is 95% trader and 5% investor, so you will hear him talking about his investments occasionally, but I advise you to not take his advice. He doesn't understand investing valuations.

Nevertheless, I recommend following and checking him out for further trading knowledge. It is also worth noting that he makes things look incredibly easy. He can handle trading pressure incredibly well, so I recommend you trade with just $10 or an amount you are willing to lose 100% of. For beginners, learning how to handle pressure is crucial for your health and for your sanity.

Some of his most memorable quotes are:

"The cheap can always get cheaper..."

Just because a stock is overbought or oversold doesn't mean it's time to buy or sell. You have to wait until the momentum is in your favor! Refrain from catching a falling knife!

This man here is Charlie, who also knows what he is doing reasonably well. He points out MACD and RSI, the 2 most common trading metrics used by ALL TRADERS OF ALL LEVELS!