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What if You Become Your Own Best Ally in the Market?

Did you know that over 80% of Americans dream of writing a book?

At first glance, this percentage seems high, but it does not surprise me. In addition to being a feasible project, writing a book meets several needs such as the desire to share one's experience, present a new concept, establish one's credibility or leave one's mark. In addition, the idea of becoming a successful author is very appealing. When we think of Stephen King or J.K. Rowling, we believe that it is possible to sell thousands of copies, to experience media glory and to lead the life of the rich and famous. Unfortunately, few people do it.

On the one hand, as you can imagine, a writing project is very demanding and requires quite a bit of effort, discipline and motivation. On the other hand, in 2015, some 300,000 books were published in the United States and, according to Nielsen BookScan, only 200 of them sold more than 100,000 copies, which represents a probability of 0.07% to achieve this result. In addition, in 2004, another analysis carried out by the same firm showed that only one book in five crossed the 100 unit threshold!

In my opinion, like writing a book, many people dream of living off their investments by actively trading on the stock market. First of all, the requirements for entry are negligible: all you need is a computer, Internet access and an account with a discount brokerage firm. In addition, entry is facilitated by low transaction fees and easy access to financial information and quality market training.

These people aspire to financial independence, social recognition and the freedom to manage their schedule at their convenience. However, it is extremely difficult to succeed at active trading. According to the great stock market blogger Adam H. Grimes, a serious active trader should expect to go through a learning period of at least three years during which the ups and downs will be frequent. Regarding the profitability of such a project, a study conducted by Barber, Lee and Odean over a period of 15 years with 360,000 intraday traders revealed that only 13% of them managed to make a net profit that is, to accumulate more money than the total operating costs.

"The only way to achieve the impossible is to believe it is possible."
Lewis Carroll, British novelist, essayist and photographer

To succeed in the stock market, it is therefore essential to set realistic expectations, be patient and be ready to work with regularity and tenacity. To do this, I invite you to first define the why of your project; that is, the reasons that motivate you. Although money remains a valid source of motivation for investing in the stock market, it is preferable to opt for justifications over which you exercise some control. As you know, profits can be slow in coming. Here are some examples of valid reasons:

  • The desire to learn;
  • A passion for the markets;
  • The desire to surpass oneself on a daily basis;
  • The intellectual, mental and emotional challenge of active trading.

In addition, it is essential to believe. Once the success rate is greater than zero, anything is possible! It is important to ignore the statistics, discouraging comments from those around you, and doubts that may spawn in the back of your mind. In the stock market, your best ally to overcome uncertainty is you!


Sources:

William Dietrich. The Writer's Odds of Success, Huffington Post, April 3, 2013.

Brett N. Steenbarger. Trading Psychology 2.0: From Best Practices to Best Processes, Wiley Trading, 2015.

Max Tucker. Why You Should Not Write A Book, Medium Corporation, August 9, 2016.

The author

Michel Villa

Michel Villa

Speaker, stock market blogger and trading coach