LEARN
FROM MARKET WIZARDS - PART 6
Lex
van Dam is a highly successful Dutch trader. He was a student while in Holland . He was attracted
to trading because he thought it was a level playing field. He might’ve gone to
university but he was still competing against lots of people who didn’t have a
degree, yet were really very clever. In
1992, he started working as a trader for Goldman Sachs in London . In early 2009, Lex started a BBC TV
show, titled: Million Dollar Traders. According
to one website, the series was based on the premise that he could teach a group
of people who had never traded before how to trade in a very short time period.
He put his money where his mouth was and gave them $1 million to trade for a
period of eight weeks. The result was amazing: the group as a whole did better
than the professionals over that period.
Later in the same year, he launched a
book titled: How to Make Money Trading, so as to explain further the trading
strategies used in the TV series. In November 2010, he founded the famous Lex
van Dam Trading Academy. Lex himself says this about the Trading Academy Trading
Academy
Lesson
There are many simple but powerful
secrets that can be learned from Lex. Some of them are mentioned here:
A). Your university degree can’t help you
become a successful trader. There are many traders who don’t have degrees, yet
they’re far smarter than you when it comes to the game of speculation.
Fortunately, the kind of skills you need can be learned: it also comes
naturally after years of experience in the markets.
B). If you want to learn about trading
you’ll need to master 5 areas of trading. They’re trading and idea generation,
company analysis, chart analysis, trading psychology and risk management. Each
of these topics is a distinct issue in trading; and once you master them,
you’re on your way to financial freedom.
C). Trading for a living is a possible endeavor (though
hard). There are many people like Lex who trade for a living. It’s therefore
better to take lessons from those who practise what they preach; not from those
who preach but have no track record to prove their own expertise.
D). It’s very important that you start
building your own track record. That’s the only way to prove to people that
you’re good at trading. It’s your gains in the markets that’ll prove that
you’re an expert, not your books, articles or knowledge. According to Lex, if you want to trade other people's money, it's really
important that you start generating your own track record, which means making
1% steadily per month, over long periods. If you can do that every month,
then you'll be rich. It is not about making 10 to 20% in a month, the risk you
need to take to be able to achieve that is way too high.
E). Money management (position sizing)
plays a crucial role in trading success. Aiming for high returns will
ultimately lead to high losses when the markets turn unfavorable to you. If you
trade your own portfolio, you’re responsible to yourself. But if you trade
other people’s money, you’re responsible to them. Your investors won’t
appreciate huge drawdowns. They know that trading is risky, but they’d be glad
to suffer small losses, not huge ones. Small losses are easy to recover,
whereas huge losses are never easy to recover. Conservative risk control
measures and rock-solid discipline are key in permanent survival in the markets
(even if your annual profit is small).
Conclusion:
Being able to manage your own portfolios successfully is great. Private
ownership has long brought about many revolutionary innovations to the world of
trading, and this has made indelible footprints on the financial markets. The
emergence of cutting-edge technologies in trading has led to many intriguing
developments - even as ever.
I’d like to end this article with more
quotes from Lex:
1. “I
trade for a living and I've done so for almost 20 years. I'm a risk
averse guy. I just want to make sure that what I have I'm not going to
lose. Of course I am unlikely to ever double my money in a single year but I
have to be careful and smart about what I do as if I don’t, my career will
finish prematurely. I think for people who trade more as a hobby, it's probably
not that different. You have to take it really seriously.”
2.
“…It always goes back to that because everybody goes through
great periods and if you have a great year you'll make a lot of money anyway.
It's just making sure that when you have that bad period that you just
stay in the game. Rule one is stay in the game. Always be able to get
back to your trading screen the next day, no matter how bad the previous few
months have been; you should still be around so when the market starts going your
way you can profit from it.”
3.
“If you do want to get into [trading] at all you have to be
prepared and work hard and work smart. Also if you do any courses you
have to be very careful about which ones you choose and which people you listen
to. There are some very high quality honest educators out there who want you to
be successful but there are many other people out there who think they can make
a quick buck by pretending to be successful themselves and promising to teach
you their ‘secret’ insights. I think the investment and trading education
market should be properly regulated.”
NB: You would be exposed to
world-class, cutting-edge, and top-notch trading experiences here: www.advfn.com
Azeez Mustapha
Market Analyst, Trading Signals Provider and Coach
Copyright (C) ADVFN PLC
For more articles, go to: http://www.advfn.com/newspaper/authors/azeez-mustapha
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