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Why Your Fate Is Losing Money In The Stock Market

Summary

This is my open letter to novice traders, and the vision for creating Stocks2.com.

What readings I would have liked someone to recommend me when I started.

Being a non-professional trader is a tough work. You are probably one of those who feel attracted by the stock market and have a further interest in having a leading role in yield a profit of your savings.

Stock trading has a hard learning curve, especially because the best way to learn is investing and loosing real money (as less as possible). You must assume that having loses and managing your frustration is part of the training process you have to go through.

But who am I for giving any advice? Touché, I’m just one like you that has spent the last 4 years dedicating my full spare time on learning how to successfully trade. Am I successful? Well, I’m pretty happy with my 50% in the last 18 months but I’m still very cautious and I’m investing small amounts.

Learning from other’s experience

If you are little wise, you will admit that when you are a beginner it’s much better to learn from other’s experience and take advantage of it. There are hundreds of professional trading gurus that will illuminate you for a lovely fee. I don’t blame them. My first approach to trading was a course taught by one of these gurus, and I liked, and got me excited to continue moving forward in stock trading.

However, what it really impacted me was reading two very old trading books:

  • Doyle
  • Nicolas Darvas

The first one was written in 1878 (more than 100 years ago), and gives you a clear vision that the stock market is manipulated game and you must know the basic rules of this game.

The second was written by a novel trader in the 50s (about 60 years ago), that describes his learning curve and how he cracked a trading system that made him earn 2 million dollars in the stock market. He is death now, and he never wanted to sell a trading course, so he has no interest in convincing you of anything. It’s just his experience.

Both books are amazing lessons to start with. I fully recommend you to read them.

My three take aways

My three take aways I got from reading these two books may seem silly and obvious, but honestly, it took me a few years to fully understand their implications.

These take aways are:

  1. When prices surge is not because there are more buys than sells, and vice versa
  2. Stock market is a zero sum game
  3. Stock market is a business, it’s not a lottery

When prices surge is not because there are more buys than sells, and vice versa

Media publishers often use sentences like: “It’s been a session dominated by stock selling” (referring that the stock market sliced), but this is completely false: There are always the same number of buys than sells. Any transaction needs a counter-part. If a stock is falling hard and people is selling their shares, who is buying? In the contrary, if stock is surging and people is investing in, who is selling those stocks.

Stock market is a zero sum game

Stock market doesn’t print new money. If you are getting gains of your investment, it means someone is losing this money, and when you lose your money, someone earned it. So, if you want to earn big money in the stock market, you must cheat others to loose it.

Stock market is a business, it’s not an ability game

Although stock market was created for funding companies that need capital to grow, even 100 years ago it was a business where a few earn big money and many loose small amounts. If you agree that it’s a business, people that put huge amounts on the table don’t leave the benefits to the random. Markets can be and are manipulated by huge investors to get the money of the small investors. And if you are guessing if you are a big or a small investor, assume it, you are a small investor no matter how figures you have in your trading account.

These three simple concepts really illuminated my understanding of the stock market and helped me to make better decisions in my learning process and even defined the way I trade. I’m not saying I have any truth. I invented nothing. I just read what others wrote and invested thousands of hours in devising how the market works. And even with that, I know I only know a fraction of what I need to know.

What I’m trying to do with Stocks2.com

In this training process in the stock market and trading, I released there is a lot raw data spread across the Internet but very few places that help to understand that data, and the ones that convert that data into information or knowledge are premium services with high fees and usually with too optimistic selling propositions like “be a millionaire from $1,000” or “we have a bullet-proof system that always win”.

Stocks2.com is an ON GOING project that aims to gather raw data available and convert it into knowledge to novice traders or investors that help them to make their trading decisions. Stocks2 is not providing investing advice, it’s not recommending to buy or sell any specific stock, but digesting the most updated data and providing an output based on widely known trading systems published by reputable authors.