The world is made up of a lot of casual traders. You may know a few friends who don’t know a lot about the market, but occasionally buy shares anyway, usually because someone else has told them this trade is a “get rich quick” surety.
Anyone who has friends like this knows that hardly anyone makes money in the market this way. I’m talking about people who hear that some new pharmaceutical company is going to come out with some ground-breaking medicine, somewhere down the line – so they run out and buy a few shares.
What’s the result of this? The friend buys shares, the rumours about the company’s exciting product line are unsubstantiated or unfulfilled, and the friend loses money.
Generally, the friend might hold onto these shares for years, waiting for them to “go back up”, because they are too stubborn to take a loss.
Unfortunately, most of the time, these shares never do go back up. Your friend – who has treated trading as a mere “get rich quick” hobby – has lost money.
And they’ll continue to lose money for as long as they hold onto these ‘hobby’ trades.
Trading as a business
Successful traders treat trading as a serious business venture, not a hobby. This is because successful traders know that if you want to see rewards, you need to take trading seriously and see it as a business venture.
‘Hobby’ traders think, “Well, I’ve got a few shares and I look after my portfolio when I can”. However, that’s usually the extent of it; and if you don’t take trading seriously and treat it as a mere hobby, it is going to cost you money.
Now, it’s fine to have hobbies, and hobbies often cost money. But when you’re trading, your goal is to make money, not fritter it away. Trading is not a hobby. There is no ‘hobby’ enjoyment from watching trades crash because you haven’t put in any effort.
Reset your goals
If you really want to make money in the market, it doesn’t happen because you’ve treated trading as a casual side activity.
Try to think of millionaires who have made money through one lucky trade. It doesn’t happen, because rich, successful traders have been clear about their goals from the outset. They want to make money in the market, and they are serious in their intentions. They have put in the research and legwork, and become successful through experience.
Trading is not a joke; it involves your hard-earned cash. If your goal is to be successful in the market, and you’re treating trading as a hobby, maybe it’s time to rethink your strategy and goals. If you – or your friends – are going to trade, you need to treat it seriously. And that means putting in time and effort.
Think about the last time you went away for short holiday. How many hours did you spend researching restaurants, hotels, travel routes and sights? Now think of how many hours of research and analysis you did before placing your last trade. One that you possibly committed thousands – or tens of thousands – of dollars to. That little exercise can be quite sobering.
So what do you need to do? Just like a well-run company has a well-thought out business plan, so should every trader have a well-thought out and clear trading plan. One that details what you want to achieve from the markets and how you will achieve it.
Only then can you hope for your hobby to stop costing you money.