Thanks to the financial markets, we can expand our horizons in ways that most people would never consider. The potential for financial benefit from trading stocks, bonds, commodities, currencies, and other instruments is common knowledge. It doesn’t take much digging to unearth tales of untold wealth. George Soros, Peter Lynch, and Warren Buffet are just a few examples of famous investors and traders who have achieved notoriety. What’s less discussed, though, is the growth that happens on an individual level.
Like any worthwhile endeavor, trading and investing offer benefits beyond apparent successes. The journey and the sights along the way can be just as memorable as the final goal, to paraphrase an ancient adage. While it is true that the growth of one’s portfolio ultimately shows success or failure in the markets, the process by which such change is accomplished can present an exceptional opportunity to learn lessons about ourselves that have far-reaching value. The implications of these insights are far-reaching.
Making the Most of Your Skills
Each of us has advantages and disadvantages and a specific framework within which we function, determined by our time constraints, educational background, professional experience, and other criteria. In the markets, it is necessary to evaluate these aspects to choose what to trade, the time period to operate, and the method by which to make trading and investment decisions. Why? We won’t get anywhere if we don’t look honestly at ourselves and how we might improve. If I can’t devote my time to monitoring the markets for extended periods and making frequent trades, I’m not likely to be a successful day trader. Either I change my major or make time in my schedule to meet the needs of day trading.
It’s the same with everything else too. We need to take stock of ourselves and our circumstances frequently. They tell us what to do and how to do it. However, none of these conditions are permanent. We can adjust our situation in the same way that I mentioned earlier so that I can make time for day trading. All modes of schooling play a role in this formula. Likewise, trying new things, making new friends, and adjusting our outlook on life are good ways to broaden our horizons. There are ways to increase the likelihood of success when pursuing a worthy objective. A big part of that is being aware of the resources at our disposal and making the most of them. Having the ability to create new opportunities is also crucial.
Identifying Trustworthy Sources
There is a plethora of data at your fingertips in the markets. It can be found in any format conceivable, from official government statistics to analyst opinion to advice from Uncle Joe. We can make use of some of this data. While others are, some are not. Conflicts of interest among people who supplied “expert” advice were a major revelation after the stock markets crashed in 2000 and after that. They only thought of themselves and their company when advising others to buy or sell a particular stock. Many people made the mistake of taking the advice of these experts. Knowing what information is valuable, which sources can be trusted, and what can be taken with a grain of salt is crucial to effective trading.
The same is true in every facet of our existence. Everyone is constantly being lectured and given suggestions. There is an ask for some. A lot of it isn’t. We need to evaluate the source’s reliability before deciding whether or not to use the information. Trustworthy and astute individuals do exist. What they tell us may be trusted. The interests of the majority do not align with ours. We need to give serious thought to what they’re saying, as well as their intentions, before deciding whether or not to take it seriously. Evaluating information from trusted sources, such as loved ones and friends, is invaluable.
Doing what we believe is right in the markets will lead to success. Lack of discipline is the primary cause of people’s inability to generate the desired profits on a constant basis. What’s that, you say? It’s no different from what we do normally. Want to slim down? Diet and exercise are two areas where self-control is crucial. Do you wish to become a guitar player? Discipline yourself to put in the time at practice until you master the talent.
Learning from Your Mistakes and Achieving Your Goals
Trading and investing severely provide a terrific opportunity to see what you do that leads to failure and what you do that leads to success. A trader or investor with integrity will have a strategy in place and use it to guide their decision-making. Whether things happen as expected and earnings are made, or whether they do not, he or she understands why.
To succeed in life, you must use the same approach. No matter what we set out to do, we need to know what it takes to achieve and how we can tell if we’re making progress. If we don’t plan, we’ll be forced to act haphazardly, never knowing if we’re doing the proper thing.
All of these are examples of the kinds of lessons that trading and investing may teach you. In addition to the more well-known benefit of learning how to use the markets to enhance your financial situation, many more are just as valuable. Modern trading and investing may be done with very little or even with no money in the case of demo accounts, so acquiring this knowledge doesn’t have to come at a high cost. This emphasizes the importance of using markets to expand one’s wealth and horizons.
John Forman has studied and traded the financial markets for nearly 20 years. He has penned scores of publications on trading strategies and analytical approaches, and his professional and personal experience spans a wide range of instruments and markets. This knowledge and his time spent instructing students about trading informed his book The Essentials of Trading (Wiley).