The Tricks of the Trade

I honestly don't look at trading and investing to be two disparate processes. Some people think that traders are hasty, good for nothing, short-term trading, long-term trouble seeking and worldwide destruction causing psychos who lack the ability to differentiate good news from the bad. And then there are some who think that investors are jobless rich hags who've got nothing better to do but to start a revolution among some bourgeoisie individuals who've got some spare money, to all invest into an "undervalued" company, soon to show good results based on a tip by a friend of a friend of a cousin of a HR manager working in the aforementioned company.

My view is that a trader is nothing but a short term investor and an investor is a long term trader. It's as simple as that. You follow certain signals and indicators, not necessarily on the charts, and you trade/invest in the company based on those signals for a specific period of time and make money. It's a simple concept which broken down to this simple form can be understood by the most common of the common man. The logic is just to make a "quick" buck to carry on doing things you actually love doing.

But the problem lies in the comprehensibility of the average Joe and the willingness to act upon the comprehension. Oftentimes I happen to meet some of these people who seem fascinated at first and then think of me as a shrewd little savant who tries to make fun of their cognitive abilities, when I explain to them how simple a process it really is.

Recently, there was one such incident where I happened to be in the same room as a long lost friend of mine, who I found out had been doing the mundane 9-5 shift for the past few years. He asked me what I did for a living and I told him I analyse the equity market and invest in certain companies to earn a profit. His next question was “Oh so you’re a share-holder is it? I would love to start with the whole shares thing. Can you teach me how it’s done?!” To which I said “Umm OK… I usually use some tools to draw conclusions as to which product to invest in and I hold till I make a profit or exit with a small loss.”

“So what do you have now?”

“What do you mean?”

“Well what shares have you bought?”

“Well I haven’t bought any of them, not in this market.”

“So you haven’t invested in anything now?”

“Of course I have, I have to make a living don’t I?”

“But you said you haven’t bought anything!”

“Sigh….”

And then prolongs a half hour lecture about short selling, futures and options trading, commodities, Forex  chart pattern recognition, signals and indicators, effects of the quarter/annual results on the company, etc. I wind up by saying that it’s really a simple process and if you understand the fundamentality of it all you can be really successful at it but people just make it complicated and difficult to understand.

The reply I get is “Sure, to Einstein’s like you it’s a piece of cake but I’m sure there’s a whole lot more to it for a beginner to understand. Or maybe you’re just not telling me the actual process and keeping it to yourself. You’re just giving me all this crap about signals and indicators to throw me off track. If it really was that simple everyone would be doing it!”

At times I wonder, maybe it’s too much for people to comprehend in such a small amount of time, but honestly there’s not much to understand. I guess people just don’t want to think that life is simple. They intentionally want to complicate it so that it becomes an excuse to not try out some things in life and enjoy the simplicities of it. Simplicity is the secret of life. The more you complicate a task, the more you suck the joy out of doing it.