| Welcome! In this free e-letter, I’ll show you where the big money is headed in the markets so you can follow it to profits. And we love to hear from our subscribers… Tell us what you like, what you hate, and how we can make Palm Beach Insider the best free e-letter on following Wall Street to profits right here. | Essential Advice, From One “Trader” to Another… By Jason Bodner, editor, Palm Beach Insider Recently I got an email from a reader, Mica, who I met at the 2019 Legacy Investment Summit in Carlsbad, California. He’s taken to trading this year, with some success… And so, he asked me what it takes to become a full-time trader. Now, as much trading experience as I have, I don’t focus a ton of energy there anymore (don’t let the name “Palm Beach Trader” fool you). I’m far more interested in buying outlier stocks and riding them toward longer-term, triple-digit profits. In an era of disease, this "new cure" could be one of the most powerful medical technologies of our time. Nevertheless, Mica had great questions. Many of which apply to any investor seriously looking to grow their wealth trading the markets. His story seemed to reflect what I imagine a lot of you are like. And with the market so volatile lately (the S&P 500 is down 3% as I write) I felt some coolheaded wisdom would be helpful to you. In my response, I shared six essential tenets of being a successful trader. And over the next couple issues, I’ll share these tenets along with my candid response to Mica’s email. I hope you enjoy…
Mica, Thanks for checking in. I hope you and the family are doing great in the COVID era and all… As far as trading – it seems that you figured out something I couldn’t! Day trading, even swing trading, just isn’t for me anymore. I found I’d get the timing all wrong. I’d pick a great stock, buy it, and watch it go down… After a few days, I’d sell it. Then I’d watch it go up again. This pattern emerged time and time again. Then I noticed… the stocks I picked to go up in a few days, would wind up MASSIVE winners years later. That’s when I shifted more to investing rather than trading. I know my advisory is called “Palm Beach Trader,” but our specialty is to find trades that work out in the longer term. (You can see that our portfolio holds five stocks that have doubled or more, including one that went up 600% in roughly two years.) I realized long ago that I couldn’t achieve gains like that from short-term trading. And although I liked the action, I far prefer to spend my time thinking and researching and relaxing. I found trading too taxing on my time and mental energy. So, I became a stock picker. I reckon I’m a decent one, too – but only because I found what works for me and I focused on it. I’d encourage you to do the same. If you’re finding success in trading, that’s terrific and I encourage you to continue. But, I also want to suggest a few essential points to help keep you on the right track… Focus on risk management. You don’t want the money you’ve earned trading to dwindle away because of a few overzealous calls. Take profits quickly, and cut your losers just as quickly. Being agnostic about your trading and not letting your emotions get involved is tricky, but it’s how all the best traders stay in the game for the long haul. That brings me to my next point: beware of leverage. Using leverage to turn $100 into $500 is a great potential tool for growing capital. But knowing that it could just as easily turn a $100 loss into a $500 loss is just as important. If leverage is used incorrectly, you can get hurt. You know the tortoise and the hare? I’m more like the tortoise. I wouldn’t want to be the hare when things go sideways. Overall, just be sure to not make any trades where the risk isn’t worth the payoff. If your business is successful, I’d think long and hard about selling it and moving to trading full time. And only once you’ve had years of success in trading. The old Wall Street saying goes: “there are old traders, and bold traders. But there are no old bold traders.” You rarely read about the ones who crashed and burned. But if you’ve found a successful method, it should work over the long term. But no matter what, always have a pile of cash to fall back on should the unthinkable occur and your account blows up. There’s play money, and there’s safe money. Knowing not to mingle the two is key.
In Friday’s Palm Beach Insider issue, I’ll share the rest of my email to Mica, and reveal the one specific piece of wisdom that brought me out of a trading rut early in my career. Patience and process! Jason Bodner
Editor, Palm Beach Insider
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