In my last post I mentioned how Wall Street is one of my favorite all-time films. In it, Gordon Gekko is one of the most ruthless business moguls ever portrayed in a film (played so perfectly by Michael Douglas that it won him an Oscar). Gordon is surly, vigilant, and most of all…hecka rich.
What would it look like if Gordon Gekko put together a guide for newbies to the online stock trading game? I spent a good bit of time thinking about this, and even watching the movie again for ideas.
Gordon is ruthless, yes, but he also knows the game. The same competitive spirit that drove competition between John D. Rockefeller and Andrew Carnegie is the same spirit that Gekko personifies.
It’s not a question of enough, pal. It’s a zero sum game, somebody wins, somebody loses. Money itself isn’t lost or made, it’s simply transferred from one perception to another.
It’s never about the stock market or the money. It’s about beating the competition and winning.
Here’s his tips for you on how to win.
Lunch is For Wimps
This is perhaps one of the more memorable lines Gordon says in the movie. There’s a little bit of humor to it, but a lot of truth when it comes to online stock trading.
If you think you can take water cooler breaks whenever you want to, you’re wrong. The day trading game is won and lost in a matter of moments. Profitable trades can be in and out within a minute. The key is being ready and available whenever the stock starts to move, having your trade ready, and executing it.
Of course, all of this depends on your personal trading strategy. Some folks are less aggressive. But many online stock traders will watch the screen for hours at a time, waiting to make the perfect move. If you’re out taking lunch, you may miss the perfect trade. Yes, the game is ruthless. You need to be ready to move when the market moves.
This is Your Wake Up Call
One of my favorite scenes from Wall Street is when Gordon Gekko calls Bud Fox early in the morning. He says:
When it comes to the stock market, I’ve really come to appreciate the guy known as SuperTrader. This guy gets it. He understands the vigilance of outworking your opponent. Oftentimes, he is up long before the trading day begins, preparing and scanning for potential stock trades that day.
While experience and nerves play a significant role in how successful your online stock trading is, hustle is another key aspect. Are you going to out hustle the other traders in the market? Are you going to put in the longer hours studying? Searching for momentum before it happens?
The most valuable commodity I know of is information.
Traders like SuperTrader succeed in the long run because they find information that nobody knows to look for, and get in on trades. I’m not talking about illegal “insider” information. I mean information that’s public knowledge, but that nobody else knows to be looking for.
Examples: Government contracts awarded to public companies. Rumors about supplier relationships for blue chip manufacturers.
This is your wake up call, pal. Go to work.
I Bet on Sure Things
The public’s out there throwin’ darts at a board, sport. I don’t throw darts at a board – I bet on sure things. Read Sun-tzu, The Art of War. Every battle is won before it is ever fought.
Gordon knows that the stock market isn’t a game of luck. Chasing the latest Jim Cramer stock pick, or some penny stock your uncle told you about, isn’t a strategy for winning. In essence, it’s about taking cold, calculated risks based on one thing: information.
The information can come in a variety of forms- technical analysis, earnings reports, company news, etc. The key though is to only base your decisions on information.
That gut feeling you have about a stock moving…go get some pepto-bismal. Basing your decisions on feelings is a sure fire way to lose in the stock market.
The most successful traders approach the market with a game plan. They know what indicators they’re looking for to get in and get out. They know what volume they’re looking for, moving average indicators, short float info, etc. They don’t trade shooting from the hip.
Find the sure bets, take the emotion out of it, and execute a well-planned trading strategy.
I hope this guide motivates you!
What tips would you share with beginners to help them be successful in trading?