Tuesday, February 10, 2015

Grand Victory: Lessons for Traders

The Delhi elections have given a truly spectacular victory to AAP (Aam Aadmi Party). Winning 67 out of 70 seats is probably a record, unlikely to be repeated by anyone.

There are many lessons for traders from the career path of the AAP.

1. AAP was created to fulfill a burning desire for an anti-establishment political group.

People should become traders when they have a burning desire to trade. Wanting money is NOT a burning desire.  Trade when you want to fill the need for trading, not because you want money.

2. AAP was suddenly very successful in the 2013 elections. This was beginners luck.

Many traders make money at the very start. This is beginners luck, but the new trader thinks it is his skill.

3. The 2013 election victory of AAP gave them the false impression that they were invincible. This caused two mistakes. First, they abandoned their government. Second, they contested 400 seats for the 2014 Lok Sabha election. The result was a catastrophe. AAP was almost finished.

When new traders taste profits, they start flying. They increase volume, add leverage and feel they can do no wrong. The result is almost always a disaster. The trader loses so much money that he goes out of the trading business.

4. From the ruins of disaster, AAP regrouped. They decided to focus only on Delhi. They refused to participate in the many state elections that were held, including Haryana.

Traders, MUST focus on the markets. They should determine the type of trades they are comfortable with, then forget about all other trading opportunities.

5. The 2015 elections have given AAP a victory even they could not have imagined. What the party did was to follow their plan, and, leave the results to God.

Traders should never look for earnings. What they should do is follow their plan and leave their results to the market. Often, they will be rewarded many times more than they ever imagine.

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