(c) 2006 The Welsh Wizard.com

Mentoring, not necessarily from me, can help anyone who could relate to elements of the following types of novice trader: -

PAPER NOVICE TRADERS.

The lack of emotional involvement with the market by only paper trading explains why so many individuals can win “competitions” with notional money, but can never make a pound from real trading. Almost none of these individuals ever go forwards into actual trading, as they become hobbyists. This is often because they are afraid of success. The psychology behind this is that success has the power to change lives, and remove the individual from the routines and certainties of their humdrum daily lives which, although trapping them in the rat race, still provides them with a feeling of emotional security, without which they are unable to feel safe. This is why so many lottery jackpot winners crack up, and why such a small percentage of the entire population take the plunge to work for themselves. Mentoring can help the remaining minority of those who are willing to buck the trend to cross a bridge into "becoming alive" from previously "just existing".

THE ACTIVE NOVICE TRADER.

Novices who have been actively trading are of a different mould, because they realise that the only way to make money and design their own life is to stop being someone else's employee, and start working for themselves. And they get on with it. However, without the right method, mindset and emotional make up, they find themselves frustrated by a mixture of some success and some failure which nets out to an overall loss or a "going nowhere" scenario ("break even traders"). They become too close to the problem and too remote from the solution.

Struggling to understand why they are not succeeding, they reach a point of self torment from which only mentoring can help them escape the fog, emerge to view clear blue sky, and avoid "washout". Washout is where they themselves end up feeling physically, emotionally and mentally washed out and, finally, financially washed out, without a second chance available.

THE ACADEMIC NOVICE TRADER.

Then there are those who, with great commitment, embark on an endless overly academic study of market movements, as though they are sitting their school exams. They find themselves encouraged by their observations of moneymaking opportunities yet are unable to find either a consistently reliable technique, or the confidence to act upon them and bag the booty.

These people are usually highly intelligent individuals. However, what has happened here is that they have approached the market with a rigid belief that reading Stockmarket movements is a pure scientific\mathematical affair. This is wrong, for analysing markets is a science, but trading them is an art! It was Einstein who said that imagination was greater than knowledge, and without imagination the art part of trading cannot be mastered. Everyone is born with imagination, but it has gradually been beaten out of him or her by a Society system that likes to produce uniform controllable outlooks, instead of true individuals.

What is needed is a "re-activation" of "their third eye"; to awaken that heightened state of awareness that has laid dormant for many years. Frequently, academic novice traders will convince themselves they have found a scientific formula for success, but then proceed to lose all their money, before ending up harbouring regrets which frequently lead to depression and trading self-sabotage.

THE NERVOUS NOVICE TRADER.

Most nervous novice traders I have encountered are also highly intelligent people. Fear of risk is usually the reason why they are often reduced to a nervous wreck, and especially so where they have no training in how risk is something not to be feared, but to be managed. They will continuously find every reason under the sun why they cannot get on and make trades, they are basically waiting for "certainty" to come along, and of course it never does.

All successful traders are in control of their emotions, and have a sense of proportion in regard to real risk versus perceived risk. If your emotions are controlling your trading, then you are simply not going to succeed. The person with the intelligence needed to become a heart surgeon is not going to do well in the operating theatre if his or her hands are shaking. You see, the only cure for someone who is afraid to fly - is to fly! But the confidence to fly cannot come from climbing into some old single engine rust bucket controlled by a blind pilot.

An experienced hand is needed to guide this trader through the dark, and safely out into the light. Self-confidence is the quality here which needs to be motivated, and a series of excercises to develop a relaxed emotional approach to trading.

THE IMPATIENT NOVICE TRADER.

Becoming efficient enough to make a living from trading is something comparable to learning how to drive again, insofar as it is one thing to learn how to steer the car, another to change gear, another to keep your eye on the road and analyse the road signs, other traffic etc., but quite another to concentrate on all of them at the same time. Now that you can drive, it all seems very straightforward, but when you were first learning, it needed time, study, practise and learning from mistakes. You could have achieved this on your own, eventually, but it would have been a lot quicker to have had some lessons from a driving instructor. However, there are many who have passed their driving test who are still lousy drivers, and some of them are dangerous drivers. And so it is with trading too.

In trading, these people trade recklessly, without knowing why they have entered a trade, other than some pie-eyed theory which they have either been sold, or have concocted from a set of beliefs that have no foundation. They are impatient to earn money, but have not found the time or inclination to learn how to do so first.

THE LOTTERY NOVICE TRADER.

Millions of individuals are comfortable to play the lottery because a £1 ticket is no risk, and a jackpot win is a huge reward. The fact that the odds of such a win are poorer than the odds of being struck by a meteorite does not seem to put them off. There is nothing really wrong with that, until this individual brings that philosophy into the trading arena.

All too often, I encounter the person who dogmatically believes he or she can earn a huge annual income by investing large amounts of money into a trading desk but perhaps only a hundred pounds or so into their trading fund. You don't need a huge amount to get started, but it is important not to arrange things the wrong way around, unless you are a long-term investor who does not need to earn a living from trading.

These people are invariably so risk-averse that they make Scrooge look like a gambler. Mentoring teaches you the correct structure of your business, if you wish to have a real prospect of succeeding as a Trader, by lowering sights at the jackpot and increasing the stake in proportion to obtainable reward or, in other words, how to use money to make money, which is the only way to do it properly.

A typical lottery novice trader will say that he or she can only afford a tiny amount to trade with, and is unwilling to save up enough money to trade properly, or is unwilling to draw cash against his assets to have a sensible amount to work with.

He or she wants all the big annual income that can come from trading, but virtually none of the risk. He or she will always find "reasons" why, one day, they will trade properly, but that day never actually comes. What mentoring can do for this person is to jerk them into reality, and teach them the difference between having a dream which is always going to be a dream, and doing what is necessary to make that dream come true.

THE FRUSTRATED NOVICE TRADER.

Frustration is one of the many types of emotion which can suffocate even the best efforts at efficient trading. The frustrated novice trader is usually an individual who understands and agrees with everything I have said in the preceding paragraphs, and has already attended courses, seminars, training etc., but has returned to his or her trading desk to find, quite simply, that what they have been taught, or sold, just does not work.

This person is a well meaning, well-intentioned, intelligent, diligent and determined individual who is to be admired for effort and tenacity. They will possess magnificent personal characteristics such as perseverance, courage and the will to succeed Unfortunately, they are losing money hand over fist, and have been slow to accept that the methodology they have been taught or sold is balderdash. This makes them feel bad because their ego is bruised by feeling duped. It is difficult for them to want to pay a Mentor a fee, as they feel they have already paid enough money out to others, and they want any new Mentors to put everything right, at their expense, while the bad guys live in the luxury they have obtained by duping the novice with their Moses like charisma and fancy marketing ploys.

In addition to this, the Mentor has the hard task of trying to undo what they have learned before being able to teach them what they should be learning. Nonetheless, this kind of person, IF they can let go of the rubbish they have learned, is likely to move quite quickly to the state of successful trader after mentoring.

By consistently trading badly, they have at least mastered consistency. Reversing the flaws in their approach leads them to consistently trading efficiently instead. However, they have to learn to "slow down" as their frustration will have brought them to the end of their tether, and they will be in too much of a hurry to make good the failure they have so far experienced. They need to "write off" their bad experience to date (like a bad trade) and move on. NOTHING they have learned, however useless, is wasted, for they have learned many ways of how NOT to trade.

THE TECHNICAL NOVICE TRADER.

It is a common error on the part of "technical" novice traders to presume that a technical or mechanical method alone is all that is required to profit from daily price movements in a financial instrument. Mentoring can teach them that it is not the method which needs to be mechanical, but the actual physical execution of trades.

A technical method must actually be dynamic in nature, to be able to bend with the variable flow of price movement. Mentoring steers you towards an appropriate mindset to achieve that, and teaches you to separate one from the other, yet employ both at the same time.

THE FUNDAMENTAL NOVICE TRADER.

The "fundamental" novice trader is a learned and thinking individual who is not too lazy to study the papers, the accounts, and the commentaries on individual company shares and their parent Indices.

The error they pursue is a failure to distinguish between the very different concepts of trading and investment. Clearly, if you are going to commit significant amounts of your money for a very long time into the shares of a company, or its parent Index, you want to know about fundamental elements such as the balance sheet, earnings per share, percentage of yield, make up of Directorships and so on. However, this is of no use whatever to the short term trader, let alone the daytrader. They are different goals which rely on different approaches.

The fundamental novice trader is not a trader at all, but an investor in disguise. Mentoring can help them find which camp they belong to, and help them transform from one to the other, if they want to. However, these two sides of the coin are not mutually exclusive. This is because there is no reason at all why you cannot earn your living from trading, and then move excess income into long term investment.

THE TOMORROW NOVICE TRADER.

The tomorrow novice trader is an individual always of substantial ability, but is in a combined state of personal denial and laziness. This is because he or she will already be earning a living from something, perhaps a job or a small business, but is aware, whether instinctively or factually that "the writing is on the wall". I.e. He or she believes that what brings in the bacon at the moment is, at some stage in the near future, very likely to come to an end, and an escape plan is needed.

The idea of trading for a living provides a perfect idea, a perfect plan for what is to be the route to take after the current income reaches an end. Unfortunately, this individual is just dreaming, for he or she is always finding an excuse why he cannot do something today instead of why he can. He or she belongs to that fraternity who follow the maxim of "why put something off until tomorrow, when it can be put off forever".

He or she is generally miserly in nature, and on the one hand unwilling to leave the present job or business until its gravestone is ready, and is unwilling to dive into trading for a living unless or until the "certainty of success" and the "absence of financial risk" comes along, in a package topped off with a blue ribbon and a certificate of guarantee. This person expects the Mentor to be available on the National Health Service, and wants a guarantee of eternal financial life before laying out a penny.

What mentoring can do for this person is to provide the kick up the backside so earnestly needed to motivate them into their new business of trading, with commitment and seriousness. This however is no easy task, for they have become so habitual at finding reasons why it cannot happen until next year, the year after, or sometime after that. Yet, contradictorily, they buy the computer, the datafeed and pay for the courses and seminars now, as though they mean to get on with it. But if they get on with it, this means they are endeavouring to make their dream come true, but if they succeed, they no longer have the dream to hang on to. Psychologically, these individuals have the largest obstacle to preventing them becoming traders. However, they have all the ability required to do so. It's a paradigm, which is rooted in a state of denial and laziness, which they know they must confront at some stage, but definitely not today.

THE GAMBLER NOVICE TRADER.

The gambler novice trader is a gambler. So far, his gambling on trades has lost, lost and lost again.

He or she knows that there is a difference between gambling and trading, because the latter measures probability, whereas the former ignores it. The gambler is, by nature, a fatalist. This is because it is much more comfortable and easy to transfer responsibility to the gods than to take it on board and be responsible for the outcome of reckless trading.

Occasionally, the gambler will get lucky, and make a large sum. This however is always followed by an even larger loss.

However, he or she actually has some very special qualities, including courage, no fear of risk, and active imagination. Indeed, the gambler has many of the qualities of a good trader except one; he or she has no decent method or self-discipline. Mentoring can change that, and make the best of the good qualities and help eliminate the poor ones, to turn this individual into one of the most efficient and successful traders possible. However, this is only if the individual is prepared to listen and be taught.

THE BLAME EVERYONE ELSE NOVICE TRADER.

The blame everyone else novice trader is an individual with great analytical ability, and considerable natural ability to approach tasks in a very mechanical fashion. He or she is quite proud of their emotional detachment from others, and is unlikely to relate either to the pain or problems of others, and not ever to express his or her own emotions.

For them, trading is a black and white affair, which could work, but doesn't, because there is a fault with the teacher, the method or the operation, it can never be the fault of him or her. This person has a very nice side to them, but you have to discover it and draw it out, for it will not be willingly offered. They have ALL the innate ability and intelligence to be an awesome trader, but their cold manner and lack of warmth and imagination causes them to fail to see the methodology, and they find reasons why they can make no money this way because everyone they talk to is selling them a white elephant.

Invariably, this person feels unloved in their personal life, unrecognised for their superior intelligence, and unconvinced that anything less than the holy grail itself can justify them taking risks by trading for a living. Paradoxically however, they state that it is their absolute mission to become a trader.

Mentoring these people does not require the teaching of the elements of good trading, because until they are made to feel better about themselves in a personal way, they will just deny it works and blame everyone else. However, make no bones about it, if they can be brought around to a different mindset, they make for awesome mechanical traders who would be hard to beat even by the best. Mentoring here starts with a battle with the mindset, and if it is won, we are talking star quality trader, but if it is lost, then so is the teaching.