ood alternative. Many local ISPs have more capacity than subscribers due to their limited exposure and can have excellent subscriber-to-line ratios. Business-oriented ISPs are also excellentresources, such as backbone providers like MCI/WorldCom’sUUNet, Level 3 Communications, Sprint, EPIC, and others. Thereference in the back of the book provides a good list.
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The last thing you want to learn is how good is the technicalsupport you will receive when you need it. Is it 24/7? This can beimportant if you live on the west coast when the market opens at6:30 a.m. If their customer service does not come up until 8:00a.m. local time, you could have a problem. Our recommendationis to use a local, well-staffed, well-equipped, and well-financedprovider. It also is not a bad idea to have more than one ISP as abackup if it is not cost prohibitive.Okay, now that you’ve learned how to connect to the Internet, it’s time to focus on the type of system that you will use. Therule here is Your system is no stronger than its weakest link. Youneed a good computer, composed of a CPU, RAM, hard drive,video card, sound card, monitor, and input devices. Since trading does not require much sound, just about any sound card issufficient. As far as input devices are concerned (primarily a keyboard, mouse, and CD-ROM), almost any available on today’smachines will do fine. Some traders prefer the trackball typemouse devices because they are more comfortable over long trading sessions. The other components need a word or two.• CPU: This is the brains of your computer. If you are buying a new computer, do not take the cheap alternative onthe central processing unit (CPU). Buy the fastest one youcan afford. You might get by with 266 megahertz, but youwill be happier with one in the 400 to 600 or better range.• RAM: This is the random access memory. The moreRAM you have the less time your computer spendsretrieving data from your hard drive. This is not an areato try and save money. 128 megabytes provides far superior performance to just 32. You will be pleased withmore, and in the trading world this is a minor expenseby comparison to the technology impact cost mentioned.• Hard drive: Today’s trading programs are memory hogs.The reason is the outstanding graphics. But as long asyou have 3 to 6 gigabytes or more, you will not have anyproblems. If worse comes to worse, it is one of the easiercomponents to upgrade.• Video card: Due to the explosive demand for computergames, video card technology has blossomed. You
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should not have a problem on any new computer withthis component. With multiple monitors, an expandedvideo card is necessary.• Monitor: Here is another key component. It must belarge enough to accommodate all the windows you willmonitor while trading. This could be 4 to 10 or moreLevel II (market maker) windows, a Time & Sales screen,plus charts, order entry, order tracking, tickers, andother windows. The other key attribute is picture quality. The serious trader may be viewing the screen 7 ormore hours in a day. If advanced technical studies areoverlaid on price charts, like Gann lines or MACD, avery sharp picture is required. If you need crisp text andimages, pick a dot pitch of 0.28 millimeters or less.Depending on which software packages are used for decision support, we have found quite a few traders who prefer usingmultiple monitors. Multiple monitors give the trader increasedflexibility to view market data. For example, I like to read a goodbit of data at one time since I actively day trade; therefore I havethree monitors on one CPU at the time of this writing. I knowtraders who are more active than I am who utilize as many as sixmonitors. The caution I offer is to avoid putting more data infront of you than you can absorb. As time and experience grow,so will your propensity to absorb data. As this occurs, add additional technology to support the information you require. Whentrading becomes an integral part of your life, the cost of technology is not a real consideration. In fact, it is one of the cheapestconsiderations. Consider the trader who trades 50 times per dayon average, at an average ticket cost of $15 per trade. In thecourse of one month, that trader will spend $15,000 in commission. Over the course of a year, this compared to a $10,000 systemmakes the hardware cost less. Therefore, buy the best technologyyou can.Once again, don’t try to get too deeply involved in themechanics of computer selection. Use a professional. A trader’sjob is to trade. But have adequate knowledge and understand thelanguage of the providers you will use. We have found that thosestudents that have an inordinate interest in the technical side ofthe systems tend to get buried in them. My rule is that Spending
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too much time on hardware, software, or Internet connectivitytends to be counterproductive to trading.After you’ve connected your computer to the Internet, whathappens next?You log onto your EDAT trading software. A link is established between your computer, your broker’s back office, theover-the-counter market (NASDAQ), the New York StockExchange, and a variety of ECNs, depending on which ones yourbroker is affiliated with. At the same time, your software company is linked to all the exchanges via a price quotation vendor.Direct prices from the exchanges are processed and sent to yourbrokerage firm or software company. It converts them into a format that fits the software package you are using and transmitsthem to your computer. And all this happens in seconds.When you place an order, it is sent to the exchange or ECNyou select. Instantly it is recorded in the back office of yourbroker-dealer. This is important because if you lose your Internetconnection, you can call your broker and find out if your orderwas filled or canceled or is still pending. You do this with one ofyour redundant systems, which you have because it is criticalthat you have immediate access to your firm’s back office.When your orders are filled, the price immediately “reports”on your computer screen. On most systems orders are colorcoded. Typically, a live (unfilled) order is red. When it gets filled,it either turns green for a purchase, purple for a short sale, or bluefor a liquidation of a long position. Cancellations generally areshown in black. This color coding makes it easier to spot openorders, so that you do not leave them open when you shut downyour system. Powering down your system does not automaticallycancel an order, and because live orders can be filled even aftertraditional trading hours through many of the ECNs that offerextended hours, I strongly suggest that you Never walk awayfrom a live order, unless you have set stop levels with predetermined exit points.Because electronic trading gives you the control of your execution and order routes, it also requires responsibility; therefore,Always know your positions and the funds in your account. TheInternet is a complex system. Combine this complex networkwith a complicated broker/dealer network like NASDAQ and theNYSE and you have potential for problems. As you help pioneer
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the future of electronic trading, your responsibility is to know allyour trades and not to rely solely on technology to monitor yourtrading activity. Traders take this responsibility very seriouslysince many have learned expensive lessons from ignoring position management. Keeping a trade journal is a natural solution tomanually recording trades. Not only do you create anotherrecord of all activity, but the act of recording your activity revealspatterns and emotional influences that will help you grow.Another critical rule regarding technology is, Use redundant systems to access your brokerage firm. If your telephoneline or Internet connections are interrupted, a cellular phone is agood choice and a cheap investment in comparison to the potential for loss in trading blind while your system is down. Workwith firms with accessible trade desks that have qualified registered personnel who can get you in and out of trades when situations do occur. Not only is it important to have a mediumthrough which to contact the trade desk of a firm but it is alsoequally important to be able to speak to a resource who cananswer questions and put a trade on without your having to messaround with automated response systems. This is not the timefor technology. When a problem occurs with technology and youneed to speak to someone, “high touch” takes precedence over“high tech.” Too many firms today have lost contact with theircustomers because they have attempted to replace personnelwith new technology, as if the two were mutually exclusive. Thereality is that when technology fails, people still need to be thelayer of insulation between reasonable frustration due to technical failures and infuriated anger due to incompetence or inadequate redundancy that can be easily provided by a trade desk. Agood electronic firm sees all orders or positions you haveon/pending on their back-office computer system, and it can liquidate them and cover them as you see fit.The final rule regarding technology relates to what you cando to be proactive to test how your connectivity is pulling theneeded data to trade. Before citing this rule, always know thatanother fact of life is that live data or real-time price quotationsare, in reality, only near real time. There is no way to replicate onyour computer the price activity that takes place on the floor ofan exchange as it actually happens. It must be gathered, digitized, edited, reformatted, transmitted to your software-broker,
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and delivered to your computer. That takes time, perhaps onlynanoseconds, but time nonetheless. That is why the best systemavailable in your budget is the minimum requirement.Knowing that, the rule is Ping before you trade. Your firmshould allow you to “ping” the servers that you receive data fromeach day to test how clean your connection is to the servers thatserve the data to you. This test path of the connection for accuracy and speed is called a trace route.Through the trace route you can send a signal to a beaconlocated at the source of your data. Whether you use a servicebureau that sends the data to you or you receive the data from aproprietary network provided by the brokerage firm you tradewith, testing the number of “hops” it takes and the time it takesto get to the beacon will allow you to pinpoint where problemsor potential problems in the form of bottlenecks may exist. Aping test will quantify how many router portals you will travelthrough to reach your data destination. Because the Internet israpidly growing, hubs and portals are constantly changing, andthat does not always mean for the better. Hubs can become saturated through activity and subscriptions in a given area, whichcauses delays and strains on subcomponents of the path you taketo your data source. These strains or bottlenecks will be theplaces in your trace route that weaken the connection; hence, thereality that you are only as strong as your weakest link. Traceroutes will show you how fast data are received and sent at eachhub to help highlight where potential problems may exist.Although there is little you can do about this due to the fact thatthese hubs are each multi-million-dollar networks, you can atleast attempt to connect through another service provider thatwill most certainly have different trace routes.For example, you may ping the data source from which yourreal-time data come (decision support tools) and find that it mustpass through 12 hubs before it reaches you. You may find thateach hub delivers data at very high speeds such as 95 milliseconds. But as time goes on, a certain hub may begin showinghigher and higher times, such as 300 milliseconds (slowerthroughput). Although these times may not show noticeable differences in the data you receive immediately, this is a good indication that a given hub or series of hubs along your trace route isbeginning to show signs of saturation. Given that scenario, you
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may want to test another ISP service to compare times and traceroutes. Moving from one service to the next makes sense duringthis rapid-growth revolution in technology and bandwidth if youcan reduce the number of hops you take with associated fasterspeeds. Your ISP won’t like it, but who cares—you are not running for mayor here. You’re giving yourself every advantage toreceive mission-critical data on time. If your ISP is falling behindin the new world of survival of the fittest, drop them like a badhabit and move on to the next best service.So the rule is this: Test your trace routes often, and alwayslook for new innovative companies that are providing new solutions to Internet connectivity. The biggest is not always the best.New companies like Level 3, Epic, and Enron are emerging companies that are getting into this fascinating communications networking business, and they are providing great new solutionsthat often surpass the known players. Don’t ignore their presence; they have great futures in connectivity. On a side note,companies like Enron are best known for their energy and oilaffiliations, but they have for the past few years built an incredible fiber-optic network while digging trenches to lay pipe. “Whynot throw some fiber in the hole while the ground is open andbuild a network of our own?” was obviously the foresight of theEnron executives who created this formidable new player in theworld of telcos and connectivity. I mention this because not onlywill it help you with your technology but also it relates to myrule to get knowledge of new-technology companies that mayhave the potential to become the next CSCO or MSFT of theworld. Technology is the reason for our new economy. Embraceit, because it is the future.
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RULES FOR MONEYAND MINDMANAGEMENTBe humble and admit mistakes.Never let emotions control you.Avoid stock tips.Never take home a loser.Open trades on the anticipation of news;offset positions on what actually happens.Define the strategy, and match thediscipline to it.Allow for more heat.Exclude commission costs from your exitcriteria.191
Copyright 2001 The McGraw-Hill Companies. Click Here for Terms of Use.
Never let your confidence exceed your skill.Know thy tax law.Contemplate before you speculate.Lose the labels.Learn to pace yourself.Follow your instincts.Find your own game or recipe for success.Learn to lose.Make trading a habit.Never let your attitude suffer.The market is always right.
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he rules I want to begin with for the first section of thischapter will cover the gamut of errors that occur frequently with both new and experienced traders regardingmanaging money and market risk. Instead of laying them out in alinear fashion, I thought the rules would best explain themselvesthrough a true story. As I take you through this story, I will offeralong the way strategies that could have been used to mitigatemuch of the risk. Finally, for the second half of the chapter I willlist rules for the mind that every trader should follow. Whenreading a recent article, I encountered a story written by a reporter who described his own experience while trading a fewhigh-tech Internet stocks. The author was quite brave to share hisexperience, and my intention is not to fire shots at him. Instead,I commend him for the candor. He makes no claim to be a trading expert, and his story teaches the first rule of risk management: Be humble and admit mistakes.Unfortunately, the mistakes that follow are all too commonfor many traders and investors. The story reflects how mediahype mixed with excitement and inexperience can lead to anexpensive lesson. What made this story particularly interestingto me is the ironic way in which the reporter himself fell victimto his own reporting.After reporting on high-tech firms for five years, a reporterdecided to trade a few high-tech flyers. He bought an updatedcomputer and opened an online brokerage account. He openedfour positions buying shares of the companies that made his newcomputer, manufactured the chips in his computer, provided hisInternet service, and developed his Internet browser. The earnings reports of all four companies were about to be released whenhe bought each of the stocks. As he says in the article, “I bracedmyself for winnings.” However, he had not prepared himself forlosses, and while in the trades, he had a difficult time admittinghis mistakes. With no exit strategy in the event of failure, when193
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the computer and the chip manufacturer missed their earningstargets, he realized his mistakes quickly, but he dealt with thempoorly. Additionally, the browser company announced that it wasgiving its software away, which was received negatively by themarket, while the Internet provider’s stock was the only gainer.Three out of four were losers.Undaunted, this reporter charged forward into new trades,breaking the next most common rule: Never let emotions controlyou. He turned on his television as a source of additionalresearch. It alerted him to a “hot” IPO just hitting the market. Assoon as it hit the secondary market, he broke two rules noted inChapter 5 by placing a market order and trading IPOs. Emotionsare the most plausible reason why anyone would use a marketorder to buy an IPO. Greed and excitement are the emotions thatlead so many amateurs to financial ruin.The IPO skyrocketed from $15 to $60 the first day, eventuallyclosing at $50. He thought he was happy until he got his confirmation, which showed that he paid the high of the day at $60. Notknowing what to do, he relied on hope and waited another daybefore exiting the trade, eventually getting out at $30 per share.As if he had not received enough punishment, he joined achat room for $75 a month. He read a biased discussion thatappeared to be a conversation between a bull and a bear speculator on a particular stock. It fascinated him. Eventually, the bearconceded that this $4-per-share tech stock was poised for a majormove up. This reporter blindly jumped in to buy the stock. Thestock bolted to $51⁄2 on thin volume with very few shares tradingat this price and then quickly fell to $3. Due to the light volumeat $51⁄2, he either wasn’t able to sell or just didn’t put in an order.After taking his losses, he learned that the bull and the bear werethe same person and that the chat room trader had front-run thestock. (Note: Front-running is the practice of buying stock aheadof other orders, which are expected to have substantial marketimpact. In other words, the front-runner profits from the buyingof other parties. This is an illegal practice for licensed stockbrokers and should be for everyone in my opinion when associatedwith manipulation through chat rooms or any other medium.)Hence, the rule: Avoid stock tips. Maintain control of your trading by making your own decisions; don’t react to the hype andpotential manipulations of chat rooms and stock tips.
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As a trader, you can maintain absolute control of just a fewrisk factors in the market, such as the number of shares youtrade, the stock you trade, and the amount of time you are in themarket. That makes these factors that much more valuable, sowhy give away control? Any departure from this control takesyou closer to gambling.Finally, our high-tech trader just kept getting in deeper anddeeper by breaking this rule: Never take home a loser. If a tradegoes sour, dump it as quickly as you can; ignore this rule and the“judge” of the market will drop its gavel on you, sentencing youto financial execution. Sound a bit extreme? Maybe, but I can’tthink of many reasons to take a losing overnight position. Hope ofwinning and fear of losses take control of the amateur mindset,putting the trader at a significant disadvantage. Perhaps the ironyof this real-life story is that this reporter traded these stocks as literally and predictably as the media who report market events andtry to explain every move and reaction in the market. The realityis that the market cannot always be explained, and those members of the media or amateur crowd that believe and wait foreverything to be explained discover this lesson very quickly.The rules our reporter friend broke while embarking on hisnew trading venture remind me of the paths we take in life. It isall about making the right choices from the beginning. He startedoff on the wrong track, a move that can often be the beginning tothe end, resulting in the breaking of one rule after the next. Thisis equivalent to a juvenile delinquent’s starting out on the wrongfoot and then later growing up to become a frequent flyer on theparole officer’s most active list. He had been reporting in theindustry for a while, and he felt he knew it. But I do not think heknew much about how the stock market functions; he merelyhad some background knowledge regarding the tech industry.Unfortunately, the reporter made no attempt to learn howthe market functions, or, at least, he did not mention it in the article. If he did, he would have learned a critical rule regardingnews: Open trades on the anticipation of news; offset positionson what actually happens. Instead, greed and excitement provedthat, in this case, his confidence exceeded his skill, and the juvenile delinquent of trading was born.A lot can be learned from studying where another trader goeswrong, but when it comes to managing trades for yourself, the
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lessons can become more complex and difficult to learn. The reallessons begin by asking yourself less obvious questions. Reviewing how you handled the trades you opened during the day is anexercise that some consider mundane and time-consuming, butthe result of doing so will be a foundation of discipline. Questionsyou begin to ask yourself, such as, “Did I act with clarity, conviction, and discipline?” are important questions for your journal. Ifyou can answer yes to these kinds of questions and you still getpunished by the market, learning not to beat yourself up for doingthe right things but to learn from the experience instead will helpyou frame the proper mindset of a trader. Over time, you will berewarded for such discipline. Micromanaging your daily activityis a good “cooldown” for each day. Unfortunately, this type ofdiscipline cannot be taught completely; much of it comesinstead from your own personal choice to control risk and takeresponsibility for your own trading. These are just a few of theconsiderations you must address when you engage the market.Unfortunately, every day people are introduced to the marketthrough the same emotions to which the reporter fell victim.Thousands of amateurs who neglect what should be called commandments never have the opportunity to embrace the passionwithin them that may have been present. Ponder how many people begin trading simply by buying a computer, an Internet connection, and a fresh new online account, driven by the next IPO orother market event that elicits emotions like greed and excitement.Next, ask yourself what their success rate will be. I think you candecide which methodology makes the most sense.Neither this book nor any other can completely teach youthe “art of trading” nor that which I believe to be the cornerstoneof this art, controlling your downside risk. Therefore, make thedecision right now that whatever trading discipline you aspireto, or work at, you will stay within the parameters of the tradeyou set prior to entering the trade. The rule is, Define the strategy, and match the discipline to it. Discipline cannot beexplained for all trade scenarios. Again, we are faced with thereality that the market is not that literal. Discipline cannot bedefined as cutting losses at 1⁄8 or a 1⁄4 point. There are many occasions when it pays to be more risk tolerant (such as shorting),and other times to be purely disciplined. Instead, discipline isdefined by your ability to determine the risk-reward relationship
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before opening a trade and then to have the fortitude to stickwith your plan once the trade is opened. Otherwise, if you havea literal definition of loss tolerance, you may be the victim ofanother form of risk, “whipsaw risk.” Traders who have no conviction for trades often fall victim to whipsaws, whereby theyliquidate and cover trades too soon, only to have the stock moveback in what would have been their favor. In other circumstances, discipline may determine that if the trade works againstyou the slightest bit, you cover. So let’s explore the circumstances in which it pays to be flexible, or what I call risk elastic,based on solid criteria, and those in which it pays to be a “cyborg,” acting with pure disciple.Pure discipline is required when you are trading moreactively, such as day trading. For example, suppose you are trading SDLI to take a very fast incremental profit. The stock is showing upside momentum, and you decide to “lift” an offer withSOES. You get filled immediately, and suddenly SDLI is showingsigns of weakness with offers building rapidly. Your decision toenter the trade was based on pure momentum strength, and yourdecision to trade the stock was not based on pattern recognition.Therefore, in this scenario, you must exhibit pure discipline! Youmust trade like a cyborg, with no emotion whatsoever, and coverthe trade. Your motivation was to time the market and take a smallprofit based on perceived upward strength and an imbalance ofdemand exceeding supply. Obviously, in this case you were wrongand your timing was off. Emotions, hope, or blind faith can neverplay into your decision-making process, and the trade must becovered immediately.Other times, it pays to be more risk elastic. One such occasion would be when you are shorting stock. That does not meanyou will be undisciplined; it simply means you will need to givea short a chance to work, without hesitation.Rules for going short are unique due to exchange rules thatrequire an uptick. In NASDAQ issues, upticks are measuredwhen the current inside bid in the market is higher than the bidprior. When trading listed securities, the uptick is measured as atrade that takes place higher than the previous trade. Because ofthis rule, when shorting stock, the rule Allow for more heat isimperative. Expect it. If the bullish sentiment is in the market tocreate the uptick while day trading, and I sell the offer short, I
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have the bias that the stock is near a top or resistance level for thetime horizon I am trading. If buyers are lifting my offer, I expectthe stock to trade higher. That bullish sentiment will often followthrough and carry stock prices perhaps a price level or twohigher than your short entry point. Don’t expect to sell the perfect top due to the uptick rule, but at the same time, you mustknow where you are wrong if the stock continues higher. Shorting stock requires perhaps more conviction than any other tradestrategy. Therefore, buying to cover the first price level or twoabove your short entry point without confirming indications thatthe stock is getting stronger is a mistake. Shorting provides substantial profit opportunities, but requires a higher propensity totake risks.Exiting a trade should be a purely mechanical process,because the mental decision to get out should have been madeonce the criteria and market conditions violated the trading limits you set. The logical side of your mind should kick in, prompting an immediate exit. Emotions should have little to do withtrading, and only trading enough over time will allow you todivorce yourself from them. In the interim learning stage, use“emotional hedges” by setting rules for each trading strategybefore getting in, while implementing discipline to follow therules once in the trade, regardless of the situation.As you are beginning to see, the determination of when to bepurely disciplined and when to accept more risk is based onmany different events and strategies. Determine and define whatrisk tolerances you will accept prior to entering trades, and survival will allow you to develop instincts that will serve you wellgoing forward. In the absence of such considerations, most newtraders never survive long enough to find out what potential theymay have had. Discipline is different for everyone, and you mustdefine that for yourself, but all traders need to employ it.
MONEY MANAGEMENTMoney management must include the topic of commissions,since they are part of active electronic trading; therefore, let’sseparate some of the myths and realities about commissions. An
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important rule for maintaining the integrity of your mental stopsis to Exclude commission costs from your exit criteria. Whilekeeping track of commissions post-trade is important for evaluating your overall performance, the desire to squeeze a littleprofit out of a weak trade in order to cover the commission costsof that particular trade can quickly lead to accelerated lossesand market impact costs that far exceed the commission. If atrade is affected by the commission in terms of profit and loss,then the risk-reward spectrum is too tight, and the trade is notworth the risk. All traders will encounter losing or marginaltrades that trigger their criteria for an immediate exit. Yet sometraders, rather than exit the trade immediately, up or down a 1⁄16or at breakeven (scratch), will hold on to the trade, hoping to getan extra 1⁄16 or 1⁄8 point to cover commissions. But then they findthat the stock continues in the wrong direction, leaving themfaced with substantial mounting losses that far exceed the commission. Put another way, when evaluating a particular trade,commissions should simply be thought of as a sunk cost; therules for when to exit that specific trade should operate independently of the existence of commission costs. While commissions on an aggregated basis are an important consideration, ifyou allow commissions to affect your trading habits on an individual, trade-specific basis, the market impact cost from remaining in undesirable trades will far outweigh any perceivedbenefits.Money management in good times also needs to be considered. Learning trade mechanics will take time but is elementarycompared to the art of trading. Learning about ECNs, limit ormarket orders, keystrokes, liquidity, and so on are all a matter oftime. You can use a simulator for practice until you are proficientwith the mechanics. But the art of trading is about your own psychology, and understanding it will be a lifelong learning process.Some traders’ worst days have come right after some of theirbest. Hence the rule, Never let your confidence exceed yourskill. When your confidence exceeds your skill, you’re in trouble. When trading strong, trade more aggressively but stick withyour rules. For example, I will tend to make more trades becauseI am in tune with the market or sector I am trading, but I willfiercely engage the rules of trading. Trading within the rules isalways critical, but after a profitable spell, it is even more impor-
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tant since subconsciously you may be taking risks that youwould never have taken had your recent trades not been so profitable. Simply put, you consciously or subconsciously become“cocky.” Some call it “self-sabotage” because your subconsciouspsyche doesn’t feel you deserve the success. All I can say is,whatever causes irrational trading behavior, the best solution isto be aware of it and be more focused on your rules.As your understanding of the market grows through trading,confidence will replace your fear. Greed and excitement are strongemotions and can often jade your recognition of what all tradersneed: a healthy respect for the market. Healthy respect and evensome fear forces you to gain more knowledge and understandingbefore embarking into the unknown, while excessive fear paralyzes action. Before you know it, you become a victim of the stockmarket, left with a jaded view of its tremendous potential becauseyour fears were realized through damaging losses.Another rule regarding money management is less interesting but still important: Know thy tax law. There are some specialtax advantages available to the active trader. I am not a taxaccountant or lawyer; therefore, I will only alert you to what isavailable. You will need to contact a competent tax practitionerfor professional consultation if you think you are eligible for anyof them. I have included the Web site of a CPA firm familiar withthis specialty in Appendix C.
MIND MANAGEMENTTraders need to maintain a clear focus, and that comes only witha clear head. The rules that could be listed for this topic are asbroad as the subject of psychology. Therefore, I will focus onsome of the more common mistakes I see new traders make.The rule Contemplate before you speculate is one that manyignore, including the reporter at the beginning of this chapter.The cost of trading must be considered from numerous perspectives. Lost income if you plan to trade full time and anticipatedtrading losses are just a few of those considerations. Can youafford to become a full-time trader? Or are you going to tradepart-time? These are questions that you must address with your
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spouse or partner if necessary. Making these decisions alonewhen others are involved is a mistake and only adds pressure toyour state of mind during this learning process if