Buy High Sell Low
Lessons and Warnings for Beginning Traders
You will lose money when you first start trading; it is unavoidable. But will you lose just a little or a lot? The lessons I share in this book cost me about $50,000, but they’ll cost you only the price of a book.
The book has no charts, no trading techniques, no special setups to recognize and no complicated patterns to learn.
It has only one formula.
Instead, what you will find here are the practical and simple – though not necessarily easy – things you must do to prepare yourself for successful trading.
- How to pick the right security to trade, and how to avoid the wrong ones
- How to pick a broker and how to avoid the wrong one for you
- How to select your trading software
- How to evaluate your risks and create plans to avoid or mitigate risk
- How to develop your own trading strategy instead of depending on others for it
- How to manage your money both in and out of trades
- How to prepare for taxes and record keeping
- How to think like a trader rather than an investor
Here’s what one beginning trader told me:
“It is worth buying this book for its brutal honesty, its focus on starting from scratch with a realistic voice of reason and not an encyclopedia of technical data. I see the benefit in this book when you state that a lot of the slow, painful, expensive work was not necessary to learn. It gives me practical step-by-step information on how to walk through the routines I need to practice to start gaining experience today.”
Nicholas Gehringer, Beginning Trader
In Buy High Sell Low you will learn expensive lessons on the cheap and thus avoid making the expensive ones yourself.
Rethinking My Retirement Plan
The real estate and stock market crashes of the last few years damaged or destroyed the retirement plans of millions of people.
I was one of them.
A deadly disease, a dreadful divorce, and a soul-destroying job had led me to re-evaluate my life, but the economic environment made it unavoidable: I had to make drastic changes in my life if I was going to survive, let alone thrive.
I considered becoming independently wealthy, but since I had no wealthy relatives on the verge of death, that option was pretty much closed to me. (In fact, I had no wealthy relatives period – dying or otherwise.)
Through a process of elimination, I decided that trading stocks was the life for me. No boss, no customers, no employees, set my own hours, get disgustingly rich. What’s not to like?
When I first decided I would learn to trade, I took full advantage of the wonders of the Internet Age. I googled my brains out, read voraciously and promiscuously everything I could find. I researched until my eyes crossed. I signed up for every free newsletter, tried every free lesson, and queried everyone who might know anything about trading to try to glean from them whatever knowledge I could.
In spite of the breadth of my reading, the depth of my research and the overwhelming volume of stuff I was told, I still felt lost. I was wandering alone in the dark with no light, no map and no guide.
Yikes! If I’d have had any idea of how utterly ignorant I was, how much I had to learn, and how much money I was going to lose, I just might have gone back to my soul-crushing job. Fortunately, my ignorance saved me from making that particular mistake. Still, I had to figure it out all on my own.
I wrote this book so that you won’t have to figure it out all on your own.
I run a trader’s group that meets every month. At every meeting, I meet beginners, people who are just learning to trade, people just as naïve and innocent as I was when I started. Their queries are very much like mine were. They ask me questions such as:
- “Which trading platform is best?”
- “Which broker should I use?”
- “Why do I need to pay for data?”
- “What do you pay in commissions? How much should I pay?”
- “What’s a futures contract?”
- “I’m thinking about trading (stocks/forex/options/ futures); what do think about that?”
- “I’m thinking about buying XYZ training program. What do you think of it?”
- “How do you know what to buy?”
- “How do you know when to buy?”
- “How do you know when to sell?”
Over the years I’ve done my best to point these beginners in the right direction, partly because I get my jollies from being useful but also because I was there myself and know how confusing it can be trying to learn how to succeed in trading.
Everything in this book I had to learn the hard way: by slow, painful and expensive experience. But I later learned that a lot of that slow, painful, expensive work was just not necessary.
The book you are reading now is the guide I needed when I first started trading. I wrote it because it didn’t exist and it needed to exist. It will guide you, not only to the things you need to do, but also away from the things to avoid.
If I can save you a little time and a little unnecessary expense, then I will consider this book a success. I cannot do the work for you and I cannot make your decisions for you, but I can point you in the right direction, warn you about the big potholes ahead, and teach you what to do to become a successful and profitable trader.
What You Will Learn
To succeed in trading, you must learn to think, act and respond like a successful trader. That may seem so obvious I don’t need to say it, but sometimes what is most obvious is overlooked or ignored. That’s why I will repeat it:
You will not succeed without learning new ways of thinking and acting.
I describe these new patterns of thinking and acting in the chapter called The Methodology of Successful Trading. Developing those new habit patterns will require commitment and time and hard work from you. You can also signup for my free newsletter at 38atoms.com if you need a bit of a kick start.
But first, you must face some elementary decisions and must take a number of simple but important steps. The steps are practical but not easy. The decisions are simple yet vital to your success.
The bulk of this book is about those practical, simple steps.
You will need to do the following things to trade successfully, though not necessarily in this order. I will walk you through the each of the following steps:
- Decide which particular security you want to trade and the market in which you wish to trade it. I describe the various types of securities and point out some things you should avoid at the beginning of your trading career.
- Acquire a trading platform (software) which works with your chosen security and make sure you have the data feed you will need.
- Select a broker who supports trading that security, (not all brokers support all types of securities), then open and fund a trading account with that broker.
- Develop your Risk Response Plan.
- Develop the first trading strategy you will use.
- Manage your money both in and out of your trades.
- Prepare for taxes and record keeping.
- Improve yourself by following the Methodology of Successful Trading.
I make no effort to be objective in this manual. I learned a lot of lessons the hard way and as a result I have a lot of strong opinions. At the end of the day, you must take responsibility for your own decisions. I offer my opinions and experience to help you, but you have to make the decision whether or not to accept that help.
This book will not teach you how to make a trade. Making a trade is a simple skill that any reasonably intelligent 12-year-old can master. But this book will help you move from ignorance and inexperience about trading success to knowledge and know-how about trading success.
Once you work through the lessons of this book, you will have become an informed and competent – if perhaps a bit inexperienced – trader. Absorb the lessons of this book and you will – by virtue of the behaviors you adopt, the patterns of thinking you use, the self-determination you possess and a little bit of good luck – seize control of your own future by succeeding as a trader.