A tough lesson in learning to trade


EDUCATION is an integral part of trading. When I started working at Goldman Sachs in 1992, I went through a nine-month training program before I did one single trade. The time was spent learning the technical skills that trading requires. I have not stopped learning since. That’s what I love about it, markets change and you have to change with them.

Unfortunately, there is a whole industry out there pretending that trading and investing is easy and that you can purchase success by writing a cheque. Aggressive sales techniques are being used to sell you courses at exorbitant prices. Courses that supposedly will make you rich quickly, with no further effort required. The taster course is normally free but the follow-up course, where the real secrets are revealed, will end up costing thousands. Of course the secrets turn out to be worth zero.

I have strong views on how to become a better trader and investor. It requires time and hard work. You need to generate original investment ideas based on your own knowledge and experiences. That way you don’t end up with a portfolio full of consensus ideas, just like the other traders. You also need to make sure that you know at least a little about the companies you invest in – it is your hard-earned money at the end of the day that you put at risk.

Looking at technicals will protect you against paying too much, and improve your timing with regards to when to sell a stock and move on to the next. But don’t make an investment decision solely based on two lines crossing one-another. Trading is a psychological battle with the market and yourself. When people make money, they can feel invincible and might end up over-trading until it all goes wrong. And when they lose money, they find it very hard to cut their bad positions. In the end it is all about risk management, not blowing up and ensuring that you are still around tomorrow.

Following my BBC reality TV show Million Dollar Traders, where I put my money where my mouth was, I have now done the same with the Lex van Dam Trading Academy and its flagship course 5-Step-Trading®. I passionately believe that, independent of years of trading and investment experience, the basics are where we all normally go wrong.

At Active Trader 2012, I will be looking at all the mistakes that traders, including myself, keep making. And I will give you some tips that might help you become better traders. Success in trading and investing starts by not making too many mistakes, and of course, by avoiding the wrong financial educators. And don’t worry, I will not try to sell you an expensive course.

Visit www.lexvandam.com to find out more about the Lex van Dam Trading Academy. Active Trader – at which Lex van Dam will speak – is on 24 May 2012: