A career in the gritty Texan construction industry might not seem like the ideal preparation for becoming a stock trader.
However, staying safe on-site demands precisely the same qualities of meticulous preparation, attention to detail, and self-care that keep successful traders alive in the markets.
Maybe that’s why newly retired ironworker Tim Heischberg of Houston has found himself so fascinated by the trading process. And he definitely has an affinity with the principles of risk management that are so crucial to profitable trading.
Not that Tim’s first steps have met with unqualified success. On the contrary, he’s only too happy to admit that it has been “a bumpier ride” than expected, but getting the job done right is his ironworker’s mantra.
Fortunately, with the expert guidance, he’s getting at Profit Prism, he’s very confident of turning things around.
Truth be told, while there are traders who become profitable almost immediately, there are others who need more time.
For these people, the most important thing is to have the resilience to persevere, the self-awareness to recognize their mistakes, and the determination to develop a trading style that suits their personality and abilities.
Why There’s No Single “Right” Way To Trade
Tim has key qualities like perseverance, self-awareness, and determination in abundance. He also has the patience to take things slowly and trade small.
Such qualities are vital because new traders often find themselves faced with a bewildering menu of possibilities.
Are they going to be day traders or look to hold swing positions for a few days or weeks?
Will they focus only on long trades or try to short as well.
Will they trade penny stocks or options on blue chips?
Seasoned traders know there are no right or wrong answers to these questions. There is no single surefire method that trumps all others. Much depends on the trader’s desired lifestyle and his or her personal preferences.
Options, for example, can be a great way of quickly growing a small account, but they do bring extra layers of complexity and don’t suit everyone.
Tim found that, in his own words, he “didn’t do options well at all.” And that’s perfectly okay. It might be that with time and practice, he’d overcome these difficulties, but the fact is, there’s no need to.
At Profit Prism, Tim has found a variety of ways of growing his account, and he’s now enjoying learning with Jeff Williams in particular. “I’ve been trading while learning,” he says, “but trading small to limit my losses until the training wheels come off and I can fly.”
So the point is not whether options are good or bad in and of themselves, but that every new trader needs to take the time to find the instruments, strategies, and indicators that work for them.
“I was looking to supplement my retirement without blowing up my small account. The wife told me I won’t get another chance if I do : )”
The Supreme Importance of Stop Losses
The same is true of stop losses. Tim initially struggled with some of the technicalities of placing his stop orders, but even many successful traders disagree about the best way to manage their stops.
Some believe that entering stop losses into the system can make them more likely to be triggered and prefer to keep their stop price in their head, entering a sell order only when that price is reached. Others may protect themselves by buying put options entitling them to sell at a specific price.
The key thing is not so much how it’s done, but that the trader has a clear idea of the price that’ll deliver the maximum acceptable loss on a particular trade. Also, the trader should avoid the temptation to move a stop hoping that a losing trade will suddenly turn round.
“I needed a small account specialist who could help me get my account going in the right direction. I don’t do options well at all.”
Mindset: The Real Key to Risk Management
Having traded briefly without stops, Tim now appreciates just how crucial they are. But stops are nevertheless only one aspect of risk management, and he has also been remarkably quick to develop an understanding of the other vital elements, which have a lot to do with the psychology of trading.
“When you have a bad day, shrug it off,” advises Tim. “Don’t let the market get into your head or else you’re dead.”
As he puts it, “Don’t be greedy. Pigs get fat, hogs get slaughtered. A small gain is better than a big loss, and if you miss a trade don’t chase it or it might back up and run you over. It’s easier to sleep with missed opportunities than lost dollars.”
Of course, statements like those might sound cliché, but it’s only because variants of them can be found in almost any quality trading manual. And the reason they’ve been quoted so often is that they’re both valid and vitally important.
“Getting a lot of good counsel and education from Jeff Williams in the trading/training room. The payoff is coming soon.”
Aiming To Double His Trading Account
As Tim has realized early in his trading career, there’s much more to risk management than the precise computation of risk and reward ratios, position sizes, and maximum acceptable losses.
What really matters is having the right attitude and having the self-control to stay out of the market until the right opportunity comes along. Luckily, under the expert guidance of Jeff Williams and his team at Profit Prism, Tim is rapidly improving his technical skills and steadily gaining in confidence.
“I really want to get to the point where my small account blossoms into a large one,” he says, “I’m restarting at $2,500 and would like to see it at least double by year’s end.”
Most would agree that Tim’s goal is ambitious, however, with the mental resilience he has shown so far, bolstered by his acute grasp of the essential principles of risk management, it’s a very realistic goal.
And now, there’s a high possibility he’ll go on to enjoy the financial freedom that’s his primary trading motivation.