Over the last few Months I have read Robbie Burns, The Naked Trader’s, latest Book ‘Trade like a Shark’ several times. This is supposed to be Robbie’s take on the Psychology of Trading/Investing and to a large extent it is precisely this - although I would add that it is much, much, more than just that.
The first time I read ‘Shark’ I must have thought it was pretty good - otherwise I would not have bothered to read it twice. In fact, I simply can’t remember my initial thoughts but after reading it a second time I was very much of the view that this Book was really something quite special, and I would go so far as to say this is the best thing Robbie has yet written.
Normally after reading a Book that I think is significant I will produce a Review of it and shove that with a Link to the Book on ‘Wheelie’s Bookshop’ page; but this time I felt this Book was so excellent it deserved more than that and the structure that fortunately came to my mind was to go through the Book for a third time and to use a Highlighter Pen (once I had actually remembered to buy the rather essential item from Tesco) to mark the bits of text that really stood out to me and then I would type them into a Blog and put some comments with my own view of the point the text was making.
So that is exactly how this Blog will go - it is largely chunks of text from Robbie’s ‘Shark’ Book with my thoughts either ahead of the text or immediately behind it !!
As you will know if you are a Regular Reader (I will resist the temptation even to mention that pathetic Breakfast Cereal attempt at humour that I always try to trot out after this phrase), I am a massive fan of what Robbie has done over the Years and pretty much followed what he did from the start with his column in ‘The Sunday Times’ under the Heading ‘My DIY Pension’. I am pretty sure I have read all of his Naked Trader Books in the various Updated Versions and I recommend that all Readers, especially anyone who is new to the Game, should read his Naked Trader Book. However, as superb as Robbie’s Naked Trader Books are, I have always felt that there was something missing.
What I am getting at is that in my view there are very few ‘Gurus’ out there who even come slightly close to Robbie’s skills when it comes to Investing/Trading but if you were to read Naked Trader millions of times and to follow what it says entirely to the letter, you would still be a long way off the extremely high level of success that Robbie achieves. To some extent I think the guy has an amazing natural skill that we will never be able to pick up - but to be honest that doesn’t matter; if we could get just 60% of the way to Robbie’s full talent then that would be sufficient to ensure us enormous Wealth over time.
My sense has always been that perhaps what I was missing would have been filled in if I was to attend one of Robbie’s Courses - this is of course an option but because of my Health considerations it has never struck me as particularly convenient and to a large extent I just figured out my own ways of taking what Robbie (and many others) say about how to do things and then I have created my own Approach/System.
Having spoken at length with many People who have been on Robbie’s Courses and interrogated them with regard to trying to identify the Secret Ingredient - it has pretty much become apparent that People who have been on the Courses can’t really give me the answer - although I have only ever met one person (out of probably as many as 40) who said it was not all that useful. In fact, I will add that a common factor I notice amongst many of the People on Twitter who I consider to be some of the most switched-on Investors/Traders, is that they have all been on Robbie’s Course.
Anyway, getting back to the point, as much as I think Robbie’s Naked Trader is the best Book there is for Investing/Trading for normal People, I take the view now that if you are someone who has been doing the Game for quite a few Years, then you might not find the Book all that useful. I am sure you would find some value in it, but it probably wouldn’t blow your socks off. Conversely, if you are new to Investing/Trading (perhaps you have been doing it for a couple of Years, or you have been doing it longer but are not managing to consistently make Money or you are simply losing all the time), then I have no hesitation in recommending the Naked Trader and you can find a Copy in the Bookshop and on the ‘Beginners/Useful Links’ Page.
So this is the crux of it - if you are an Experienced and Successful Investor/Trader then it is extremely likely that you will read ‘Trade like a Shark’ and get a huge amount out of it. I found that it is a Book which really made me think and the Key Point here is that I take the view that this Book bridges the Gap between Robbie’s more basic ‘Naked Trader’ Books and the outstanding level of Skill and Ability that Robbie demonstrates Day to Day with his Trading/Investing. It is no good just whizzing through the Book and thinking “What is Wheelie on about, it is a load of waffle” or similar - the point is that you need to read the Book very slowly, carefully and deliberately and to think about each paragraph and how it relates to your Trading/Investing and where Robbie is saying something that would make a big difference to how you do things. Don’t be frightened though (even if you are getting ‘Jaws’ Movie flashbacks), like all Robbie’s scribbling, it is an easy read and is written in his usual style with loads of funny bits and some wicked Cartoons.
One of the things that really surprised me is that Robbie hasn’t been Trading/Investing much longer than I have - in fact, I might even have started a bit before him. The difference is that where I floundered around and made mistake after mistake for years and years, Robbie seems to have very quickly hit on an Approach that works and although I am sure he has done some tweaks and alterations to his Methods, to a very large extent the way he does things today is probably pretty much the same as what he was doing 15 years ago or more. That is impressive and it must have taken a lot of Research, Reading, Analysis etc. to come up with this Solution so quickly. The man is clearly no fool.
Right, let’s get on with it. As I said, you will find chunks of Text from the Book with my thoughts around it but I must add that you should not think “Oh well, Wheelie has given me all the best bits so I can save my Money buying the Book” - of course you are free to think and do whatever you like (as long as you have written to me in triplicate first and I have given you the Official Wheelie Permission), but I would suggest that it is worth getting the Book for the detail and nuance it gives and for the copious Real World Examples that Robbie has put in from his Readers and from his own Trading and of course the Chapter on the different Investor/Trader Styles is worth multiplies of the Price of the Book on its own !!!
Oh, and I must add that there is a bit on Psychology….
Around ‘Simplicity’, Robbie puts in this Quote from Warren Buffett:
‘There seems to be some perverse human characteristic that likes to make easy things difficult.’
This is something Robbie refers to a lot - he is a big believer in keeping things simple and as time goes on I find myself moving more in this Simplicity direction and in particular, ‘Cutting out the Noise‘. This next bit is the essence of the Book:
‘In the markets the sharks win. They gobble up the money from the fishes. The fishes are all panicked, swimming about, not knowing what to do - the sharks pounce and eat them up.’
‘Most people in the markets are fishes. They are swimming about panicking, worried, fearful, greedy - full of different emotions. The sharks are intent on one thing alone: taking the fishes’ cash.’
This next bit comes from a bit later in the book but I am showing it here because is supports the quotes above:
‘This book is called Trade Like a Shark and that’s exactly what you have to do to win; you’ve got to be cold, ruthless, efficient, unemotional.’
Here is a scary Stat from the Book:
‘Did you know that roughly 70% of investors lose over time, as do 95% of day traders?’
This is something I say all the time - it is no shock that Traders tend to lose and the majority of Investors are really pretty hopeless. I suspect that the number one reason for ‘Investors’ losing is that they buy too much AIM Junk. Simply by only buying Quality Companies with Dividends and Profits etc., most losing ‘Investors’ could probably turn around their performance. Day Traders are basically wasting their time. I probably know of 3 or 4 who are successful at it and have been around a while - and I know a huge number of people who muck about with the Markets. Quite simply the Odds are stacked against you and it is extremely unlikely that you will be in the 5% who succeed (oh, but of course you are ‘Special’…….)
This next bit comes under the section ‘What the best do’ - it is a great chunk of text and I have copied down half a page here !!:
‘Traders I have met who went on to do well became unemotional about their trading and treated it as a business. Though it could take time to get to that stage, anyone who did it found he or she became a lot more successful. They were determined, kept their brains clear of crap, stuck to their rules and maintained strict discipline. Their trading accounts started showing healthy profits.’
‘The ones that did badly were hopelessly emotional about the whole thing. They spent hours trying to get it right - got caught up in lots of different strategies, confused themselves, took wild gambles. Refused to sell losers.’
‘They lied to themselves and others about their losses. They repeated mistakes time and time again. They got into terrible states. Their brains were filled with jargon, nonsense, platitudes, other people’s ideas, fear, greed, Facebook, Twitter…’
Reading that bit again as I do my ‘Proof Read’ prior to publishing this Blog, it strikes me that many of the facets of useless Investors were things I used to do when I was in my early Years - it is a shame Robbie didn’t write this Book 20 years ago !!!
This next bit gives an insight about how Robbie works that is missing from his other Books - he basically ignores anything other People say about a Stock - he is only interested in his own clinical judgement of the Stock - this approach has had a big effect on me in recent times where I have also ‘Cut out the Noise‘ a lot myself:
‘I’m not relying on anyone else to do this work for me. I don’t read stuff anyone has written about a share I am looking at. I look calmly at the facts and figures. Logically, what are the good points about the share? What are the risks? Where shall I get out if I’ve got it wrong? And what am I after from the trade?.’
‘After all my detective work is done, if I am certain I have more chance of it going up than down I will make the trade.’
Then more on the ‘Treat it like a Business’ theme:
‘Lots of people new to trading think of it as a hobby. It isn’t. If you run your trading account as a hobby you’ll lose.’
Now my bugbear, my nemesis, my Kryptonite, Stoplosses……..
‘In his show ‘The Apprentice’, Sir A shows his ruthless streak by firing candidates quickly and easily. Even when it is obvious he likes them personally. Then he tends to say “With regret, you’re fired”. This is exactly the same as cutting a losing share without emotion. Maybe next time you cut a share you like, as you press the sell button say, “With regret, you are sold”.’
‘Not taking losses quickly is one of the biggest reasons most traders fail. A share falls, falls some more and the trader feels he is stuck in the losing position instead of just quitting.’
On this next bit he is talking about Mr Spock and Sir Alan Sugar:
‘And logically and unemotionally they should both run their profits as much as they could, allowing good shares to go up to make the big money.’
This next quote comes from some bloke called Mark Douglas - Robbie has lots of quotes from other Traders in his book:
‘Those traders who have confidence in their own trades, who trust themselves to do what needs to be done without hesitation, are the ones who become successful. They no longer fear the erratic behaviour of the markets. They learn to focus on the information that helps them spot opportunities to make a profit, rather than focusing on the information that reinforces their fears.’
When I think about that quote it makes sense. I guess over time I have refined an Approach that works reasonably well for me and I know what tends to do well and what to avoid. I also find that I don’t get particularly panicked by the Markets because my obsession with ‘reading’ the Charts tends to mean that I am expecting a lot of the moves anyway. This is a bonus of an appreciation of Technical Analysis that is rarely if ever mentioned. I also feel that with experience I have been able to figure out what makes a difference in terms of News and what is really just ‘Red Herrings’ and irrelevant. I suspect that this sort of thing you can only get with Experience and by getting stuck in and working hard at your Investing/Trading.
This next chunk is a common theme from Robbie’s Books - he is right 100%, you don’t need all this IT rubbish. I use an ancient 7 inch Tablet to read the RNS Statements around 8am in bed every morning and I have a much more recent but inexpensive (£150 or so) 10 inch Asus ZenPad Tablet and the Netbook I am currently typing this into is 10 years old and runs Microsoft XP !!! (ok, I really need to change the Netbook and that 7 Inch Tablet is looking very battered !!). Oh and of course I have my Samsung S5 Smartfone which is superb (better than those Fruity things !!), especially for running my essential ADVFN App and occasionally I use it to login to igIndex and of course for accessing Twitter.
‘They don’t need six screens. One will do (that’s all I have). We’ll talk a lot in this book about how to cut down on stuff that isn’t necessary.’
Robbie was talking about a TV Programme that was on many years ago that looked at how several ‘Traders’ were doing (I saw this Programme and it really was classic - the way some People go about things is just shocking). One was a School Mum who had got into ‘Trading’ after another Mum at the School had told her she made loads of money doing it - of course the one on the TV Programme had utterly no clue at all and even worse she was trying to Trade Forex !!
‘She had no plan. There was no research or analysis of any sort. She didn’t look at any news or seem to have any grasp of why a currency would move up or down. She had no idea of how much she was prepared to lose on a trade. She didn’t think about timescale. She made trades for the sake of it. It was just press and hope.’
‘She felt “anxious, reckless and excited”. Those three words would never describe someone trading like a shark. They describe someone capable of losing a lot of money.’
Robbie then adds more regarding other Traders on the programme:
‘In both cases neither trader had bothered to research that nearly everyone loses trying to day trade currencies. Or if they had researched it, they didn’t want to know the truth.’
He then ponders what they would need to do to become a Shark and could they achieve it?:
‘Both would have to forget trading currencies and put some work into learning how to trade shares for the long term. Jane would need her own computer and desk away from the kids. Her lifestyle was probably too busy for any sort of frequent trading - her best bet would be as a buy and hold investor. But that isn’t going to make her the big bucks quickly (though it can make very big bucks in the end if you buy the right stocks and leave them alone.)’
Interesting bit there regarding holding Stocks for the Long Term and leaving them alone - this is a theme I come back to time and again and I wrote a lot about this in my recent Patience Blogs.
Chapter 2 of the Book is called ‘What Kind of Trader Are You?’ and I really enjoyed this Chapter as Robbie goes through loads of different Styles (most with clear drawbacks) and I can see myself in this list and I can see people I know in there as well !! Robbie has the following types:
You will need to get the Book to see what these are (some you can guess at easily) - by the way, I think I might be a Cat but the great bit about that is Robbie thinks it would be an easy fix to Shark me up - you guessed it, flippin’ Stoplosses !!!! (Arghhhhhh !!!).
This is a short but simple quote (I am not sure I wholly agree with this as I will probably mention more later in this Blog - although clearly heightened Emotions are not helpful):
‘There is no room for emotion whatsoever. To win you have to take money from people with emotion.’
I am not really arguing about the emotion aspect here - the angle I am getting at is that to a large extent I don’t see Investing as a Win/Lose Game. OK, for Traders there is probably a lot more of Win/Lose but I think for Long Term Investing, if you buy a Really Good Stock and then someone Buys it at a slightly higher Price but it goes up loads and loads and both of you manage the Investment very well with things like Adding where appropriate and TopChopping to control Risk and Bank Profits, then both of you will do very well on the Buy. So it can be more Win/Win.
I hope you enjoyed Part 1 - if you find you are Chomping at the Bit to find out more then you can get yourself a Copy of ‘Trade like a Nasty Fish with lots of really big Sharp Teeth’ by clicking this Link:
And if you have not read Robbie’s ‘The Naked Trader’, you can find a copy here:
Remember, I take a small cut from this for pointing you in Amazon’s direction and of course Wheelie’s Beer Fund always requires a good top-up. Robbie as the Author obviously must get a few Pennies as well (but we can‘t begrudge him that because he did write the blessed thing).
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