The Minimalist Trader: Trading with the Rent Money

• Posted by chicagosean
• on November 19th, 2010

apologies to Carl Richards @ BehaviorGap.com for my crude attempt at adopting his great work ;)

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Trading profits don’t accrue on a schedule. The market doesn’t care about your financial situation or your need to pay the electricity bill. You don’t just flip on a switch and have $500 of trading profits credited into your account (unless you’re Goldman Sachs). In fact, I’d be willing to bet there is a near perfect reverse correlation between your need to make money and the actual profits you will earn via trading.

This is not because Mr. Market secretly hates you. It is because you are trading from the mindset of willing the markets to your needs instead of getting into the “flow” of the market and taking what is given. You are forcing trades when the odds are not in your favor, instead of patiently sitting on your hands as a silent observer and waiting to strike when the risk/reward is most decidedly on your side.

The Minimalist Trader focuses on making trading serve his long term goals, not his immediate gratification. He pays attention to trends, not ticks. He considers how each trade fits into his big picture strategy. He evaluates the long-term performance and soundness of systems, and pays less attention to the noise.

Becoming a Minimalist Trader requires a healthy dose of the two P’s: Patience and Persistence. Without either, you are doomed. You must have the patience to trust the long term trends and odds to work in your favor, while exhibiting the strength and foresight to persist in the face of inevitable headwinds that will undoubtedly blow in your face from time to time.

How can one possibly evaluate possible trade entries when all she can think about is needing to make $1800 on this trade so that she can pay the rent which is due at the end of the week? She can’t. What about those trades that are showing her a $300 profit and all she sees is the ability to buy some new designer shoes so she bangs out of the trade at a profit, only to watch the stock continue to move cleanly in her direction for what otherwise would’ve been an easy $5000 profit? Enough of these mistakes could easily send the most put-together individual to a therapist or insane asylum. I’ve been there and can speak from experience.

Everyone’s financial situation is unique and how you arrive at being able to operate with the long-term in mind will be different from the next guy’s approach. Perhaps you’re already wealthy? Bully for you, friend. Get to work. Perhaps you have a full-time job and you’ve adopted a low-touch trading strategy that doesn’t require you to watch the market during market hours? Excellent. Perhaps you have a money-making blog on the side like me? (just kidding, I wish!).

Whatever your situation, just be mindful that the more you need the money now, the more uphill your climb will become. You are putting the financial and emotional odds against you. You are doing a disservice to your now and to your future. This isn’t a personal finance post and this is well tread territory, but it bears repeating: Spend less than you earn. This is the basic building block of wealth no matter what endeavor you undertake – trading or otherwise.

Do yourself, your family, and your friends a favor and don’t become this guy….
(salty language – you’ve been warned)

Tip of the hat to my man @Bubbleboytrader (bubbleboytrader.com) for sharing this video.

Stay tuned for more in this Minimalist Trader series. In the coming days, we will discuss another enemy of the Minimalist Trader: INDICATOR ABUSE. If you haven’t read the previous posts, you can find the links here:

• The Minimalist Trader: A Framework
• The Minimalist Trader: HIGH OVERHEAD
• The Minimalist Trader: OVER-TRADING

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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