Hi guys, hi from Andrea Unger! This post is about the path and qualities that are needed to become a trader…
Would You Help Me Become a Trader?
I’m answering here a message I received on Facebook from a Facebook friend of mine, who contacted me a couple of years ago, asking for my mentoring.
Two years ago, when he explained his situation to me, I suggested that he would not invest any money in my Unger Academy.
Am I crazy?
Not really! I gave him this piece of advice because I believed he would not get any benefit from the teachings that the Unger Academy provides.
The reason why I told him so, is that I thought that his approach to Andrea Unger, which was something like “Wow, Andrea Unger is very good at what he does, so he can teach me how to become a good trader too”, was completely wrong.
I understood that he was not trying to enhance his personal baggage of information, but rather to learn from someone he considered good at trading. However, he had not taken into proper consideration the contents I could eventually teach him, and if those contents were something he could cope with.
Not Everyone Can Become a Trader
I teach automated trading, a path people should undertake only when they have the right mindset.
Why do I think this is so important? When you approach an educational path in order to perfect your skills, you first need to understand what direction you are willing to go, as well as what could be good for you, and then become a specialist in that direction by studying that specific topic.
I recommend the automated trading approach because I think it is easier to teach and learn. However, I know this is not a universal solution. For instance, speaking of my Facebook friend, I thought I wasn’t a good choice for him, because he wasn’t actually interested in becoming an automated trader.
He had only foggy ideas about trading and thought that Andrea Unger would do for him only because Andrea Unger was a good trader.
I suggested that he would read some online material, so that he could widen his general knowledge of trading and find a direction.
I also actually suggested that he quitted trading, as I was convinced the main reason why he wanted to become a trader was to make an income. Well, you know that I always try to keep people away from trading, if they want to do it only to make money.
Diversification Vs. Specialization
After some time, he wrote to me again, claiming that he was now able to trade for a living, which I was very happy to hear.
He also told me something more about what he was doing. He specialized in trading the Gold. I often suggest that traders diversify the assets they trade, and here came a guy claiming that he made money specializing in a specific instrument.
Let’s draw a short comparison between these two different points of view.
I strongly believe in diversification as a great tool to help us trade the market more smoothly.
If you are a discretionary trader, then specializing and gaining a deep knowledge of a specific market is of great help.
When you know a market deeply, you obviously become one with that market, and when you trade that market, you are in your environment, let’s say, so being specialized in that specific market is of great help.
Diversification and Automated Trading
In automated trading specializing is not really necessary. Of course, it can always help us know what the market does and how it behaves, but it’s not really necessary.
What an automated trader does is to analyze a number of markets using the same tools and matrices, read the results and decide what to do.
In this case, diversification is very important, as it allows you to distribute your efforts and results on a number of different instruments, minimizing the risk of contemporary failure (I really hope this won’t happen tomorrow).
As a discretionary trader, you cannot focus on many markets, so you need to focus on a few – maybe one – and become a specialist.
At the end of the last year, when I went to China, I met a guy they call “The king of Copper”. He was a very nice guy, and was extremely specialized in trading Copper futures.
He achieved success thanks to his deep knowledge of that instrument, so specialization is fine if you are a discretionary trader. In so doing, you can know the evolution of the market, what is going on and what you should do to keep on being in profit.
Beware of Leverage
The next thing my Facebook friend did was providing me with an account of his trading performances. He said that he made the X% in 2017, the Y% in 2018 and that in 2019 he was more or less at breakeven.
We were just at the beginning of 2019, so I did not see this as a problem, at least until he told me about the reason behind this.
He told me: “I’m not able to make the aimed profits because of the reduction of leverage. I have no longer the 400 leverage. The new maximum according to ESMA rules is 30, and without the 400 leverage I can’t make the profits I was making. So I’m planning to change broker and choose an Australian one who is not yet linked to the ESMA rules that are active in Europe”.
When I heard this, I thought that was a great problem, indeed. That is the reason why I’m answering to this friend of mine through this video.
If the profits you made depend exclusively on the leverage you use, you are in great danger, because you are heavily underestimating risk.
If you make money just because you use a heavy leverage, you must consider that you have been lucky making money over the last two years. That was fine and I’m happy about that, but you are really risking too much.
Analyze Your Results with a Pessimistic Attitude
You should consider whatever you have done, evaluating what could have happened if one or two trades went really wrong.
The fact that you were very good at choosing entries, exits, etc. does not mean that nothing really bad could ever happen. If your profits depend on a very heavy leverage, it means that if things went wrong, you would have lost a lot, if not all, the money you had.
So, you should never analyse your results starting from profits. Instead, you should start from risk, imagining scenarios that hopefully did not happen, but which could have happened, and what would have happened in those cases to your account.
Always be pessimistic in your analyses. Leverage is not the reason, I can tell you that the new ESMA rules are of great help for traders, as they protect them from taking excessive risk. They are still risky, in my opinion, but there is no longer that excessive risk, because any strategy depending exclusively on high leverage has something wrong with it.
Many people would justify themselves saying: “Yes, but look, I have this and that…”. Okay, everything can be fine, but believe me, there is a weakness, and if that weakness becomes a problem, it will be a big problem!!!
So leverage is not the solution to become profitable, please remember it.
Whoever is really interested and motivated in mechanical automated trading: the Unger Academy is the right place to go, but there are also other places. I mean, I am not promoting myself here, I just said it.
But if you are just struggling to understand what would I do to trade and what is trading, the Academy still has something that can help you.
Carefully Evaluate Yourself Before You Become a Trader
Those who visit our Facebook page can find a link to a self-evaluation test that will help them understand what level they are and what they should choose and so on. This is just a way to help you.
Maybe, sometimes my answer is: “Forget about trading! Don’t trade!” this is something I often say and I believe that among those who are reading this blog post or watching the video there are also some of those to whom I answered “Please, don’t trade, forget about trading”.
It’s not a bad thing, I mean, I’m not offending anybody saying this. I’m only trying to protect people when I think they have a complete misconception of trading.
There are people who clearly approach trading with a completely wrong idea about it. I generally prefer to suggest that these people keep away from trading, which is very important.
When somebody thinks that they can make a lot of money studying a course that lasts a couple of hours, I try to convince them that trading is not for them, because if they realize this from the very start and listen to my words, they will protect their capital.
The other way to realize this truth is to trade and lose one’s money, which is obviously more painful than listening to my words.
I hope you don’t feel I’m arrogant, when I say that trading is not for everybody. I hope you take it the right way and that, when I suggest that you keep away from trading, you listen to me, or, maybe, you can explain your reasons, because I can obviously be wrong in my evaluation and I can change my mind.
However, if I feel that somebody would be harmed entering the world of trading, I clearly say it, because I don’t want any victim on my personal path as an educator.
That’s all guys. If I forgot something, please leave a comment and I will try to answer. I think we can open interesting discussions here.
Ciao from Andrea Unger, see you next time!