Qualities of a Successful Tape Reader
Anyone looking to enter the exciting and fast-paced world of trading should first examine several things: His mental and financial well-being, his amount of patience and cool-headedness and above all his threshold for remaining calm and calculating under intense pressure. It’s also important to remember, in this business it really does take money to make money.
Before a trader can start trading, he must have capital. A lack of capital in Wall Street trading can usually be traced to over-trading. This proves the saying, “Over-trading is financial suicide.” It might mean too large a quantity of stock being traded, or if the trader loses money, he might not reduce the size of his trade to correspond with the shrinkage in his capital.
To make our point clear: A man starts trading in 50 share lots with $1,000 capital. After a series of losses he finds that he has only $500 remaining. That’s on 10 points on 50 shares, but does he reduce his orders in shares? No. He risks the $500 on a 50-share trade in a last desperate effort to recoup. The stock loses 10 points and he’s out $500.
After being wiped out he tells his friends how he “could have made money if be had had more capital.”
Incompetence really deserves first place in the list. Supreme ignorance is the predominant feature of both stock market lamb and seasoned speculator. It is surprising how many people stay in the street year after year, acquiring nothing more, apparently, than a keen scent for tips and gossip. Ask them a technical question that smacks of method and planning in trading and they are unable to reply.
Such folks remain on the street for one of two reasons: They have either been “lucky” or their margins are replenished from some source outside of the markets.
The proportion of commercial failures due to lack of capital or incompetence is about 60 percent. Call the former by its Wall Street cognomen—overtrading—and the percentage of stock market disasters traceable thereto would be about 90 percent.
Success is only for the few who really want the work (not the glory), and the problem is to ascertain, with the minimum expenditure of time and money, whether you are fit for the work.
There is no sense mincing words over this matter, nor in holding out false encouragement to people who are looking for an easy, drop-a-penny-in-the-slot way of making money. Tape reading is hard work, and those who are mentally lazy need not apply.
Nor should anyone to whom it will mean worry as to where his bread and butter is coming from. Money-worry is not conducive to clear-headedness. Over-anxiety upsets the equilibrium of a trader more than anything else. So, if you cannot afford the time and money, and have not the other necessary qualifications, do not begin. Start right or not at all.
Having decided to proceed, the trader who is equal to the foregoing finds himself asking, “Where shall I trade?”
The choice of a broker is an important matter to the tape reader. He should find one especially equipped for the work: one who can give close attention to his orders, furnish quick bid and asked prices, and other technical information, such as the quantities wanted and offered at different levels, etc.
The broker most to be desired should never have so much business on hand that he cannot furnish the trader with a verbal flash of what “the crowd” in this or that stock is doing. This is important, for at times it will be money in the pocket to know just in what momentary position a stock or the whole market stands. The broker who is not overburdened with business can give this service; he can also devote time and care to the execution of orders.
A successful trader will know how to keep all the balls in the air at all times and surround himself with knowledgeable people, such as his broker, who can help him make snap decisions. This is a high-pressure field, and it’s not for everyone. Before embarking on a career as a day trader, remember to carefully examine your financial standing and mental capacity. If you are unable to remain cool under pressure, and you plan to depend upon trading for your base income, it might be best to consider another career. If, however, you have these qualities and solid financial backing, you could find yourself an incredible success.
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