Why Aren’t We Rich Daddy?

He had bought and sold hundreds of stocks and several properties over those years, but had never really made any real money. He owed it to himself and his family to finally get his act together and make some changes to his trading plan. That was the day the pain of not living up to his potential made him sit down and write out his trading strategy and rules.

One Saturday morning, while he was sitting at his computer studying the market, David’s 7 year old daughter came up, tugged at his shirt sleeve, and said, “Daddy, why aren’t we rich?”

He looked his child in the eye, and thought to himself, what a great question – why aren’t we rich?

As she stood there expectantly waiting for an answer, he struggled to come to grips with the realization that, although he had focused his undivided attention on nothing but creating wealth for more than 15 years, he was still broke.

He had bought and sold hundreds of Stocks and several properties over those years, but had never made any real money to speak of.

He looked at his daughter, and asked, “What makes you think we aren’t rich, sweetheart?”
She looked at him sternly and said, “Because you said that if we were rich, you and mom wouldn’t have to go to work any more, and you both still work all the time.
You said we could live near the beach and play in the sand every day. I want to know what you are doing about that. When can we go and live at the beach?”
There’s nothing like a child to cut straight to the heart of the problem – and what was he doing about it?
“We’re not rich because daddy made some mistakes,” he finally answered.
“What kind of mistakes, daddy?” she asked.
“Well, I bought some shares that were going down and then didn’t sell them soon enough. Then I bought some houses but sold them again just before they went up in price.”
“Why did you do that?” she asked.
He had to think long and hard about that. He had no reason to buy shares that were going down in the first place. He had no reason to hold on to them when they kept going down. He had no reason to sell the properties either, come to think of it.
Her logic was flawless – why wasn’t he doing better financially than he was?
He knew in that moment that he had to change his strategy.
He owed it to himself and his family to finally get his act together and make some changes – that was the day the pain of not living up to his potential made him sit down and write out his stock market trading plan…his trading strategy and rules – he had to have a life raft.
He started by writing out his vision – what he wanted his life to look like when he became a successful trader and investor, then worked backwards from there – through the details of how he was going to achieve his dream.
He saw in his mind the 4 bedroom penthouse on the beach, the red Ferrari 360 Modena, the 80 inch plasma screen computer monitor in an office overlooking the surf beach 17 floors below, the family holidays, the million dollar donations to worthwhile causes and children’s charities.

He visualized all the tremendous benefits of becoming a successful trader, investor and philanthropist

.
He realized that his main problem all this time had been that he was afraid of losing, and that fear was just too expensive to let it control his life any longer! He had been playing not to lose, instead of playing to win.

He decided he would never again sell a property unless there was a compelling reason to do so.

He decided that he would no longer accept anything less than perfect execution of his stock trading plan.

He decided that he would take every trade entry signal his system gave him and follow his trading plan as if his life depended on it.

As if, after each trade was closed out, he had to stand in front of a panel of super traders, and explain his actions to them – why he entered where he did, where he placed his stop losses, why he exited when he did.
And if they weren’t convinced he followed the rules of successful trading, he would be taken out and shot!

This certainly focused his attention on only trading strong trends – trends where the price bars were trading above their respective moving averages for long trades, or below for the moving averages for short trades, and the Stock price was moving strongly in one direction.

He pretended that if he couldn’t justify his trading decisions to his trading Mentors, he was dead…
That was the day he resolved to study his selected group of Stocks, the ones that had a track record of trending strongly, every day.
He would then take every trade his system produced, put his stop loss orders in the market as he entered each trade it a place where the trend had to change to take him out of the market, and he would hold every position until the trend changed.
He would act ‘as if’ he was a great trader, even though his record up to that point had been less than inspiring…
That innocent question from a child turned out to be the start of David’s successful trading career.
He started to trade profitably and consistently for the first time in his life. He thought he was doing well, and indeed he was making money.
He knew from his wealthy mentors that rich people are different; they make rational decisions based on facts, not emotions.
They understand the value of money – they respect it as a tool for building a better world. They buy well for logical reasons and hold until there is a valid reason to sell.
Then one day, he closed out a trade, and excitedly told his daughter, “Daddy made a big profit in the market today darling, come and look and see what I did.”
His daughter came over to the computer and looked at the screen as he excitedly showed her where he had bought a Stock and then sold for a $13000 profit. She looked at him and said, “But daddy, it’s still going up, why did you sell now?”
His smile faded as the power of that question sunk in…why had he sold it?
What was he doing getting out of such a strong trend just to take a profit? What would his trading Mentors say?
She was right…the market was still open, so he bought back in again. He had never been able to bring himself to do that before – he was becoming a great trader!

The rally continued and he kept buying more as it rallied. The trend finally changed, but his profit on that trade, when he eventually got a valid sell signal, was $34500!

His daughter’s simple, logical question 5 weeks earlier had been worth over $20000!
That was the last time he ever got out of a trade based on his emotions. His fear of the market was gone – thanks to some simple questions from a 7 year old…
So now, it’s your turn.

• Whenever you are preparing to place a trade, find a small child, even if you have to borrow one, and ask them what the trend is. Then don’t trade the other way!
• If your trading isn’t as great as you know it could be, decide to create a trading plan now that will become your life raft.
• Remember, fear is just too expensive folks.
• If you are afraid of losing money, reduce your position size until your fear goes away.
• Once you have made a series of small profits, will be trading with the markets money and you can increase you position size according to your growing confidence and account balance.
• If you have a series of losses, reduce your position size again until you get back on the right track. Stick to your trading plan once you have something that works consistently.
  Then, just go out and do it!