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Trading without Capital
By Larry Pesavento

Several things are present in the equation to be a successful trader! The Trading Plan – The Mental Attitude – The Trading Capital.

Each part has a different weighting in my opinion. Mental Attitude is 70% - Trading Plan 20% (although your Mental Attitude can affect your Trading Plan 100 %!) and the least important is the trading capital. There is an old joke (somewhat sick) in our business and it goes something like this; “The best way to make a small fortune in trading is to start with a large fortune.” No Universities teach comprehensive classes on learning to speculate. There are some classes to be sure but nothing substantial. Thirty years a go I taught an evening graduate class in investments and little has been added since that time.

Traders are left in the wind to set their own sails. Entering into the investment forum is easy. You have to have some money and be able to sign your name on the account forms. Your first clue is the account forms! Warning of high risk are everywhere on these forms. There is a reason for this. The brokerage firms want to prevent litigation if things go array (as they often do). Multiple warnings are present in the forms for commodities and options. But speculators flock to the open doors of the first bastion of capitalism ill equipped to face some of the high seasoned traders of the world.

Faced with this challenge, thousands still enter the game. Beginning traders fail at the rate of 80% or higher. However, those that stick with it can usually expect positive results between one and five years. Amazingly similar to the length of a college education.

Marty Schwartz, author of “The Pit Bull’, revealed that it was 10 years before he was able to become consistently profitable. There is hope for all traders. Winston Churchill’s most famous speech was at the depths of depression in World War II. Walking on stage, the great statesman uttered these famous words; “Never give up! Never, Never, Never”! He then quietly left the stage.

Read books and articles on the subjects you will need, Technical, Fundamental and Psychological. Find a methodology that suits your own “Psyche”. Working with a seasoned veteran trader (a mentor) is the quickest way to learn. “The smart man learns from his mistakes – the wise man learns from the mistakes of others”.

Disclaimer: You should not attempt to trade any of these setups without a good understanding of pattern recognition, harmonic numbers and risk management. We encourage all of our students to paper trade or set up simulated trading accounts and achieve some success before actually trading with their own risk capital. There are no guarantees in trading – we deal with probabilities not certainties!