Trade Like a Shark

The Naked Trader on how to eat and not get eaten in the stock market

Robbie Burns

• Publisher: Harriman House
• Year: 2016
• ISBN:
  9780857195432
• Edition: 1
• Topic: Business
• Subtopic: Stocks
• Index: Business

Take a bite out of the markets with the Naked Trader in his 100% all-new book about TRADING PSYCHOLOGY! This book is for anyone who really wants to consistently make money trading shares.Trading and investing can be tough – most fail. The human mind is to blame. It's prone to emotion, cluttered with distractions like Twitter and social media, easily trapped by scams. But it's possible to make money in the markets – and to do so reliably.Robbie Burns, aka The Naked Trader, has been trading successfully from his home for 15 years – making over £2m tax-free (while eating a lot of toast and watching Game of Thrones). He's also met and helped thousands of fellow traders at his seminars, seen every possible trading meltdown, and knows exactly what can go wrong – but also how to put it right.In Trade Like a Shark, Robbie uses his unique firsthand experience and the real-life stories traders have shared with him to expose exactly how the human mind can play havoc with your trading. At the same time he reveals his tried-and-tested methods for overcoming it, showing how to be a shark, gobbling up money from the 'fish' who are full of fear, greed and other emotions. (And also why modelling yourself on Mr Spock can work wonders.)If you've run into problems trading in the stock market – or just want to reinforce good habits – there is no better or wittier guide to the pitfalls that are out there, and some surprisingly effective ways to overcome them. It's a must-read book on trading psychology – without the jargon. Read it and take your trading to the next level now!

PART I: The Way of the Shark

1. It’s a Business Not a Hobby!

I’m pretty certain that the main reason I’ve been able to make a lot of money trading over the years is that I have trained my brain to be more like a character out of 1960s’ science fiction.

It sounds weird when you put it like that, but it’s true! I think it is the reason I am one of the very few ISA (tax-free) millionaires in the UK thanks to my stock market trading.

I’m not relying on anyone else to do this work for me. I don’t read stuff anyone has written about a share I am looking at. I look calmly at the facts and figures. Logically, what are the good points about the share? What are the risks? Where shall I get out if I’ve got it wrong? And what am I after from the trade?

After all my detective work is done, if I am certain I have more chance of it going up then down, I will make the trade.

I don’t understand people who just buy something for no reason other than someone else told them to. Or people who buy an oil company that might not find any. Or who buy an oil company when the oil price is sinking.

One of the main reasons to think of trading with a cold, unemotional brain is that in effect your trading is exactly the same as running a business.

If you are running trading as a true business then each trade you make is like a business purchase. Just as a restaurant buys ingredients to make meals, in effect selling those ingredients on at a higher price to make a profit, we are trying to buy a bit of a company that will increase in value to give us a profit.

Lots of people new to trading think of it as a hobby. It isn’t. If you run your trading account as a hobby you’ll lose.

“If you’re investing for excitement, you are a damn fool.”

John Bogle, founder, The Vanguard Group

The best businesses are ruthless

The best businesses, frankly, are run by individuals just as ruthless as sharks. Those at the top of their game – the bosses – are often unemotional and skilled at making difficult decisions that are for the ultimate good of their companies.

So when it comes to firing an employee they will do it unemotionally – or in a bigger company they’ll make someone from HR do it. It doesn’t mean to say the bosses are bad people, they just have to make a tough decision. And once done, that’s it.

Maybe in the evening they tell their partner: “I wish I didn’t have to do it.” But they still did it. The ultimate goal is to make sure their company is a winner. If they don’t cut the jobs, maybe the company will go bust and everyone ends up on the streets.

When I worked at Sky – and later, when I ran my own café – I had to fire people. I didn’t like doing it but was firm about it when I did. I even had to fire a woman who was a blackbelt at karate. I made sure I was behind a desk and ready to duck beneath it or make a run down the fire escape in case she tried to karate chop me in the nuts. She took it well, actually. It was a shame to let her go but she had been stealing cash!

If you add them up over the years, I fired quite a few people before ending up as a full-time home trader. Each time it was because it was best for the business. In effect I was cutting a loss. Or potential future loss, as the employee wasn’t performing, wasn’t right for the job – whatever the reason.

And it is exactly the same with trading. If you are trading you must run it in the same way as you’d run a business.

You have to be ruthless, clear-headed and logical. You have to make tough decisions when you need to and make them quickly. Whatever it takes for your business to succeed.

A shark-like businessman

A shark’s mind is clear, logical and if need be ruthless. So was Mr Spock’s: if he had to sacrifice one person to save 50, he’d do it without hesitation – even if that person was himself. The needs of the many outweigh the few.

An interesting example of a businessman who reminds me of a shark (or Mr Spock) is someone who, in The Naked Trader, I joked would make a great share trader: Alan Sugar. But I’m not really joking!

You might not be the biggest fan of Lord “IwasselllincomputersoffthebackofavanwhenIwoz14” Sugar but in business he definitely knows how to act like a shark.

I’m not saying he’s the world’s best businessman. What makes him successful isn’t never making mistakes – it’s the way he has a track record of looking at what has worked and what hasn’t and why. He then takes action as soon as possible.

In his show The Apprentice, Sir A shows his ruthless streak by firing candidates quickly and easily. Even when it is obvious he likes them personally. Then he tends to say, “With regret, you’re fired”. This is exactly the same as cutting a losing share without emotion. Maybe next time you cut a share you like, as you press the sell button, say: “With regret, you are sold.”

He hasn’t always been 100% a shark. The Amstrad E-m@iler (yes, that’s how he spelled it) was an epic failure. It was an old-fashioned landline telephone with an LCD screen, keyboard and ridiculous business model, with adverts on-screen and emails that cost as much as one of those dodgy late-night phone lines to check (ahem, so I’m told). Analysis showed that it would add £150 a month to people’s phone bills even with low use.

People stampeded not to buy it.

Sugar stuck with the damn things for several years, throwing good money after bad, and then even more money after that.

So even a true shark can have a patchy record – and get better with time. There is hope for us all!

If Lord A was a trader, how would you see his shark-like instincts at work? He would instantly cut losing positions, the same way he would instantly fire someone because he or she wasn’t working out.

He wouldn’t even worry about it – it’s just a s...