Beginning traders

Who wouldn't like to make millions of dollars overnight through some brilliant investment? While that's not very realistic, the old adage remains true; You can't win if you don't play. Granted the inverse is also true; if you don't play you can't lose but let's ignore that side for now.

Over the last couple months I have gained a lot f respect for Barry Ritholtz, a financial blogger, wall street trader and regular commentator on CNBC. The following is an excerpt from an interview he gave a while back that relates to new investors and where he believes the markets and economy is heading.

I thought it was worth posting. Enjoy.

"For someone new coming into the markets, what steps would you recommend they use to get started?

Start small, manage your losses, look at what you are doing and how it fits into the broader cycle. Make sure you learn something from every trade, winner or loser.

Read vociferously. Learn constantly.

What is the biggest stumbling block you see for most beginner traders, i.e. where do you see them making the biggest mistakes?

Their own brains get in the way. Stop thinking like a scared primate, and instead think like an alien visiting earth. Look around at the emotional monkeys around you, giving into their worst instincts. All that money is lying around, waiting to be picked up by someone without that wetware getting in the way.

In today’s trading environment, where do you see the biggest opportunities for traders?

In this environment, there is a real opportunity for the truly talented to shine. Look at some of the new names who have been hitting the cover off the ball. Anyone can make money in a bull market, but this has really separated the men from the boys. Some very well known managers and traders have been unmasked as plain lucky or leveraged bull market bums or just plain old fools.

We found that having a technological edge is a must have in this environment. We eat our own dogfood – we use the FusionIQ quant product in all of our stock picking and asset allocation. It has made us much better traders and money managers.

What do you see in store for the markets in 09?

More economic weakness, no recovery in 2009. Earnings will be awful. This is likely to be a 3 year recession at the least.

If a turnaround, when do you see that happening?

Economically? Late 2010 if we are lucky.

Marketwise, as we get oversold enough, as things get really cheap, that’s where you can aggressively buy. But we are not quite there yet."

The full interview can be viewed here, http://www.ritholtz.com/blog/2009/03/interview-with-a-financial-blogger/

I couldn't agree more with, "Read vociferously. Learn constantly." I had no idea what vociferously was so i looked it up (I'm not ashamed!) It means to scream, shout or holler; an outcry. I think he's arguing that you should question what you read and look at the data behind it. Statistics are too easy to manipulate.