Was watching a TV ad from a broking company that was harping on how high a brokerage a trader was paying and how that makes him an idiot. This is not the only house that is harping on brokerage rates- most of the discount broking houses- and quite a few have sprung up already- are also harping on this. It somehow may be conveying an impression that among the big hurdles of making money in the market is high brokerage rates. While one is definitely seized of keeping costs low in any business, one has to realize that cost containment don’t create profits. The correct processes do. I have been in this market for a while and can recall times from the 80s when brokerage rates were ranging from 2 to 4%. Yes, that is 100 to 400 times what people are paying now! This was for trading! And still they expected to make money. And many did. It was the process that did it. Lower costs can increase the profit but cannot create it. Hence the focus on brokerage alone is on the wrong side.
I see technical analysts cribbing similarly on data services. Everyone is in search for either free data or cheap data. This is like playing with your basic item. If you buy substandard vegetables or provisions, can you make healthy food? The software that you use simply displays whatever data you feed into it. If you scrimp and save there (because most people are using cracked software downloaded from the Net at nil cost) then you are doing yourself a disservice. Good data is like using good material for production of anything. Here is another example of a wrong focus.
The other area where people scrimp on spending money is on good advice. This is a market where skill makes profits. When you lack the skills then you have to borrow other people’s skills. If you expect to get that for free then clearly something is amiss. Why would anyone give you something for free? No one owes you a thing here. I saw in one of the Facebook pages someone stating that free advice for day trading is available. In a flash, the screen filled up with mobile numbers of people who all wanted the free service! What do these people expect? That someone will do all the work and they will reap the benefit? This is the perfect example of the cliché, ‘there is a sucker born every minute’. Quality advice costs money. In this advisory area what you pay is what you get in terms of quality. One more example of a wrong focus.
Finally, the scrimping on good education. Almost everyone knows that they don’t know the process of making money in the market. And they need to learn. But spend money to learn? Oh no! Why should we, when everything is available for free on YouTube, go the refrain! Again, what you pay is what you get. YouTube is a channel to showcase something. Good for marketing. But serious or structured learning? Just no way. There have been people who have come for job interviews and told me with total sincerity that they learnt their TA from watching YouTube channels! Unbelievable. The man wants to make a career of being a technical analyst and he won’t spend a dime to educate himself? Would you want to be operated on by a surgeon who learnt his craft by watching videos of surgery being done? Think about that the next time you are dealing with a YouTube educated analyst. Absolute wrong focus, this one.
The long and short point here is: if you are serious about what you are doing, get the correct focus. Trading success happens from getting some processes right. For that what is necessary is some good education to make yourself skilled to a good extent, some good advice and mentoring to keep your learning updated and sharp, some good data and software to ensure proper signals to act upon and a reasonable cost of doing trading and investing. Shifting focus to the non-essential or even wrong areas just takes you away from your goal of making money in the markets. It is hard enough an endeavor even with full focus. Diluting that focus is asking for trouble.