A guest post from Rocco Pendola. A former writer for TheStreet.com & Seeking Alpha he is now on the front lines of the restaurant industry and has an interesting perspective.
After having written about the stock market for seven years between Seeking Alpha and TheStreet, I decided to make a major career shift. I became a craft cocktail bartender.
Earlier this year, after just four years in the business, I was named General Manager of one of the top craft cocktail bars in Los Angeles. I didn’t ask for the promotion; the company offered it to me, unexpectedly. Shortly after starting that role in mid-January, it consumed my life. I thought in a good way. I felt like for the first time in my life; I was doing what I was meant to be doing all along. Managing people, being a great host, jumping behind the bar — these things now feel natural to me. I was on top of the world.
Then, a week ago Sunday, the City of Los Angeles ordered us to shut our doors at midnight. The following day I was laid off and told to sign up for unemployment. Within a couple of days, the two-week closure turned into a shutdown that will last until April 19 (at the earliest). My world changed.
After three days of wallowing in my sorrows, I woke up last Thursday morning, determined to make myself useful to myself and others. I also realized that I would never get caught off guard like that again. I am using much of the free time I have to reassess my life and what I want it to look like in the new world we’re sure to inhabit on the other side of this. I am repositioning myself.
If you’re a trader or thinking about turning yourself into one in the forthcoming new normal, it probably makes sense to take a similar perspective. You can evaluate every area of your life this way. What do I need to do to not only increase my chance of success, but to prepare like you’re about to get hit face first with a pandemic that, oh, wipes out three years’ worth of stock market gains in a week, renders millions unemployed overnight, and leaves us scavenging for macaroni and cans of beans after waiting in line for 20 minutes at the local grocery store (that’s at least how it is in Los Angeles).
Lesson One: Your Emergency Fund Isn’t Sufficient
You might be the exception. But chances are you’re not. Everyone says they have an emergency fund. It’s like telling the person you’re going home with that you were just tested (not for Coronavirus, but an STD). We’re like, “yeah, yeah, of course” simply so we can get on with it. That doesn’t cut it anymore.
If the experts
say you need three to six months socked away, I’m saying you need more than
that. Up to a year. When you think about it, particularly amid this massive
economic shock, it’s patently absurd to put thousands of dollars on the line in
the stock market, when you don’t have thousands of dollars sitting in the
bullpen to pay your rent, utilities, car payment, healthcare, and other
obligations if you lose your income.
And don’t make your trading money, you’re emergency money if the need arises. That’s just plain dumb.
Lesson Two: Start A Retirement Fund
I have covered this in a previous article, but it’s apropos to revisit it here. As implied in “Lesson One,” you should have both an emergency and a retirement fund. If for no other reason, as indicated, it’s foolish to have one pool of money that serves as both. Before you can expect any success as a trader, you need peace of mind. One way to achieve it is to have your financial house, outside of trading, in order.
Having emergency and retirement funds heads off a major source of anxiety for many people. If you know you’re secure in an emergency and secure in your future, you can go into trading relatively stress-free. Because there’s no doubt, trading can — and probably will — induce stress.
Lesson Three: Frame Of Mind
Practice yoga. Go to therapy regularly. Center yourself anyway that works for you.
It’s so important. You can’t get rattled as a trader. This pandemic probably isn’t a great example, given that the increased volatility makes day and short-term trading potentially slightly easier!? That’s debatable, but the point is an individual trade can provoke anxiety. All of the things that happen in your broader account, in your life, in the world can have an impact on your mental state, which has an impact on your behavior as a trader.
If there were a Lesson Four in this article, it would stress having a methodical plan that you follow, no questions asked. Whether you come up with it yourself or follow the folks here at Steady Dime, it has to be so well-tested and fine-tuned that you follow your plans cues to the tee. But you can’t have the discipline to pull that off if you’re not firing on all cylinders psychologically.
We’re living through a trying time. So far, I am taking two major things away from it. One, be overprepared. If you think you’re prepared, prepare again. And some more. Two, the focus is so important. I spent three days unfocused after my bar was shut down. If I were a trader, I would have missed out on some lucrative trades. I wasted three days that I could have used to get to the better place I am in now three days earlier.
I hope you’re healthy. If you’re trading or plan to do so one day, I hope you have everything need to continue or to step into the profession with the best mindset possible.