Sometimes, the stock market can seem impossibly complicated. With all the derivatives and algorithms and acronyms, Wall Street almost seems like an alien environment sometimes.
However, at the end of the day, every time a trader buys or sells shares of a stock, he or she is essentially just making a simple deal: trading shares of a company for cash or vice versa.
Universal Skill Set
Just because there are no verbal negotiations going on, the stock market is made up of millions of individual deals that happen every day between buyers and sellers. In that sense, the skill set that goes into making someone a strong negotiator and bargainer has a lot of overlap with the skill set that makes for a successful stock trader.
Trading Up
While thousands of MBAs and PhDs were trading the stock market every day from corner offices in Manhattan skyscrapers, a 15-year-old named Steven Ortiz in Glendora, California traded an old cell phone that a friend gave him for a slightly better phone using Craigslist back in 2010.
Over time, Ortiz traded his new phone for an iPod Touch and the iPod Touch for a dirt bike. Once Ortiz got his hands on the dirt bike, he upgraded several times to better dirt bikes before swapping in his dirt bike for a MacBook Pro.
The MacBook Pro was a big jump up for Ortiz, who soon traded the device for a Toyota 4Runner. Ortiz, still only 15 years old at the time, then traded the 4Runner for an off-road golf cart, which was later traded for his most valuable dirt bike yet.
The new dirt bike was then swapped for a street bike. The street bike was then traded for a series of cars, each slightly better that the last, before Ortiz finally ended up with a 1975 Ford Bronco.
By this time, Ortiz was able to drive legally, and his final trade was to give up the Bronco in exchange for a 2000 Porsche Boxster.
When all was said and done, Ortiz had made a total of 14 trades over about two years and worked his way from an old cell phone to a Porsche.
What Stock Traders Can Learn From Ortiz
Stock traders can learn a great deal from what this teenager did. Ortiz did not get lucky 14 times in a row. He relied on discipline, knowledge, hard work and patience to understand exactly what he was getting into with each trade he made, and he capitalized on the best possible opportunities.
He didn’t jump from the old phone to the Porsche with one huge trade. He also didn’t limit himself to one type of vehicle or gadget. He recognized that reaching his goal was a process, and it required long hours scouring the internet and many days of watching and waiting for his next opportunity. He was disciplined enough to always trade up and not simply trade for the sake of trading.
This type of calculated, disciplined methodical approach is exactly the approach that successful long-term traders like Warren Buffett have used to make billions of dollars in the stock market. Investors should know that they are making a deal every time they buy and sell a stock, and they should always remember to ask themselves: am I trading up or down?
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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