The Importance of Mentoring for New Entrepreneurs

Becoming a successful entrepreneur takes hard work and perseverance. But you also need a little help along the way. That’s why it’s important to consider a mentor.

Mentors have critical knowledge about how the business world works. In a mentoring relationship, a seasoned business owner meets regularly with a new or potential entrepreneur one-on-one to give advice and boost morale.

One of the biggest benefits of having a business mentor is having a sounding board to ask questions and seek out knowledgeable advice. New entrepreneurs are more likely to seek advice from friends and family. While some of that advice can be sound, a mentor can help you sort out more complicated business matters that your friends or family would not know how to resolve.

Mentors can also help you look at problems and situations from perspectives that you would not have thought of on your own. For example, as a new business owner, you may have trouble looking at your business through the perspective of a customer, or a potential investor. Your mentor, who has dealt with these situations before, can help you understand different viewpoints.

Unlike advisors and consultants, who care only about a business’s outlook, mentors will help you develop skills related to your specific venture. For instance, my mentor, the late George Fontanills, was one of the best options traders in the world and I met him at a live seminar. He taught me a lot about trading and what it takes to be successful. He helped me understand that success is more than having good strategies and formulas. He guided me to truly understand the importance to find a trading style that suits your personality.

George observed my trading style, including the mistakes I was making, and decided that swing trading was the best fit for me. He understood that I don’t have the patience for trading longer term, so a short- or medium-term time frame works best. He also understood that I loved to travel and needed some flexibility, so day-trading would not work either.

Many years later, I’ve mastered swing trading. I am in my trades for a few days to a couple of months, giving me enough time for the stock, commodity, or currency to move some distance so that I can capture meaningful profits. And that’s all thanks to George, who also taught me valuable risk management skills and how to protect my trading capital.

Having the right mentor, in particular someone who plays to your strengths, can help you achieve success at a much faster and sustainable pace. It’s why I recommend that you seek out your own mentor. Find someone who is approachable and willing to answer questions. If your would-be mentor is also inspirational, that’s a great bonus. When you’ve found someone to fit the bill, be candid about your past experience, including mistakes you’ve made. Mentoring is a two-way relationship and you must be open and honest for it to work.

The Growing Popularity of Trading

There’s no doubt that trading has become more popular over the past decade or more. For some investors, working from home, where ever home might be, and earning consistent profits through trading stocks, options, futures, or currencies, is both appealing and lucrative.

On top of that, markets are more accessible than ever, information is readily available and internet access has become widespread. Perhaps even more importantly, experts are willing to share their knowledge, so mentoring and coaching help are accessible.

However, no one is saying that trading to earn money is easy. You need market knowledge, a willingness to dig deep on technical patterns and an understanding that all trading requires some level of risk.

Successful trading also requires a specialized mindset, an idea explored in my 2014 co-authored book, The Winning Way.

3 Traits Every Trader Needs

In The Winning Way book, we look at three psychological mindsets that are necessary for a trader, regardless of experience, to be successful. Those mindsets are: one, accept market uncertainty; two, focus on the “now”; and three, think probability.

I thought it would be useful to outline these qualities in a little more detail here.

Accept Market Uncertainty

You have to believe that each trade is a random event and the outcome is out of your control and beyond any kind of analysis. Unless you know what each of the millions and millions of investors and other market participants are betting on each day, it’s impossible to predict what the markets will do.

I began making a trading profit when I started to believe in my own tools and systems for trading. I accepted that markets are uncertain and that leads to randomly distributed winners and losers, at least in the short term. However, in the long run, I trust that my edge gives me a higher probability of winning than losing.

Focus on Now

We’ve all been conditioned to learn from past experience. That works, mostly, since a change in behaviour usually leads to a different outcome. But in trading, it is detrimental to associate current trading decisions with past results. As every mutual fund prospectus tell us: Past results are not indicative of future performance. Professional traders understand that each trade is random, operating independently of previous trades.

Great traders focus only on opportunities that are happening right now.

Think Probability

The focus on uncertain markets can be difficult for some traders as they wonder how to achieve consistent and profitable results in such an environment. Although markets are uncertain in the short run, long-term predictable results are achievable. Your own trading strategies and systems give you an edge. You will have both winning and losing trades in the short run, and in the long run your edge will give you a higher probability of winning than losing. Being able to understand probability also helps you become a more disciplined trader. You will be able to trade with less emotion, allowing you to think more clearly and ultimately make better trading decisions.

My Story

I started trading in 2001. By 2003, my initial success had disappeared. I was spending thousands of dollars on complex trading systems that just didn’t work. In short, I was struggling to find a new path that would suit my goals.

At that time, I was fortunate enough to meet the late George Fontanills, one of most respected options traders in the world. I needed George to help me understand my trading personality and what type of trading would be most suitable for me. More importantly, I needed a mentor to send me on the path of developing a winning mindset.

George mentored me on trading strategies and techniques, but most importantly, he guided me to my own trading personality. He knew I wasn’t suited to day trading, because I hated the idea of staring at a screen all day. He also knew I didn’t have the patience for long-term trading. So he came up with the idea of short-term or swing trading.

Swing Trading

The timeframe of my trades is anywhere from a few days to a few months, depending on the stock and market volatility. And because swing patterns are highly repetitive and happen over and over again, stock movements can be predicted with a high degree of accuracy.

George was able to pinpoint my strengths and weaknesses as a trader. He taught me valuable risk management skills and how to protect my trading capital. He also taught me how to trade small but win big, and how to scale up. Under George, I learned to focus on mastering one or two markets before expanding into other areas of trading.

In conclusion, I believe that you must apply the three psychological mindsets mentioned above at all times to keep trading simple. If you can do all that, you will see a breakthrough in your trading, and very soon you will become a consistent and profitable trader well on your way to achieving success.

How You Can Learn to Trade on Rules-Based Trading

We are creatures of habit. Habits form patterns that become rules of a sort for how we live our lives in a dependable way.

One of the most compelling illustrations of this is Danish photographer Peter Funch’s “42nd and Vanderbilt” project. He stood at that corner in New York City and from 8:30 to 9:30 a.m. between 2007 and 2016 took photos of commuters on their daily pilgrimage. Many of them were the same people, day in and day out, just more grey and grizzled over time. Their faces always had the same expressions, mostly grim. Many wore the exact same shirts in 2016 that they wore in 2007, or shirts in a similar color and style. They also consistently did the same things, like holding a to-go coffee cup the same way.

That sort of habitual consistency is also frequently seen in the stock market. People who figure out how to read the patterns and act accordingly can make a lot of money, and because of that consistency, they can do so in a way that mitigates a lot of the risks of playing the market.

It’s called rules-based trading, and I should know because it’s a strategy I’ve used and share.

Rules-based trading is really a dependable approach for beginners and those with a low appetite for risk. It’s quite simple, actually, for those who do their homework and who are mindful of and keep to schedules.

It’s a way to piggy-back off the seasonal buying and selling that marks the activities of the institutional investment community, and reflects both bullish and bearish environments. Here are some examples.

On the bull side, take a look at Rockwell Automation. Between Nov. 13 and Dec. 26 in 21 of the last 23 years, the stock has gone up, with an average return of 5.76 percent. The return on options plays: 50 percent to 100 percent.

On the bear side, there’s Skecher, whose stock has declined between Sept. 14 and 27 in 17 of the last years, showing an average 6.82 percent decline. Putting options on that play will get a return of 50 percent to 100 percent.

Here’s why this system is a good one to put in place. You know what you’re getting. It’s designed to “set and forget.” You place your trade and don’t do anything more with it until it’s stopped out, the target is reached or you hit a trailing stop loss. You’re set as long as you keep it all within the precisely defined windows.

You avoid the psychological pressures of trading, but still get the fun of watching how it’s going without having to constantly be monitoring and analyzing new information. However, you do have to do your homework to identify likely targets (through data available on platforms like Yahoo Finance and Bloomberg) and apply the option strategy that fits.

Rules-based trading is an excellent way to build market knowledge and discipline that, over time, you’ll be able to take to the proverbial bank.

Certus Trading makes it easier to get into rules-based trading with our Profit Scheduler Club for options. We do the data analysis and show what options strategies will apply best, equipping you to comfortably make the trade.

Looking at an Oftentimes Forgotten Trading Pattern

As a technical trader, I spend a good amount of time looking for repetitive patterns that re-occur over and over and over again. With the help of data-crunching software, anyone can easily write a few scripts and perform their own analysis to find highly repetitive setups.  

When it comes to repetitive patterns, we often talk about chart patterns such as breakout confirmation, bullish and bearish reversal pivots, and continuation patterns that occur frequently with a high degree of accuracy.  However, we often overlook ONE type of highly repetitive pattern that occurs every year.

This pattern is very easy to trade.  

It is not s-e-x-y, which is why I consider it “The Forgotten Pattern”, but it works!

~Seasonality Patterns~

Seasonality is simply a period of time when an asset (i.e., stock) tends to move in the same direction every year. That’s it!  So, if XYZ stock moved up from November 2 to November 22 over 17 of the past 20 years, the assumption is that it is also likely to move up this year as well. 

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