Bennett McDowell started his financial career on Wall Street with the firm J.J. Kenny Co. in 1984 after serving as an officer in the U.S. Navy. Bennett also served as a Retirement Plan Specialist with the Equitable in New York and has investment real estate experience as well. In addition, his 1979 Economics BA degree from Syracuse University in upstate New York gave him a foundation on which he was able to build a solid background in Finance.
Bennett has extensive experience in trading the financial markets and is currently an active trader including day trading the financial futures markets. This is Part 2 of a two-part interview.
Optionetics: What is your most memorable trade?
Bennett: I have had many memorable trades, both good and bad. But I learned the most from this trade. When I was a novice trader and really did not know much about trading and risk control, I bought a bunch of put options on Applied Materials (AMAT) because my analysis indicated a bear market for AMAT. Well, my analysis was wrong and AMAT began its largest bull move in years and I was holding put options! Within one week, I realized my trade was in trouble when I was down about $15,000. I could not believe it, but I kept saying to myself, well the market can't keep going higher forever! Well, it did go higher! And at that time I felt like a deer caught in the headlights of a car, I froze and did not know what to do. At this point my emotions determined the outcome of the trade. I lost all objectivity and eventually got out for a $30,000 loss in just two weeks! And of course, I did finally get out near the top! That was a lot of money for me at time, and it hurt me emotionally for a while too. However, this one trade taught me my best lesson, and I have never let that happen again! I learned the importance of risk control!
Optionetics: With all the different technical analysis tools out there how does a new technician avoid information overload or “analysis paralysis”?
Bennett: That is a good question! It is interesting to note that with all the new technology available today, that the ratio of winning traders versus losing traders remain about the same as it was twenty and thirty years ago. Why? Because successful trading comes from within and since we all trade our own beliefs, we all interpret information from a different view point and thus react to that information differently. In trading, this has profound implications since it all comes down to how we interpret information and what information we choose to interpret.
Optionetics: How would you characterize your approach to the markets?
Bennett: I believe that no one was born a great trader and that anyone with the passion, commitment, the right education, and the risk capital has the potential to become a great trader. Trading is not a get rich quick philosophy, instead it is a profession that needs to be mastered in order to be profitable. Through education, practice, and commitment you can potentially master the skills needed to trade the financial markets for a living. Trading should be fun, and if it is not fun for you, then you are doing it wrong!
Every trader trades his or her own beliefs. And therefore, your beliefs and personality will determine how you trade and whether you will be successful or not.
If you must HOPE that your trade will make money, then you are not trading well and hoping creates anxiety, stress, fear, and greed. Paper trading is a great way to practice your trading and develop your skills in a stress free environment before risking real money. If you cannot profitably paper trade, then I believe you will not be profitable trading with real money in the markets. Once you begin to trade in the markets with real money, your psychology becomes the main factor in your being successful or not. All trading methods involve risk and there are no absolutes in life, the markets, or in trading.
Optionetics: What do you think are the greatest misconceptions people have about trading and investing?
Bennett: Most new traders believe trading is easy and the only thing you need to be successful at it is money. In other words, money is the ticket to gain entry to making more money. They fail to realize that successful trading is a skill that takes hard work, persistence, time, and education to master. Most traders view trading as a "Get Rich Quick" program.
Another misconception that people have, thanks to the news, is that day trading is foolish and just gambling. While it is foolish and it is gambling to trade without knowing what you are doing, professional day traders are not gamblers and are not foolish. Quite the contrary, they are highly skilled and talented professionals!
Optionetics: Thanks so much, Bennett, for sharing your valuable trading insights.
To read Part I of this interview, please click here.
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