Trading for a Living? or Trading for a Million?
- TailoredTrader.Com / Eric Benson
- Mar 9, 2017
- 8 min read
This sounds interesting and perfectly logical, yet most newly aspiring traders, and some experienced traders usually get it backwards. They trade with the mindset to “make a million, not a living”. What I mean by this is they get so overwhelmed with the fact that there is TONS of money to be made in the markets, that they seek these high and unrealistic returns in such a small amount of time. Wanting to make massive amounts of money in the shortest and quickest amount of time is destructive to your equity and trading career. Treating the trading business as a “get rich quick scheme” is going to equate to “you’re broke real quick truth”. As you may or may not have heard, trading is a marathon not a sprint. Consistency and longevity with a big picture long term plan wins in this business. Erratic impulsive behavior coupled with a tunnel vision mentality is a sure enough loser. You are much better off hitting singles and doubles rather than swinging for the fences every trade for a home run. A lot of traders (including myself in the past) looked at a price chart and would see these rapid moves of 100+ pips either up or down and say to themselves “oh, only If I could of got in that trade for that move”. Then they focus a lot of time and energy on looking for ways to get in on the “next big move” in fear of missing out. This “big move syndrome” along with the euphoria of “wanting to be right” could really get a trader off track on what’s really important to him/her, and sometimes the whole reason why they started a trading career in the first place. Which in most cases is the FREEDOM!! Millions of dollars sounds better though, right? But think about it. In any other endeavor, doctors, lawyers, business owners etc. In most cases, in order to become a “millionaire” within a field, don’t you first have to work in the field enough to be able to at least make a living from it first? To then be able to gain the proper experience and overcoming hardships to take you to the higher levels of income? So why is it that people entering the financial markets treat this theory so differently? Trading is proven to be one of the most difficult endeavors on this planet. Yet most people bypass realistic human common sense and think that they are going to open a retail trading account, crush the markets and get on the road to a being a self-made millionaire in record time.
I’m sure you didn’t start a trading career to “catch every huge move” and “being right every time” and to be a “self-made millionaire” in record time. If you did start a trading career with these intentions I can assure you, you are in for an unpleasant surprise. However the market has a disguised way of shifting perceptions of the human being, taking a person’s mentality from” I just want to make a good living making X amount a month (example) and spend the rest of my day/ time doing what I enjoy”, into “I want to make (ridiculous) amounts of money fast, catch all the big moves, be right on all the moves and being the best trader out there.” Then sit and stare at the screens for hours feeding the EGO with how you are going to “outsmart the market” and “this time is different”. This is very common and I can personally vouch for it because I suffered from this Illusion.
You’ve got to get back to the roots of why you started trading to begin with. For most people entering the markets, it’s to make extra income or to enjoy a good living and/or the freedom. Being able to place trades for profit (or losses), to support lifestyle, family, fun and financial freedom. I know it’s easier said than done in the live market, but I can assure you this shift of mentality is the best trade you could take in your trading career. For those of you trying to “outsmart the market”, trying to be right all the time, making unrealistic profits by catching all the big moves, I recommend a shift in mentality and focus. For those who maintain a mindset of getting what you want out of the market with emotional control and a clear disciplined plan, keep that mentality and don’t let the Greed of money sway you from it.
I can tell you from personal experience, I started trading for the freedom and financial opportunities. However after time past, it turned into something different. The Greed kicked in and I found myself trying to make MASSIVE unrealistic profits, wanting to be right on all trades and catching every and all the big moves in the forex market. I totally lost sight of who I was and why I began trading to begin with.
After years of failure and continuous re-analysis of myself and personal trading goals, and finally finding and working with real profitable traders over my career with understanding what makes then successful. I came into terms with myself and realized that trading is just a numbers game, a massive liquidity pool which consistently fools the emotional human being into making the same habitual trading mistakes over and over again.
After years of pounding it through my thick egotistical skull. I chose not to continue to make the same mistakes and worked on MYSELF with ONE STRATEGY, attempting to just eliminate emotional TRADING MISTAKES. I went from trying to catch every big move in the market, to just waiting patiently for MY SET-UP to occur to then execute and apply risk and trade management. I took my personal bias, emotion and wanting to be the “best trader in the world with the most amount of pips” out of the equation. I focused on the reality of the market and not that disguised illusion that trading plays so well. I got back to the ROOTS of what’s really important.
As we all know the market is an uncontrollable global speculation with trillions of dollars involved and many traders globally trading it. The ONLY thing you can control in the market is YOURSELF. Control yourself with discipline and patience to get what you want out of the market and leave the “guru’s” and “experts” on television and internet website blogs. It is impossible to call ALL shots/trades right, to catch every big move highs or lows. Stop trying, there isn’t a human being on the planet who can achieve this in any and all market places. Instead shift your focus on a simple trade plan of risk and trade management to achieve profits for consistent equity curve growth, which has to be done with the elimination of GREED, FEAR and EGO and replaced with PATIENCE AND DISCIPLINE.
I started with a structured plan of executing my strategies signals with the first goal of reducing risk at the first opportunity the market allowed me to. Second goal was to scale out some of the trade at predefined profit areas to then leave remainder of the position size on to “let it run” for additional profits, with trail stop beyond break even. This removes emotion which is the biggest factor in trading and trading outcomes. This also allows trades to run, as I was already “safe” on the trade. Long behold I unconsciously started to be a part of some of the markets big moves. Taking what the market is offering during the times and getting safe to remove emotions to let it ride is critical.
In most retail traders cases, we get “paid” by how much bigger are winners are relative to our losers. Without letting profits ride, most retail speculators can’t cover their trading losses and commissions, resulting in the continuous abyss of losing money and blowing accounts.
A great analogy would be from American Baseball.
I call it the “Strike-out, Single, Double, Triple and Home-Run series of outcomes.”
Strike-out- The batter steps up to the plate with a RISK of striking out. He has trained and practiced very hard to avoid striking out, giving himself the best probability of hitting the ball. However still realizes there is a chance the pitcher will strike him out. This does not stop him from getting up at bat to hit the ball, accepting the risk of a strike out. If this strikeout occurs the batter gets temporarily upset, but gathers himself, knowing striking out it a part of the game.
Single- At minimal, is the primary goal of the batter. It is the highest probability hit in the baseball sport. It is very rewarding as it gives the team a chance to score. Hitting singles is essential for a baseball player’s career. As long as he is hitting singles at a mathematical acceptable rate, his performance is good and has a continuous healthy career.
Double- Second base hit from the batter. It’s more rewarding than a single, however less probable. Occasionally the batters set-up wing will allow him to hit the ball harder and further for a better reward, superseding the primary goal of hitting a single.
Triple-Third base hit from the batter. This is more rewarding than both a single and double. However even less probable. Such a hit is really rewarding and doesn’t happen all too often, however “things” lined up for a triple, bad field play, batters swing, bad pitch, training etc. The batters “set up” yielding him a huge hit, superseding the primary goal of hitting a single.
Home Run-The ultimate reward for a batter on the baseball field. The least probable outcome of a batter at the plate. However when this outcome occurs it’s very exciting. Through practice, patience and training of his set-up swings of the bat, the time has come for him to score a homer. This is unpredictable and has a lot to with speed of pitch, location of pitch, batters strength, swing, and even wind. To transfer this into market context it would be, supply/demand, trend, sentiment, news and plain old markets erratic behavior at times. Similarly, as with the batter and trader, the uncontrollable conditions of wind, pitch, news and markets occasional erratic behavior, the only thing the batter and trader can control is the risk of a strikeout or trading loss. With trust and confidence in himself and a small satisfying primary goal of hitting singles with consistency, and knowing that when the set-up and conditions all align that the triples and home runs will come.
It first starts with understanding the game/markets. Part of winning is losing. Strike outs and losses are going to occur. Understanding of one’s strategy in all areas, entries, risk reduction, targets, stop losses and more are critical for hitting singles, doubles to perform and survive, and have patience and discipline in yourself to know that your swing (trade set-up) is occasionally going to allow you to hit doubles triples and an occasional home run. Hitting the high reward is great, but a baseball player must first master the psychology of striking out (stopped out). Focusing on small goals such as reducing risk, hitting a single just to get on base, to continue playing for future opportunities to hit the triples and home runs when times are right, which is needed in baseball for the big signing contracts and in trading as that’s where the profits and money comes from.
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