As many traders begin to adapt to their potential new trading career they’ll encounter many hurdles on their journey towards “trader enlightenment”. Many of the hurdles they face are placed there by themselves; greed and fear being the two most obvious. But there’s a list of other obstacles new traders will face and need to overcome in order to progress. The impatience to pursue their new found career can cause destructive characteristics that can severely harm traders’ progress, twinned with excessive risk this dangerous cocktail can bring down traders and accounts in record time. Many of the aspects of trading we find difficult can be easily remedied with reminders and hints by mentors, however, some are not so easy to overcome…
Suppressing greed as traders can prove to be difficult, particularly given the many wild claims traders will see pushed to them through adverts, or on trading forums, where individual traders will brag of “ten percent returns per day”. The reason traders enter the industry is to make money. There’s no sophistication or dissembling required; traders want to take as much cash as possible from the market as they can. They’re not out to change the world, or to “do good”, they’re in it for entirely ‘selfish’ reasons. But left unchecked greed can be an incredibly destructive characteristic in a trader. The easiest method to suppress greed is to set realistic and more importantly achievable goals.
Perhaps an account growth of 100% (not compounded) per annum should be set as an achievable target for a trader and the trader should walk through the process ‘backwards’ in order to arrive at that 100% growth figure. For example, traders may have a €5,000 account, with a target to double it. Therefore the 100% annual growth amounts to circa 8% growth per month, roughly 2% growth per week. When traders step out the returns from yearly to monthly to weekly they can develop a better perspective of what’s achievable. And 100% account growth is not only an achievable target at circa 2% growth per week, but a return that would put traders achieving this level far ahead of the majority of their peers who lose money consistently.
What are we afraid of when trading? The fear or losing money, the fear of losing face, the fear of making wrong choices, the fear of putting in a lot of effort for our venture to ultimately fail? Let’s look at these in isolation and attempt to dispel many of these fears. One of the exercises in order to overcome these fears is to isolate them and confront them directly.
There is one absolute certainty in trading; we will lose money as traders. In our development stages, whilst the whole experience of trading is new to us, this can hurt as it’s a completely new experience to us. We may have lost money before gambling on the outcome of a horse race, on the score of a football match, on a guest visit to a casino, but we’ve never risked money on a semi professional basis in order to see that money potentially grow. The fear of losing money, when traders begin their journey, can often lead to a form of ‘trader paralysis’ severely impacting our development. But there is no losing face in trading, it’s just you and your broker. Your results are as personal as you want them to be.
As for making wrong choices that’s also an inevitable part of the trader’s dilemma. Traders make wrong decisions, all the time. If we’re right fifty percent of the time we’ve been exceptional, traders have to accept that being wrong is simply part of the price of doing business in this business.
There is no method whereby we can fast forward or skip certain parts of our trader development and every individual trader will have a different time scale by which they learn. As in life certain traders may be quick learners, others may be slow. But what is for sure is that many traders will need to suffer and endure certain experiences in order to become a fully aware and competent trader.
Traders may have seen guides and advice on various websites and forums suggesting that it can take up to four years to become proficient and profitable, others will state half that time, as a highly personal experience it’s impossible to put an approximation on how long it will take traders to become profitable. Once again perhaps we should approach the impatience from a different angle and decide (once we’ve fully committed to trading) that we’ll stay with it for as long as it takes. Could be a year, two, perhaps up to five, but what we won’t do is attach a timescale. We cannot rush this personal experience, and the majority of successful traders will always refer to an approximation, they’ll maybe cite that it “took approx. 4 years to become proficient and profitable”. They won’t state; 2 years 5 months and 1 week.
Why does it take so long for traders to accept that, in order to be successful, money management is key? Without a doubt one of the aspects traders find hardest to ‘get their head around’ is risk. And it would appear that, however many times many traders are told that they should only risk no more than X percent of their account, the advice is ignored. How can we put it succinctly; do you want to have a really bad day and look at your account and see you’ve only lost two percent account balance, and with a good trading day two days in succession afterwards you might find yourself 2% positive, or do you want to make such a substantial loss that your account may take weeks, or months to recover?
We’ve listed four aspects of trading that many traders find difficult to adjust to: greed, fear, impatience and risk. Readers will note that a thread runs through the four separate aspects; all are intertwined and somewhat related. The overall message in this article is one of control; control the greed, fear, impatience and the risk and you’ve given yourself an excellent chance of success.
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