Let’s take a look at what consistently profitable trader might be going through in his trading.
Is this how you feel in your trading?
I cannot accept the losses
One of the biggest problems of any trader is accepting this essential part of trading business.
So how do you feel and behave when you believe this about yourself?
Notice when you allow your brain to enter into any of these patterns of thinking. Take a look through the list, see what applies to you personally.
It is a great thing if we are able to catch ourselves breaking predefined trading rules, such as our Risk Management or Entry rules. However, it is our thinking patterns that lead to breaking the rules or to any other problems in our trading. Consider for a moment, have you ever caught yourself thinking any of the above thoughts?
Being aware of our thinking is much harder than being aware of the fact that we did not put a stop loss in a trade. If you learn catching the moment when you talk yourself into not putting the stop loss you will start working with the cause of the problem, not the effect.
So let’s reverse the original statement:
I can easily accept the losses
Now, this may not be true for you at the moment, but try to imagine how you would feel, behave and trade if this thought would be your reality.
Consider the last point – isn’t it really the greatest feedback the Market could ever possibly offer to you? The Market is not against you, it is simply there to teach. It is clearly telling you, from its perspective, that your view of the circumstances was not correct at the moment when you placed the trade. What did you believe about the current market situation just before you pulled the trigger? Take that belief, reverse it and you have the corrected point of view, available to you with Market’s help.
I you are serious about working with your beliefs, consider trying this method – Katie Byron’s “The Work”.
The Market can do nothing to hurt you, nothing can cause any damage to your reality, so why is it that we find it hard to just relax? How much easier our job would be if we would follow the Market, instead of following our thoughts about the Market?
The reality of the Market can never do anything that would cause you stress. Only your interpretation of the Market – your thoughts about it – cause emotions and prevent you from being detached.
Yes, it is important to have a trading system – a framework inside of which you view the Market. A trading system will cause you to interpret Market’s actions, so it must be constructed in a way that avoids all inner conflict. However, if you are unaware of your thinking, even the best trading system will fail because you will not be able to follow it precisely. You will never notice when faulty thinking enters your mind and causes you to choose incorrect interpretation of the information Market puts in front of you.
Until we learn to just relax and listen to what’s going on inside, there is no point to try building a trading system. The conflict our unconscious mind tries to hide will be projected into our trading and ensure our failure.
Trading is probably one of the most difficult endeavors one can choose in life. The amount of knowledge to learn is overwhelming, the amount of information to read, process and understand in real time is pushing our limits as human beings. It can be really draining emotionally, exhausting physically. You do not get any reward from doing what you do other than monetary – and it can take much time before these monetary rewards are starting to come your way.
There is no one to support you either when you are trading privately. There is no value that you are generating for the society, unless you do so with the money you earn on the market.
Given all that, it is only normal that on many occasions you will be stuck. You will feel like quitting, depressed and frustrated. What do you do in these situations to help you move on?
First let’s see why these black stripes happen in our trading career. Interestingly enough, they are not necessarily caused by big losses that one might experience. I think we are most vulnerable to such emotional drawdowns during our learning phase. It can take years of regular trading education, including practicing the concepts on a demo or a small real account before the trader starts seeing the light in the end of the tunnel. During this time there are many challenges that we must deal with.
My own approach to all these issues changed greatly over the years, and only very recently I was able to work positively with them.
Five years ago I would get excited about some new trading idea, work for a week or two like crazy on it, fail to get immediate results and proceed to become extremely frustrated, abandoning all trading for many weeks. It is obvious that such attitude was preventing me from reaching any consistent success.
Two years ago I would start trading a small live account or a demo daily. I would do all the necessary analysis, put on the trades and do some notes in the journal. I would not have a systematic approach in doing it however. More often then not I would finish 2-4 weeks period with reasonable profits, but would burn out completely in the process. The result was abandoning the trading again.
Just recently I started trading consistently, analyzing the market every single day, researching different trading opportunities and putting the trades on. Despite all the technical knowledge that I accumulated over the years I am still making many mistakes and moving forward only by analyzing and working through these mistakes. I record and analyze every single trade that I place, writing a journal entry when opening the trade and another one when closing it.
Only by working through one mistake after another, one failed trade after another, I am building a consistent trading system.
The main factor that gives me confidence moving on every single day, placing the trade, not quitting, is market psychology that I’ve been learning over the past two years. My technical understanding of the markets did not change much, but my attitude has changed dramatically. Every time I see a stop loss being hit I am completely calm and accepting. Every loss I get is just another lesson. Thanks to building a very rigid money management system I am completely comfortable with the price I am paying for these daily lessons. This is when real trading education happens – after all the theory and analyzing the markets on the history.