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.
- Income generation. The chances are that any starting traders will not be able to make money consistently for more than a year – and that is a very optimistic estimate, given that there is right learning information available. It is very difficult to work another job while studying and practicing the markets.
- The overwhelming amount of information. Depending on your goals, you might want to implement a simple trading system and do it consistently every single day, not bothering to learn much more about the markets. This approach never worked for me, and was actually preventing me from moving forward with my trading, as I was hoping to “make it” with very simple methods, refusing to learn more.
- Operating under complete uncertainty.
- Having to do the same steps every day consistently that can be difficult physically (our brain is just like a muscle, and will get tired from too much mental work).
- Not having a clear work process. This is a huge one. Even if you are ready to put in all the hours required, ready to show up consistently every single day to analyze the market and find the entries according to your trading system, you will be frustrated more often than not unless you have a clear Daily plan, Journaling method, Analysis and Entry rules.
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.