There are many aspiring, as well as seasoned traders out there who are trying to earn a living in the markets each day. However, the vast majority of them struggle to ever make a profit, let alone make enough money to pay the bills. Therefore, if technical charts are so simple and so easy to learn (at least that’s what most online educational companies are pitching these days), then why do so many traders struggle and ultimately fail? The answer is actually pretty simple: we are HUMAN.
Being human means we are largely run by our emotions. When learning technical charts, ‘fear’ and ‘greed’ are often represented as the two most powerful emotions that make the markets move. While I generally agree with that ‘theory,’ making money from OTHER people’s emotions also means we have to be able to understand and control our own emotions first. This is where most traders fail. So, while being human (having emotions) is what makes the markets move and allows us all to be traders, it’s also the same thing that causes most aspiring traders to struggle.
So, where does that leave us? For starters, it means spending a lot more time working through emotional demons and a lot less time looking at charts, which is typically the opposite of how most traders appropriate their time. The only way to become a profitable, successful trader is to find your niche, which is to fully understand who you are as a trader. Most traders eventually learn charts, but very few traders every truly master their emotions, and that’s why so few are genuinely successful. I used to work with a trader who would often say; “Technically profitable traders are a dime a dozen, but genuinely profitable traders are few and far between.” I completely agree with this statement. It’s no different than going to the driving range every day and spending the entire time hitting your driver, without practicing your short game or putting, yet the vast majority of shots in golf are inside of a 100 yards. It makes no sense at all.
In trading you will either make yourself accountable or you will be made accountable by the markets. For the aspiring trader you have to learn to control your emotions and not get caught up in the moment. This means trading with confidence not with arrogance. This can mean many different things, perhaps on one trade it means cutting your losses and moving on before you find yourself in a hole so deep you can’t get out. On another instance it might mean passing on a trade or taking a fewer shares because the stock is extra spready or whippy. It’s the understanding that not every day will be a massive winning day, and as long as you can control your losing days and keep them “acceptable” the winning days will come. Good traders wait for high odds opportunity, and that means a lot of scanning and waiting, scanning and waiting, because you can only take what the market is willing to give you…and the market is not always in a giving mood. This takes us back to learning to trade with confidence and not arrogance. Be smart. Controlling emotion is how we make informed decisions, which is imperative to trading success.
One of the most challenging things to learn as a trader is that it is a very personal business. By personal I mean that it ISN’T a one size fits all type of industry. Too many traders get caught up in the idea that there is only “one way” to succeed and they must copy someone else’s path. In truth there are 1000’s of ways to make money in the markets. So go out there and try different styles, different timeframes, different methods and see which one speaks to you the most. See which one is most comfortable for you, because if you are uncomfortable, you will likely allow your emotions to take over, which leads to doing something foolish. Find your niche!
Being human can be a blessing and a curse…the goods new is; you are responsible no matter what! So make mastering your emotions your main focus and never forget that this business is NOT easy, it will take time to master your demons and ultimately find your niche. Folks out there selling get rich quick courses or too good to be true automated black boxes are usually full of it, and not worth your time. Find someone that will take the time to help educate and mentor you in the aspects of proper, professional trading. This must also include live market experience so you can feel the full gambit of emotions that afflict traders.
Search out a method that makes sense for you, find educators who are open and honest about their own trading, not hiding behind the veil of the internet, get live market experience and then continue to fine tune your trading through continual studying, tracking spreadsheets and of course asking questions of traders who are better than you are. If you work hard and do these things you will significantly increase your chances of becoming successful. Remember, earning a living as a trader is a very rewarding experience, but there is also a lot of hard work, barrier breaking and generally an emotional paradigm shift to get there! For those who are motivated and truly want it, it’s absolutely worth it!
Best of Luck!