Trading Mentality for New Traders (opinion)
Today, I would like to discuss something that could possibly be important, or more, than trading strategies. Today I would like to talk about the psychology of trading.
Since I started trading about 8 years ago, I have come to realize that many people (including myself in the beginning) have no idea or have a big misconception about trading as a source of income or as an alternative job.
The first thing that comes to mind to most beginners or anyone planning to start trading – is that trading will make you RICH. What gives people the idea that reading a book, attending a few workshops or learning stuff off the internet will make them the next Warren Buffet or George Soros?
Yes, trading strategies do work. Trading the news does make you money. Winning 5, 10, or even 20 trades in a row is not uncommon for every new trader. However, without a proper mindset, the market can and will take everything — and more, back in just a short period of time right when you least expect it. Of course, everyone will have different learning experiences. Some people make certain mistakes while others don’t. Today I’m going to be brutally honest and share the hard facts about online trading.
1. You are going to lose money
If you don’t already know this, you are about to discover the first ugly truth about the market. Banish the mindset that trading will make you easy and quick money. You will find yourself in a losing position someday, and hanging on until it’s too late. Some people with the “scared to lose” attitude will tend to double or triple down to average out their investment, hoping that the market will rebound in their favour. More often than not, that strategy will work. But the day will come when it won’t. And it will cost everything you have made, and more.
2. Trading is hard as h*ll
I have heard of doctors, lawyers and other very intelligent individuals attempting to trade. Probably on a scale of a 100 people, maybe 5 are able to be profitable in the long run. Besides, why would trading be easy? There is so much needed to be learnt, and then put into practice. There are traps and then finally there are the lessons that only the market can teach you. It will take up your time. It will take a toll on your lifestyle. And you will lose sleep over it. The market is not a playground where everyone holds hands and plays. The market is a battleground where big money wins and small money loses. Before you can be profitable in the long term, you must accept the fact that the market, just like the world we live in, is a dog-eat-dog world. Someone has to lose before someone else can profit. If you are serious about trading as a source of income, you will need to accept these facts so do not fall prey to others.
3. Patience is Key
You will need a LOT of patience when it comes to trading. Patience to wait for market opportunities; to stand your ground in an early losing position; to wait for your profit; to control emotions when markets act irrationally, and eventually patience to keep on learning and improving your art.
4. Trading is only for intelligent people
Contrary to popular belief, the statement above is NOT TRUE. I have encountered highly intelligent individuals who can’t seem to master the art of trading. Rather, the average person who is calm and patient and in control of his/her emotions is likely to perform much better. New traders will not notice this until they have experienced a few losses. Even with all the rules and strategies in place, you will lose money. Many times it’s not because the rules were not set right or the strategies were not flexible or robust enough. It can be just because of greed or irrational fear. Your emotional qualities can either make or break you. The market is simply going to do what it’s going to do, and it’s going to give or take whenever it does. You simply have no control over whether to cut losses or stand your ground in a losing trade, or when to take profits or to let your winners run in a winning trade. In the end, it’s only your actions that you have control over and only you have control over how much money you lose or make.
5. Don’t be a copycat. Be YOURSELF
Most traders will start off by learning from workshops, following influencer traders and reading strategies on the internet. Being a clean sheet of paper, the new trader will have tendencies of imitating the traders they learn from. Traders do use the same indicators and strategies, however everyone uses them a little differently from one another. Imitating someone else is like watching Peter Schumacher drive on TV and expecting to drive like him when you get in the seat. You need to study how corners are taken and when to accelerate or decelerate. Understand the concept and then make it your own. In the end, how you trade is who you really are.
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