Originally appeared October 2010
This is an email I got over the weekend; I have interacted with this trader a few times. He is a newer trader. I am selfish, I like to interact with new traders. I can see the impact much quicker. There are basic problems that new and struggling traders have. I think success in trading happens with subtle shifts in mind sets. It is much easier to shift their mind and they are more willing to listen. Also, it allows me to experience their mistakes. It reminds me where I have been and always have a potential to become.
“..the problem however is the way in which I lost it. 83 $ of these 134 $ were lost on two days and most importantly through something I thought I had left behind: revenge trading.”
There are no promises that I will not repeat the mistakes I have made. Where I have an advantage is I know when am I most susceptible and can see/feel it happening faster. It is my job to use that advantage. That does not mean I can always stop it. The need for psychological gain does overtake me. It usually ends badly, if I am lucky. In a perfect world, I would never make the same mistake twice. It is not a perfect world. Figure how you got yourself in that situation and try to identify it as soon as possible. My guess is that the reader did not realize what they were doing at the time or something was more important.
“I thought about taking time off from trading immediately (and even about quitting trading, I was so confused and frustrated to see myself back where I had been one year ago) but at the same time this thought caused me massive pain and a new wave of frustration – it felt like I was giving up, failing, like I was the idiot who just couldn’t make it while everybody else was being successful.”
Every trader thinks about quitting. Pain is a very important emotional reaction, it protects us. It has to be a rational pain to be useful. I can say that most of the changes I have made in my life came because I was tired of getting the same results or feeling pain. Eventually the alternative was better, it wasn’t because it was instinctive or I am superhuman. Without knowing the whole story of this trader, I am sure they have gotten much better. A little information is dangerous. Now that the reader knows what he does not know the game changes. The problem with most people is their time horizon. Most traders have another career, so I never really understood the problem most people have with expectations. You did not think you were going to become the CEO after your first week did you? It is possible, but not probably. Most of the time we only focus on two points. The beginning and the end. It is obviously not that simple. At the same time, when it is time, it is time. That is something you have to decide. If you have to take some time away, do it. The market will be here.
“On rational level, and now that I have had some time to think about this, I know that I completely overreacted. I thought about the reasons for this and believe that the main reason is plain and simple lack of confidence. I firmly believe that successful trading is about having confidence in yourself. This confidence must be built or “earned” like you said once with regards to a client’s plan. In a nutshell, I think that my main challenge (and probably for most traders) is to build this confidence.”
Confidence comes two ways, never being tested or constantly being tested and winning. I have been extremely fortunate in my life to be able to fail. Whenever I say this, I always get a weird look. It means that if I fail/fall I always have some place to go. I do not have to worry about starving to death or not having a place to sleep. It also means that I have to be willing to shovel shit. It does not make failing acceptable or a crutch, do not fall into that trap. It just means that the fall does not kill me. I have confidence in trading for two specific reasons. I am willing to do the work that puts me in the best possible situation. I am relentless in finding the best possible situation and willing to make changes. Also I have a base to fall back on. I know that no matter what there is a number I can make every day. If worse comes to worse I can make that number in order to live. My lifestyle may have to change but I can make that number no matter what. For a new trader that number is small, it may even seem insignificant. It is not, it is an important source of confidence. You have to start somewhere.
“Do I have the confidence that trading for a living can be done? I certainly have a hope, a “feeling”, a distant picture, but I seem to still lack the firm belief. Only this can explain that a setback with no real financial implication can have such deep impact on my psyche. This is not really surprising if you think about this. Amateurs like me are coming to the market with completely wrong ideas and preconceptions. Most don’t even survive the first learning curve. But even those who do, like me, normally never get to see someone actually do it, actually make a living from trading. This leaves much room for doubt in an environment which is based on uncertainty anyway and where most of my decisions and reflections are between me and myself.”
I think about this all the time. I have seen many traders come and go in this business. I have seen people I looked up to, blow out. I have seen what it did to them and their family. I have seen many traders succeed but more fail. I have seen people come back from the edge. I have seen people fail and come back and succeed. Not everyone can trade for a living, but people can trade for a living. I have tried everything I could do to help people only to see them blow out. Did I waste my time and their money? No, for the some they success is knowing they did everything. There are other factors that go into being a successful traders but it is usually true that “if you think you can or you think you can’t you are right”. That does not mean anything you want to accomplish is an efficient use of your capital or time. I made that decision about football and you may have to make that decision about trading.
Things that I that I think every trader needs to have to succeed.
Capital. Money is time. You have to recognize the things that you do not know and than learn them. That takes time. It HAS to be money that you can afford to lose. There are no exceptions, EVER.
Passion. You have to love to do this no matter what. You have to want to do this for the right reasons. You will want to quit several times and spend many hours with no noticeable returns. It is not a get rich quick, it is get rich later.
Ability to learn. Companies would love to have the real time feedback we have. The market is a communication device. Most humans are not programmed for the constant feedback loop. When you lose and WIN, do not lose the lesson. Be grateful and spend a lot of time trying to understand what people are telling you. You can even learn from the biggest idiot.
Strength. The market introduces us to ourselves. Do you have the strength to be honest with yourself? Do you have the strength to change when it is necessary? Do you have the strength to get back up?
Appropriate Expectations. The general rule is that it takes about 3 years of full time work to become profitable. Trading is not easy. Some people get it right away, some people have the benefit of a “good” market. Regardless it takes time but when it comes it comes faster than you thought.
A Confidant. Someone to talk to, a place to communicate. It could be your significant other, a trading journal, forum, twitter or stocktwits. We are often too close to see how things really are. I have a big problem with that with my business and especially editing. That is why I am very appreciative of the feedback.
Just in case you thought your email would get lost in my inbox, it doesn’t. I respond to all intelligent emails and comments. Some I respond to in private but Ido respond. Keep them coming.
We would really appreciate your feedback, if you like, hate, or think we are full of crap. Please leave a comment, a voice mail (312) 725-9121, email info @ traderhabits (dot) com or twitter, stocktwits, youtube and facebook. Subscribe to Traderhabits by email or to newsletter.