Have "Realistic" Expectaions

Trading can be very lucrative at times and then at other times, can seem like no profit can be made. Being a trend follower, you have to understand that markets will trend and then slow, trend then slow, trend then slow, and you get the picture.

 In the real world, a trader's account does not just continuously profit day after day, week after week, month after month, no matter what Bernard Madoff tries to tell you. Just look how unrealistic that is.

Other web sites, books, professionals, use a similar but more believable path to trading success like this.

Sometimes a trader does indeed experience this type of success at times but it's not indicative of the long term. It just tells part of the story, the story that we all want to believe in. The reality though is, for all long term successful traders, their path to success looks similar to this.

While admittedly not as sexy, the good news is the line is still traveling upward, just at a much lower angle. As a trader your job is to do the same thing over and over again (providing you have a profitable system) and the profits will take care of themselves...And just like a hot air balloon, in the beginning, it will take more energy to experience lift and the rate of ascension will be slow. As you go higher, lift/growth becomes easier and as the wind blows your balloon sideways or slightly down, once everything clears, your balloon will once again rise. But the nice thing about trading is, there is no ceiling, no atmosphere to keep you in, and no outer space to eventually end your days as you know them. So the take away here is growth is slower than one expects in the long term even though there are times of tremendous movement in the short term. Just be "realistic" in that you understand the big picture so you don't freak out in frustration when things are not moving as fast as you want them.

Personally, when I first started to do pretty well, I was freaking out when my account didn't profit anything for 2 whole months. I wasn't losing money but wasn't making much. Then I looked at what I started with and realized in the last three months, my account had grown by +80%.  Not many traders could claim that but at the time, I was stuck on the last two months, cranky that I didn't make any money. Well that's the world of trading. When things slow, sometimes there is nothing you can do but to hang in there and keep taking trades knowing the big trades are around the corner once the trend resumes, you just don't know when.

Funny thing is, soon after, in one week that same account grew by over +248%. I used the same system all along but the only difference was the market started to really move and I was there to capitalize.

One trade at a time, while viewing the big picture, you will get there. Just understand it may not happen as fast or when you think it will.

Greed is Bad

Remember that infamous speech given by fictional character Gordon Gekko in the Hollywood movie "Wall Street", made back in 1987? The take away from that speech was that "Greed is good".

Well fact is, greed will get you killed. It's always been that way. Now it's difficult to objectively determine whether one is, in fact greedy from one moment to the next but in the world of trading, it's that voice in your head that convinces you to drastically increase your risk in hopes of making bigger profits. This can work for a period of time but inevitably, once you take some losses, panic sets in and in most cases, risk is yet increased with the absolute belief that brighter days are around the corner and you must now make up what you recently lost... and there we go down the rabbit hole.

I read a trading book that once spoke of a man who turned $10,000 into $1.1 million in two months. Every time he won a trade he would increase his risk. Each time he lost a trade, he also increased the risk. He was trading in a trending market where he was winning 75% of his trades. What do you think happened when the trend was over and price action slowed? Well, he started taking large losses and after each loss, what do you think he did? Well he made bigger bets thinking his previous performance would be mirrored the second time around. Well in about 1 month, he was back to $10,000 and became enraged, blaming the very system he used that previously grew his account exponentially.

Markets trend and then they slow. It has always been that way. When you win or lose, move on to the next trade with a level head and keep that ego at bay. In the long run, you can make a lot of money and become wealthy. But it takes time. Brick by brick you will build that castle but don't try and take shortcuts in trading. You will be left with nothing, with a confused look on your face.

Money management/risk management is probably the most important aspect of trading. Realizing and calculating how many times you win compared to how many times you lose and at what amounts, allows a trader to understand how much he or she should risk on each trade, and then when to gently increase those bets, while keeping risk the same. That way, win or lose, in the long term you understand you should be okay. Also, this allows you to understand the big picture. Medium growth is so much more sustainable than fast growth.

Remember Why You're A Trader

Greetings y'all. It's been awhile since my last post. My apologies as I was recharging with my amazing wife over in Europe. Brings me to sharing this very important point. Every trader needs to remind themselves why they trade. Why they deal with the stresses of becoming financially independent via the most challenging industry in the world. It takes a lot of work, it sucks at times, and takes an extremely long time to experience sustained success. Now the good part... Once things turn around, reward yourself. Pay yourself and the people around you a little. Do some things that allow you to appreciate the fruits of your labour. Yes it's a business but always remember at the end of the day, it's about increasing the quality of life, not sitting in front of computer screens 365 days a year. Take a break sometimes so you can enjoy your successes along the way. You'll be glad you did. Cheers.