Patience and Trading: Making Money Consistently is Hard
- There is no clear cut way to make money from trading, which is why most private traders lose money. Trading is definitely not the easy-life, loads-a-money kind... I believe so many start trading in the belief that they will have fantastic riches with very little effort. Sadly they will definitely be in the 80% that lose and give up. Most accounts have been blown because of the 'account killer' mindset. For myself it took me quite a bit of time to stop losing like an idiot!
- Becoming an expert trader does not happen overnight. It takes years of practice - when you enter the stock market you need to realise that you're up against some of the best people in the world operating in very complex markets. It is easier to lose money than to make money on a consistent basis.
- Trading is very fickle. Just like a restaurant you are only as good as your last trade. Don't ever take success for granted...I should know...having gone straight from novice to making a lot, then having a bad few years, I'm now clawing way back up. You have to treat it like a business and invest substantial hours into it.
- Don't think that just because you have read books on technical analysis and have familiarised yourself with the patterns and signs, that it will automatically follow that you will make money from trading. Imagine how difficult it would have been trying to become a plumber from just reading books. I'm not saying you couldn't become a plumber (of sorts) from reading and trying things out and practicing various skills of the trade over and over again but imagine how many cock ups there would be before you got it right. How many times would you have lost your temper and threatened to give up? How much money would you have lost before being able to do plumbing jobs consistently profitably? That's the journey we are on. We are up against pros with experienced mentors and bottomless pits of cash. Brings things into perspective just how difficult it is.
- The main problem with books is that you cannot ask questions in order to test the strategies and check understanding of the subject matter. Add to that the fact that simple strategies make money and imo an intraday technical book would be 90% about money management and psychology - only 5-10% on strategies. So two and a half chapters and the book is finished. The real fact is that you can't gain experience from books and as such I believe experience and practice is a far more important ingredient for success (in anything not just trading) than the technical information and methods. The trading methods can be acquired in books but it is experience that allows us to see the things that really matter and I'm not convinced that the information from a book can ever act as that 'filter'.
- A very important principle to remember when trading is that that which is easy to do is almost certainly the wrong thing to do. It is easy to take your profits when you have a big winner and that is why it is wrong. 90% of traders take profits way too soon because it is the easy thing to do and because of this they never generate the handful of big winners that are required to pay for all the small losing trades. 90% of traders lose money at the end of the year because they do the easy thing. If we want to be part of the 10% that makes money then we have to do the hard thing. This is the true essence of being a contrarian trader.
- Patience is one of the key ingredients in my trading strategy, it stops me rushing in to things which in current market conditions helps me... Remember that knowledge is important, but patience and discipline are more important and tend to be harder to come by. Even if your system requires you to trade short-term you shouldn't be jumping in all the time believing that every move has to be traded because there's money to be made on every trade... (actually there is but that doesn't mean you can monetise it!).
- So patience guards against overtrading in the markets. Patience for a trader is an invaluable attribute to possess; the ability to wait for a trading setup or market opportunity and the patience to keep a running trade open without interference will surely help you create the gains you targeted. In fact, you can greatly improve your chances of success simply by having the discipline and patience to wait for the right opportunity. Take your time and only go for the best of opportunities making sure that the elements of your trading strategy are satisfied before entering the trade. Never worry about missing the boat and accept that waiting on the sidelines is a vital part of the game. Set strict targets for profits and losses and preferably the trade should offer a favourable risk/reward ratio.
- All the best traders make mistakes. The guys who make the most money, are those who maintain a position and stick with it if they get the direction right of course. The skill is limiting your losses and running your winning trades. Never fund a losing trade but also never keep too tight a stop. How many of us can say how much we would have made if only we had held on just that little bit more?
- And don't give up. Keep plugging away. An experienced broker once told me that there are quite a number of good analysts in the City, but very few of them can manage money. At the time I didn't understand that but in fact he was very much spot on. As you evolve you will find out the real problem that traders face : THEMSELVES. This is where the journey becomes interesting.
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