Often times, I’ve witnessed new traders enter the field and the thing they’d obsess most about is developing a “system” or method of some sort that will generate consistent profits. I was much the same way when I came into the game, but in all truth, that’s only about 10% of the battle of trading. In this article, I’m gonna, through my own experience(s), tell you what I think is the hardest part about being a trader. Be prepared for the pure, unadulterated truth of becoming a trader could be like.
What’s the most difficult part about being a trader? The answer is: Execution.
I am not exaggerating when I say that I developed a method in which I was correct in 85-90% of my calls on the market, be it intraday price moves or moves based on my view of the daily charts. By the way, I’m a pure Price Action Trader, meaning that my only consideration is the prices themselves. Anyways, there were times when I’d sit in front of the screen, and market-watch on a 2-minute or even a 5-minute chart and would be able to tell you exactly what the market is about to do and would be right, again, 85-90% of the time. Let me digress for a moment and say this — I’m not setting the stage for the selling of any eBooks, coaching, or any of that stuff by mentioning the precision of my calls on the market. I will not be selling a damn thing, so please don’t take this as such.
That being said, the same goes for me watching the daily charts. I’d perform my analysis and would correctly call a major move and be dead ass accurate. In fact, if you follow me on twitter (@MoneyTrust_), you would probably see some of these calls that I’ve made over the past couple of years. I even called the crash in oil prices and called the rebound (you can see where I called the rebound here: Analysis of the Crude Oil Market). There was also another call I made on Amazon (AMZN) stock. If I remember correctly, AMZN was trading at $248 per share at that time. I called a rise in the price of AMZN stock and it went on to rally more than $200. There was also a call I made in wheat. I was bearish in wheat and took a short position and it turns out that I was right. There were also several other major moves I called in 2015 alone but that would take another article to outline.
Even when I was wrong about trades, my method worked in one or three ways. 1) Keep me out of that trade. 2) Exit the trade with a small profit. 3) Exit with a small loss.
Before you think that I’m bragging about my method, here’s the kicker in all of this. Of all of the trades I named, I acted on only ONE of the trades mentioned, that being wheat (I acted on several others but I’m discussing only those mentioned). And even then, I exited the position with a profit of $700 per contract but if I would have held on to my position as I originally intended, my profit would have been a little more than $4,000 per contract. Even on my intraday calls, I rarely took positions and when I did, I was usually right. To put it plainly, I was able to call the market with a high-degree of accuracy but I had trouble acting on my conclusions. It was as if I didn’t believe in my method…even though I was right most of the time. To show you how severe my trading defect was, I’ll say this: if I acted on my information, I’d probably be a millionaire by now. The type of moves I’d forecast were the types that could quadruple my capital in a week’s time! Nevertheless, my trouble was in taking the trades.
For a while, this drove me into a deep depression. Here I was, a guy who’d set out to achieve great wealth and I’d created a concrete plan to do just that and I was having trouble executing my plan. My desire for wealth was not a pipe dream as I had a plan that could accomplish that for me in a relatively short period of time. During this depression, however, I got to thinking objectively about all of this and I realized that:
1) I was playing with scared money. It wasn’t that I was under-capitalized, my issue was that I wasn’t willing to lose. I couldn’t stand the thought of the market moving against me even in the slightest. A dumb ass way of thinking, I know.
SOLUTION: I came to the realization that I have nothing to lose. The only way to gain what I truly want is to lose what I currently have. If I want a better life, I had to lose the current comfortable life. Worrying about the money, as it turned out, was simply a way to remain in my comfort zone.
2) I thought entirely too much about past losses. When I first began trading and didn’t know anything about the markets, except how to buy and sell, I took some pretty dumb ass trades and as a result, took losses that were great in proportion to the amount of capital I had. We’re talking about losses that vaporized 50% of my capital in a single trade!
SOLUTION: What I had to understand was that back when I was GAMBLING in the markets and taking those mind-numbing losses, I had no plan whatsoever. Now I have a proven plan that’s been both back and forward tested.
3) The uncertainty bothered me as well. It was almost as if I wanted to KNOW that I was gonna be right, which is impossible in a probabilities game such as trading.
SOLUTION: I had to grasp and fully accept the fact that I was playing a probabilities game and that anything could happen. In fact, a rereading of Mark Douglas’ Trading In The Zone helped to reinforce this idea.
4) I then had to ask myself what were my REAL goals in life, as in my subconscious desires. On a conscious level, I wanted to be a successful, wealthy trader, but my subconscious desire was obviously something different. Ya see, during most of my life, I’ve never had much money. I’ve never held a job that pays over $25k a year. When I would make great money, it was always the result of my entrepreneurial efforts. For example, when I was 23, I was making upwards of $50k+ a year as a freelance graphic designer. But, here I am now with a concrete plan to make millions of dollars, and it’s almost as if I had a difficult time convincing myself that I could do it. I determined that BELIEF is what it boiled down to.
SOLUTION: Of all of the previous problems listed, this was by far the most difficult because it may be the root cause for all of the others. The way I got around this was to first, reread a book by Maxwell Maltz, MD titled PsychoCybernetics. I read that book many years ago but it’s message went right over my head. During this second reading, however, I understood exactly what he was saying. I realized at once that my problem was that I identified myself with my past self instead of with my future self. In other words, I continue to see myself as that guy who didn’t have much money growing up and so forth. By reinforcing that self-image, the subconscious mind will see to it that I remain as that guy who never made much money. It mattered not that I had a plan to make millions. As long as I continued to view myself as being someone who doesn’t really have much, that would continue to block me from getting more. A sort of self-sabotage, I guess you could say. The obvious thing is/was to change my self-image and to believe in myself and my abilities. I realized that when I thought of myself as I intended to be in the future, taking trades was no problem, I’d guess because there wasn’t the mental blockage there to keep me in my comfort zone.
Conclusion: As I’ve shown, anecdotally at least, coming up with a trading plan is only a small part of the battle in becoming a successful trader. The real struggle in trading is at least 90% mental. I remember believing that the more accurately I was able to analyze the markets, the sooner I would march on to trading success but not even close. As a matter of fact, that quick trigger to put on a trade that I had during my gambling days as a beginner, was the same quick trigger I was dying to get back since I now had a plan. Contrary to popular belief, one can definitely come up with a trading plan that is right majority of the time and that produces low-risk/high-reward trades, but mental blockages can render that plan ineffective. That being said, I hope that my story will help those who face similar situations.