Just a quick blog post today, the sole purpose of this post is to try and save you some time if you’re currently pursuing a trading career and struggling with it, in an effort to get you to work smarter, not harder.
Regarding a trade – how often are we left raising our hands to the sky, wondering what the hell just happened and how could we possibly have been so stupid? You know that feeling of pure helplessness, where your greed & ego literally, physically, prevent you from pressing that button to stop out of a trade, because “well I didn’t lose yet, if this piece of crap stock would just reverse like it’s supposed to (because I say so), I can avoid taking this loss and everything will be fine.” You know what I’m talking about.
It’s an all too common feeling, and we’ve all been there.
If you’re anything like me, the beginning of your trading journey is filled with ups and downs in terms of motivation level. There were times I’d read something inspiring and then feel super motivated to go off on a 10-hour charting spree where nothing could stop me from world domination and becoming the greatest trader alive. And then other days after some bad losses I’d close my computer after the session and you couldn’t pay me enough to even think about looking at a chart. I was going to eat an entire bag of Cooler Ranch Doritos & order Dominos while I wallow in my sorrows about how hard this game is and why I do this to myself.
It’s an all too common feeling, and we’ve all been there.
Where am I going with this? Here’s where I’m going with this: You need to stop doing BOTH of those things. The days you chart and study way too much are just as bad as the days you do nothing. What do I mean by that? I mean they’re both horrible time management methods. You need to work smarter, not harder.
There will be about 500 times along your trading journey where you are 100% convinced you’ve “figured it out.” and you’ve “turned the corner.” Don’t have these thoughts. Don’t think you’re going to wake up one day and just magically know how to trade and it’s green days and blue skies from now until forever. You’re just setting yourself up for the next down of the up and down roller coaster that is becoming a successful trader.
Causing yourself to go through these extremes, where you’re super high about trading and then super low when the high fails for the 30th time – this promotes and allows for emotional volatility, the very thing we’re trying to eliminate in all aspects of our trading.
The harder you try to shorten your path to trading success, the longer it will become.
By this I mean that if you’re struggling, don’t think the answer lies in burying yourself in 80 more hours of studying and charting and technical analysis boot camp. It’s not. The problem is you. Not the charts, not your trading software, not your short borrow list, not your setup or your monitors, it’s you. Just you.
So my suggestion is this. Next time you’re inspired to go off on a mission to trading world domination, don’t start with charts and patterns. Instead, focus your time on finding a good trading psychology book. Start with something that addresses the root of all your problems: your own head. Tackling and mastering yourself will prove to be far more effective than digging into old charts.
I know of one “trading education” program where you get a giant packet of old charts from between 2009-2012. I scratch my head when I see that….who the hell cares about a bunch of old charts from a few years back? How does that help you?
The market is constantly changing, as are the individual stock charts within it, and to find longevity & success you need to develop a sense of fluidity and flexibility to work with them. The momentum stocks of tomorrow do not care about your knowledge of 2009’s charts. Is reading into that stuff helpful? Sure it can be. But don’t make it your primary focus – trying to pack your brain full of past technicals will not help you grow your account.
So bring your focus away from “I need to study more charts. I need to try harder.” The process of learning trading is a slow one, and the only way you truly accomplish this is not through studying things that have already happened, but through logging hours and screen time. Just sit in front of the computer and watch price action each day. Even if you’re confused, just watch it. It will slowly start to make more sense over time, just trust me on that one. Get a brief education on technical analysis basics, which most of us already have, and then focus more of your time on psychology and the mental side of managing your trading. That’s the best way to do it in my opinion. Once you’ve proved you are able to control your emotions in a trade, then and only then can you branch out and focus on new technicals & patterns etc. Not the other way around. This is not the chicken or the egg, it’s non negotiable that a stable mental foundation comes before all else in trading.
Steve Burns is an accomplished trader who’s read and analyzed over 400 trading books in his 20+ year trading career, and these are the three trading psychology books that he felt were most valuable and influential to him on his journey – so think about reading these, if you haven’t already.
I’d like to wrap up todays post with a quick analogy regarding preparation in your trading journey.
Imagine you were going off to fight in a war. If you had to go to war, you can read all the books about it that you want, you can go through boot camp and basic training and run simulations to “prepare” you for it…but there’s really nothing like it but the real thing. No amount of prerequisite work can actually prepare you for the true reality of a situation like that until you’re in it and experience it first hand.
The same concept applies with trading. You can read about it and look at past charts all you want, but until you actually get into it, get involved in trades with your own real money, experience the emotions and pitfalls first hand, nothing can truly prepare you for it. You just have to start doing it. And grow from there in a trial and error format.
You will experience losses in the beginning, which is why I am stressing so much in these blog posts that you focus on the mental side and the psychological warefare aspect of this game. If you’re able to control your emotions and the psychological side, it will help you avoid blowing up your account and allow you to stay in the game long enough to get the hang of it. But you need to stick around long enough to reach that point first. That’s where most fail. They don’t fail because they can’t do it – they fail because they just do it wrong the first time, and run out of money before ever giving themselves a chance to succeed.
So if you find that you’re struggling – think about putting the charts and moving averages down for a while, and do a little self reflection about your shortcomings as a trader and your mental game. Improving that will improve everything else exponentially. Look into it.