Jim is a novice trader who is deeply frustrated and ready to give up. He’s read all the trading books, followed all the trading “gurus,” and worked tirelessly day after day. Despite all his efforts, however, his account is almost completely wiped out. Jim’s experience is common. When they start out, novice traders are extremely excited. They dream of success and the recognition that huge profits will bring. Some achieve early success, but many soon discover that achieving consistent profitability is elusive. Many are drawn to trading, but few can trade profitability. The winning trader is a special breed, a person who is highly motivated, but at the same time, he or she is realistic and able to persist in the face of adversity.
It’s easy to get yourself “psyched up” when you first start out trading: One can merely convince himself or herself, “All I have to do is apply myself and I’ll achieve profitability.” This can often be a useful positive attitude, but the “power of positive thinking” doesn’t usually go very far in terms of achieving trading success. It makes you feel good in the short term, but then you find that mere hard work and persistence doesn’t pay off. It is necessary to use sound trading strategies, expose yourself to a variety of market conditions, and hone your trading skills. Successful trading requires talent, and there’s no way to develop one’s talents without extensive practice.
Although a positive attitude is useful, a healthy skepticism is paramount. When it comes to trading, you can’t believe anything you read or hear. Even when a trusted mentor teaches you the “conventional wisdom,” it is essential to remember that so-called conventional wisdom is true only when it is true; it is false the rest of the time. History in the markets only repeats itself when it does. And the only time you actually know that you’ve stumbled upon a profitable trading strategy is when it, indeed, produces a profit.
Convincing yourself you can master the markets with sheer determination and willpower isn’t going to get you very far. You must accept the fact that, in the end, trading is like a game. You’ve got to take it seriously on the one hand, but learn to enjoy the process on the other. Traders take the game seriously in that they acknowledge that real money is on the line and it is likely that real losses can wipe out one’s trading account. They address this issue through risk management.
On the other hand, they know that no trading strategy is foolproof. They realize that despite all their efforts, it is quite possible that some unforeseen adverse event can go against their trade, or that market conditions may just not be conducive to one’s trading plan. That’s where a happy-go-lucky attitude is useful. It is vital to view trading as a sport. If you score the winning point, fine. But if you miss it, don’t get too bogged down. Just pick yourself up and try again.
Eventually, with enough practice and experience, many novices will move into the realm of the seasoned professional. It is not going to happen overnight, however. It will take time and practice. That’s where the motivation comes in. It is easy to stay motivated for a short time if you think the payoff will be large and relatively immediate. But trading is a profession where years can go by with little progress. Some seasoned traders warn that it may take several years to achieve consistent profitability.
Over the years, a great deal of money will be spent on commissions, losses, apparatus, and instructional materials. The would-be professional trader isn’t fazed by it all, though. He or she views the money spent on trading as similar to what any professional spends on college tuition. He or she believes that eventually, his or her time and effort will pay off. The winning trader is highly motivated. He or she admits that trading is a challenge and that success is far from assured. Despite this harsh reality, the winning trader persists until he or she achieve consistent profitability.