What guides a trader to the next level? Someone once posted a sample of Szevenâs trades when he started out, (very small consistent profits), then jumped ahead a couple years to his post of attaining a major benchmark of $1 million on the year. The poster was pointing out that Szeven didnât get from point A to B in a single step. Does the progress occur in small graduated steps? Or are there long periods of consolidation (steady consistency) followed by aha! moments that move one to the next level?
I invite highly successful traders to provide their input on this.
Large losses have left demons behind that still haunt my confidence. I started day trading in July and I jumped into the game with pure confidence in my strategies (paper-traded them for a couple months). I didnât hesitate to put on a trade when the signal was there. I had a great starting month (almost $18,000 in 3 weeks), only to wipe out almost all of it in a couple days. I traded more cautiously, rebuilt confidence, only to blow it again, and again. My confidence eventually eroded, but I had no idea what else Iâd do for a living. I reached the point where there was no more money for tuition, so I had to fight the demons for some time and ease my way back into the game, far more cautiously.
I know intellectually that if I trade my signals and utilize strong risk management, I will not lose. 90% of my large losses were profitable at the start and I failed to lock in profits (or, at the very least, a break-even exit). I expected the price to behave in a certain way and refused to believe it would not at some point do so until finally a breaking point was reached, far beyond any expected profit.
This is critical: None of my trades were bad trades on the front end; however, many of them were managed badly.
It occurred to me this weekend (and this was an aha! moment) that it isnât the trades you put on that can hurt you; itâs the trades you donât take off quickly enough. I realized that I could trade every one of my signals with a stop based on violation of my expectation and my âedgeâ puts the odds very strongly in my favor. I can confidently put on ANY trade that sets up for me, just as I did when I started out, and strong risk management will protect my capital.
I know all this intellectually. But just as an athlete may perfect a move by practicing it again and again, until s/he implements the move again and again in the heat of competition, there is no real progress.
I just finished Mark Douglasâ âTrading in the Zoneâ last week. He uses the analogy of a small child who approaches an unfriendly dog and gets bit. The child now has a core belief that says âAll dogs are dangerous.â Later, the child sees other children having a blast with a friendly dog. S/he has a desire to play, too, but the core belief still drives the fear. The child sees now that all dogs are not dangerous, yet a very long time may pass before the child gets the courage to approach the group and play. The desire to play must be strong enough to overcome the core belief that all dogs are dangerous.
Now, I stand at the edge of the field watching the fearless traders who post the big numbers, and I want to play, too. Can my desire to play at the next level overcome the old demons that haunt me with irrational thoughts that prevent me from confidently taking all my strong setups, or perhaps missing entries because a setup isnât absolutely perfect and I place unrealistic limit orders?
âTrading is intrinsically simple. Not easy, mind you. But very simple.â â Oliver Velez
