When I started trading, I thought it was the best thing ever. The buzz of the financial markets, the volatility, CNBC and Bloomberg, expert opinions, earnings season, FED days, triple witching expirations, Non-Farm Payrolls were but a few of the items that I soon got familiar with.
My first trade was shorting the Dow. I was on a margin call the day after. I guess you could say I was a bit unlucky, or inexperienced. I shorted the Dow the first time it hit 10k. It went to 11k within days. Lucky for me it was £2 a point.
I didn’t learn anything from it. Instead I just ploughed more money into my account, money I didn’t really have. I made some, but mostly I lost it. On one occasion I lost £7k on a trade in an account I had forgotten all about. How amateurish.
I am lucky enough to have worked on a trading floor. People often think that the “traders” on the floors are good traders. They rarely are. More often than not they are brokers, and they rarely trade actively. Positions are often handed to them which then require risk management. They can be very good at that. I saw some phenomenal brokers on the floors, yet somehow they could never trade their own money. I don’t think it is for the lack of skills. More often it is just a question of dedication of time.
My own track record from my time on the floor was nothing to shout about. I rarely had time to sit down and really focus on the trading. There were always meetings to attend, phone calls to make, colleagues to talk to and just general office routine.
Today my trading life is very different. I firmly believe that I would never have traded as well as I do today, had I not been forced to sit down and do it every day for 10 hours.
Since leaving corporate employment, what has changed? The answer is simple. I learned to deal with all the little nuances which make up a trading day. Take for example today: an awful trading day. I missed the first two trades of the day, both of which would have enabled me to reach my target for the day, because I had an acute case of food poisoning. My first trade was a loser, which I had to agonise over for an hour. The second trade was simply a poor trade. By then I was down 3%.
In the past I would have “doubled” up to make my money back. I would have sought out trades, which may not have spoken to me under normal circumstances, but which I know I would have been compelled to execute to get my money back.
99.9% of all traders get less risk averse when they are losing, and more risk averse when they are winning. You want that in normal language? When you are losing, you should bet less. When you are winning, you should bet more. The vast majority of traders do it the other way round, including some high profile traders who lost fortunes for their clients and employers.
Today I no longer panic as much, when I have a couple of losing trades. It has taken me a while to get there. The third trade today made back a lot of the losses from the first two trades. It was still a losing day, but it felt good to come back from the abyss, without breaking the rules. Forget the money. It was the process that felt good. The money comes from doing the process over and over.
You see, in some sense, trading is quite repetitive. You process the information and you execute the same kind of setups over and over. The money comes to you once you have accepted that it is like flipping a biased coin. You have a set-up and the odds are in your favour, you just have to keep flipping the coin.
It is hard to write an article, which isn’t a narcissistic “look at me” expose, only designed to feed your own ego. Invariably you follow the classic “hero’s journey”, with the obstacles to overcome and the inevitable victory. So hopefully the following paragraph will shatter that image:
Trading is a profession like any other. The only difference is that in this profession you can also lose money, while in most other professions you don’t. I can’t see Alex Ferguson asking Rooney for a cheque if he played poorly. I have had many losing days, many blown up accounts, and many days where I wanted to kick the nearest lamp post repeatedly. It never came easy to me.
I don’t know anyone who was good at it from the beginning. I know many traders who were rubbish at it in the beginning, but who then found their way. Two mentors spring to mind.
The first one made a heap in a bull market, but then lost it all in the bear market. However he had the good sense to look back at all his old trades, and learn from them. He came back from the brink, and is still trading today, 46 years on.
The second followed a similar path, with a crushing loss, which compelled him to start all over and treat his trading like a business. Both of them will tell you that trading is relatively easy. What makes it hard is when you are in trouble, and you refuse to accept that you are in trouble.
So if you are in the situation where you are thinking that this business is not for you, because you haven’t made your first million immediately after taking that expensive weekend course, then take a step back and remember that by and far everyone else is in the same situation. The only way to move forward is to treat trading as a serious hobby or profession, and dedicate the time needed to master it. Trust me when I say that it is not the actual business you have to master, it is yourself and your emotions which you have to master.
Any news, opinions, research, analysis, prices or other information contained on the trading.co.uk website are provided as general Market commentary and do not constitute investment advice. Trading.co.uk is not liable for any loss or damage, including without limitation, any loss of profit which may arise directly or indirectly from use of or reliance on such information.