Tough enough?

Financial trading of whatever type is a very difficult ‘game’ to play for a number of reasons. When you’re faced with an insurmountable obstacle, when you’re losing, when you feel rotten at doing something for months on end – especially something new and well outside of you usual zone of comfort – what do you do? A lot of people will say to themselves, “I can’t win.. I don’t have what it takes.

They are actually right in many respects. But what is it that they, ‘don’t have (what it takes)’? What confronts them is actually not physical obstacles. If it’s not ‘physical’ obstacles, what is it? It most often is in the non-physical domain which I will call the psychological. It’s what’s referred to in trading as ‘trader psychology’.

Losing at something is terribly unrewarding, psychologically – I think most will agree. People in general tend to assess losing by the number of losses made and the size of losses. So if they’re losing loads on 8 out of 10 trades, over the course of a year – say on demo accounts – then that is a big signal for most to leave it off. What a lot of people don’t do is say, “What am I not doing right? What were my mistakes? Am I repeating mistakes? Am I acquiring the necessary knowledge, skill and experience (KSE) to beat this thing?” And can they modify what’s not right to make it better. Working on yourself and your thinking is one of the hardest things to do. Working on (or at) something that is terribly unrewarding is equally hard – even if one knows that others have been able to make it rewarding.

I’ve often referred to learning to play chess in other places – it’s a difficult game to win at  in the intial stages. Most people who learn the basic moves and strategies, lose early on, against many other seasoned players. For that reason most noob chess players remain recreational players and plateau off, hardly ever reaching tournament level of skill. And that’s fine – I’m not saying everybody who learns to play chess needs to reach high levels of skill. I’m only explaining that losing is part of learning and it can happen for years, if one is on a path to achieving excellence. But learning means learning new skills and learning from mistakes. Those mistakes are nothing to do with the chessboard. They’re all to do with that non-physical thing called the mind.

Successful traders are not born with a gift. The Turtle Trader experiment – though it involved a selection process – showed that people who were not born as traders could learn to trade and be profitable, if they adopted a certain set of rules and if they stuck at it. So being born with a gift for trading, is not something I will accept. I’m not saying that people who are profoundly mentally deficient at birth can do it. That’ll be like saying that someone with an IQ of 40 can become a rocket scientist. I’m talking about people of average intelligence – they can learn to do it and be successful. But learning is not just about reading a book, going on a course or being educated.

In a previous post – Financial Trading – what’s that? – I referred to the ‘enemies’:

  1. Lack of time
  2. Lack of sustained motivation over a long period.
  3. Lack of dedication and commitment.
  4. Lack of determination.
  5. Inability to withstand failure after failure (ideally on demo accounts).
  6. Inability to learn new skills.
  7. Inability to learn from mistakes, and stop repeating them. People often learn what their mistakes are but repeat them for quite some time, then blame some external thing.
  8. Having a go and hoping to win. Hope is the enemy in this. The markets are there to kill hope – and it does so very quickly and mercilessly. If hope would win the day, then everybody would do this and be millionaires.

These are not the ‘enemies’ out there. These are the ‘enemies’ within. How do you conquer the enemies within? ‘Time’ may seem to be a physical obstacle – as it is something measurable – but for a majority of people it is about time management and priorities. The latter are not physical obstacles.

Getting tough means being brutal on mistakes, learning about your own psychological insides and reshaping your own psychology by interacting with the markets. It is more about discovering yourself than about discovering how to use ‘technical indicators’ or to apply ‘fundamental analysis’. Even successful traders fall into huge patches of losses. The ability to pick up one’s self and keep going – resilience – is a big big factor. Resilience is a psychological strength that can be learned or developed. I do not imply that it’s easy to learn.

All the working on one’s self and acquiring new skills can be achieved on free of charge/obligation demo accounts. There can be no loss of real money on demo accounts – I need to state the obvious. So the physical means to obtaining skill and competence to become a successful trader can be achieved for almost free (i.e. I’m not counting cost of things like electricity to run a computer and cost of internet access etc).  Demo accounts can be blown up and recharged repeatedly. What’s the limitation therefore? Quite simple – the enemies within.

If you want something bad enough, you’ll work on it really hard. If you believe that by ‘hard graft’ you can do it because others of equal or lesser intelligence can do it, then you’ll do it. If you can toughen up using a strong belief that you can do it  and work on yourself – then do it. If you think you can’t – then don’t.

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