*“I’ve never had a losing trade. I’ve only ever ran out of margin.”
Over the years of trading, learning, and mentoring other traders I’ve come across traders who are naturally gifted and there was no doubt that they would succeed, while others were obviously bound to fail often time and time again. Some can learn new techniques and adapt fairly quickly while others refuse to let go of preconceived paradigms that block them from realizing vital changes in market conditions.
The key differences are almost always in the personality of the trader with traits that are changeable through self denial of the tendencies that cause failure as well as discipline of method.
I’d like to explore some of these differences starting with demo (virtual) trading.
There have been numerous discussions in this forum with traders on both sides of the fence pushing for the pros and cons of demo trading.
Some hold that key elements of successful trading techniques can and should be refined in demo trading before risking any personal funds.
Others hold that demo trading does very little to mentally prepare the trader for real life conditions and therefore only serve to familiarize the trader with the platform.
What causes demo traders to fail to transition to real accounts?
If we look deep enough, we can pinpoint key psychological issues that prove to be the catalyst of failure in this area:
The “virtual” funds have no mental and financial bearing on the demo trader.
· They cannot pull these funds from the account if needed to sustain themselves.
· If and when they margin call the account, they can easily reset or sign up for another account.
· They have invested no time in obtaining these funds through physical labor.
They are directionally biased.
· They feel comfortable taking positions in one direction and often justify their undying belief that it has to happen by fundamentals they don’t really understand.
· They enter opposing positions to their paradigm belief with fear and trepidation often taking profits too soon or settings protective stops too close as a result.
They don’t believe in their own ability to transition to real trading AND they fear failure and loss.
· Deep down they doubt their own ability under fire and will often hide this by claiming that price feeds for demo accounts is skewed to favor “blind luck”.
Before going any further, let’s examine the bullet points:
The “virtual” funds have no mental and financial bearing on the demo trader.
They have immediately recognized this as “fake” trading therefore it does little to promote them to their end goal: getting rich. They don’t approach demo trading as a real exercise of developing both skill and mental conditioning.
In football (American), players spend an enormous amount of time in practice.
Yet not one game has ever been won during practice. Or has it?
The Dictionary is the only place that success comes before work. Hard work is the price we must pay for success. I think you can accomplish anything if you're willing to pay the price.
Players run drills over and over again meticulously practicing every detail of a run route; learning the juke (spin move) in each direction to offset the opponent. They learn and practice where and when they should expect the ball to either be handed to them or to expect it to be thrown to them. They know full well that they will not be the recipient each time a play is called, but nonetheless they are expected to run the play exactly as practiced and with the determination and enthusiasm that they are the only intended receiver.
When a trader consigns themselves to the mental attitude that because “virtual” funds are no more real than dollar bills drawn on construction paper, they have immediately and with major consequence aligned themselves with failure. Because they have no ability to sustain life or advance wealth, it’s easy to hit the reset and start over.
In like, any football player who disregards practice as pointless because his skills are better refined in the real game and resists the often grueling repetition of running drills is not playing for the team, but only for himself.
In relation to the trader, a large percentage are trading with one sole purpose, to get rich as quickly as possible. This is flat out delusional greed that serves only to bankrupt the trader both financially and mentally. Successful trading means setting realistic and rational goals.
“The quality of a person's life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor.”
(Work + Time) = (Success + Perseverance) = Wealth
The order of this equation is not reversible in any fashion.
“Leaders aren't born they are made. And they are made just like anything else, through hard work. And that's the price we'll have to pay to achieve that goal, or any goal.”
“Once you agree upon the price you and your family must pay for success, it enables you to ignore the minor hurts, the opponent's pressure, and the temporary failures.”
The second section dealing with demo trading:
They are directionally biased.
This is something that very few traders are aware of. They automatically assume that once you learn to trade that taking a SHORT is just as easy as taking a LONG. For the few who already have the mental discipline and skill, this is very true. Whereas for those who don’t, going “against the grain” of their mental bias is often an event they liken to mental torture.
If they are mentally biased toward LONG positions and they actively trade the EUR/USD, they will often cite reasons why they insist on LONGING perceived bottoms repeatedly while side stepping the enormous wealth available while trading with the trend due to that bias. They will pull headlines from any website or currency analyst that immediately fits their paradigm and puts at ease the mental anguish of denying their obvious shortcomings.
“It's easy to have faith in yourself and have discipline when you're a winner, when you're number one. What you got to have is faith and discipline when you're not a winner.”
Being directionally biased often leads to placing opposing position STOPS too close, not allowing enough room for price to move before being hit. Often they will take profit immediately once positive because they fear that at any moment, the demon haunting them caused by their own directional bias will suddenly appear and they will lose.
They will often quote, “No one ever went broke from taking profit.”, while realistically and historically the opposite is true. You can go broke by taking profit too soon just as easily as you can by not using STOPS altogether.[/font]
It has similar symptoms to traders who have a strong fear of failure.
“The real glory is being knocked to your knees and then coming back. That's real glory. That's the essence of it.”
Fear. We say the word so often we lose the impact is has on us.
Fear in relation to trading is in direct relation to pride. We fear losing because we fear loss. We gloat and boast of our successes, but rarely admit to our losses.
Fear can manifest from a sense of preservation. Not only of life, but of perception by others.
The most highly admired traders often suffer from a sense of perception preservation. Destroying that perception would be akin to immediately being labeled a failure. Being viewed as a success, however, feeds our ego and pride and hastens our likelihood to hide our failures the next time around.
Granted we can’t obviously stereotype all highly regarded traders as fitting into this peg, but there are certainly those who do.
Fear of lose is indicative of attachment to the monetary value of the money being traded. In trading, you must stay impartial to the monetary value of money otherwise it will cloud your judgment and cause poor trade performance.
Fear is an emotion that if allowed to fester, will birth greed. Greed will birth more fear and then the trader is defeated wholly.
“Success demands singleness of purpose.”
Singleness of purpose. This statement implies that emotion and attachment from the monetary value degrades purpose. The successful traders mind is concerned with one purpose: consistent growth and the preservation of capital.
“Confidence is contagious. So is lack of confidence.”
When a football team enters the field of play, each and every player has been mentally prepped by the coaching staff and each other to believe that the game is already won even before the coin toss.
No successful foot ball team has ever walked on the field admitting the possibility of defeat.
Why as traders are we any different?
You must believe that with each trade, you will be successful. Belief is a fleeting mistress. She can empower you or leave you feeling helpless in her absence. She retreats from us at the slightest hint of doubt.
I will say this much honestly. If you cannot empower yourself through belief in your ability, then you should not be trading. And by ability, I don’t merely mean the ability to trade. Ability applies to self control, self denial, confidence, humility, reason, and calm.
You should plan each trade with confidence while maintaining a reverent humility before this beast that is the currency market.
If you are not successful with the trade, then make the trade a learning experience. Don’t rush into another trade before you have examined the play by play to determine where weakness is hiding.
-What did I do wrong? Analysis? Entry? Stop Level?
-Was the market not in the proper state to enter a trade?
-Did I violate my own rules in taking this trade?
-Did I underestimate my leverage Vs. the market volatility?
Successive loses cannot be explained by market noise or volatile fundamentals. At some point the blame for failure needs to rest on the shoulders of the only person responsible: the trader.
“Once you learn to quit, it becomes a habit.”
It’s hard to admit fault and responsibility. Especially if you’ve enjoyed a string of successful trades by skill or just by dumb luck. We’ll quickly blame the market, blame the broker, blame the “lagging” indicators for not allowing us to succeed.
Some are so adapted to losing that it comes as a complete shock when they do win. It causes them to become overjoyed and celebrate every small victory.
The trader does not accept defeat. He recognizes it and learns from it when it comes, but it should never be your constant companion. He stays guarded against it through diligence and self denial of the tendencies that feed defeat. A well fed enemy is a hard enemy to do battle against.
“Show me a good loser, and I'll show you a loser.”
If you opened a trading account assuming that the market was obligated to treat you fairly, then you bought into a dream that doesn’t exist. From the start of your first trading day till the end of time the market is stacked against you to succeed.
But where do we get the idea that the market is fair? What makes us think that trading is an easy endeavor that brings success and leisure?
It’s true that it is peddled by numerous websites claiming easy profits and life of luxury and leisure. And for a few hundred dollars you can buy into this market and start making money today!
While there are cases of people who have made fast, easy money and become rich according to a recent CNBC article that number is less than .09% of the total wealth of the country.
The other 99.01% earned their wealth through hard work and discipline. They created something you bought, they traded something you bought, and they grew something you bought.
If Bill Gates had believed IBM’s comment in the early 1980’s that PC’s would never be needed by home users, then he would have never needed to market the Windows operating system.
Fortunately for him, his belief in his ability to create a product that people would want to buy was stronger than his fear that IBM was correct.
Earlier in this post, I mentioned those that I have met that I could immediately see the ability to succeed in. These people are highly motivated and have a strong competitive spirit that drives them. They may not succeed immediately and they may suffer loss along the way, but as long as that strong fire burns in their gut, I honestly would place a wager in their favor. I’ve vouched for many of these even while they were still “green” in the trade because of that fire burning deep down. And several have proven me right by becoming well respected members of this forum.
I hope you have enjoyed this first post and take away from it the conviction of excellence. Success and failure rest solely on you and no one else. Diligence in learning, diligence in practice, and diligence in execution are vital to success.
Examine why you want to trade. Take away the greed and the laziness that accompany most descriptions. If you merely want wealth and a life of leisure, you may stand better odds spending your money on lottery tickets.
The trader is a warrior.
He fights the battle because he loves the competition. He loves that the odds are against him; for when they are, the better to demonstrate his skill and self control. The trader knows what he wants - Success.
With that, all the wealth in the World is contained.
What do you want?
“I firmly believe that any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - Victorious.”
*Adapted from Vince Lombardi’s quote, “The Green Bay Packers have never lost a game. They’ve only ever ran out of time.”
ALL QUOTES BY VINCE LOMBARDI
Over the years of trading, learning, and mentoring other traders I’ve come across traders who are naturally gifted and there was no doubt that they would succeed, while others were obviously bound to fail often time and time again. Some can learn new techniques and adapt fairly quickly while others refuse to let go of preconceived paradigms that block them from realizing vital changes in market conditions.
The key differences are almost always in the personality of the trader with traits that are changeable through self denial of the tendencies that cause failure as well as discipline of method.
I’d like to explore some of these differences starting with demo (virtual) trading.
There have been numerous discussions in this forum with traders on both sides of the fence pushing for the pros and cons of demo trading.
Some hold that key elements of successful trading techniques can and should be refined in demo trading before risking any personal funds.
Others hold that demo trading does very little to mentally prepare the trader for real life conditions and therefore only serve to familiarize the trader with the platform.
What causes demo traders to fail to transition to real accounts?
If we look deep enough, we can pinpoint key psychological issues that prove to be the catalyst of failure in this area:
The “virtual” funds have no mental and financial bearing on the demo trader.
· They cannot pull these funds from the account if needed to sustain themselves.
· If and when they margin call the account, they can easily reset or sign up for another account.
· They have invested no time in obtaining these funds through physical labor.
They are directionally biased.
· They feel comfortable taking positions in one direction and often justify their undying belief that it has to happen by fundamentals they don’t really understand.
· They enter opposing positions to their paradigm belief with fear and trepidation often taking profits too soon or settings protective stops too close as a result.
They don’t believe in their own ability to transition to real trading AND they fear failure and loss.
· Deep down they doubt their own ability under fire and will often hide this by claiming that price feeds for demo accounts is skewed to favor “blind luck”.
Before going any further, let’s examine the bullet points:
The “virtual” funds have no mental and financial bearing on the demo trader.
They have immediately recognized this as “fake” trading therefore it does little to promote them to their end goal: getting rich. They don’t approach demo trading as a real exercise of developing both skill and mental conditioning.
In football (American), players spend an enormous amount of time in practice.
Yet not one game has ever been won during practice. Or has it?
The Dictionary is the only place that success comes before work. Hard work is the price we must pay for success. I think you can accomplish anything if you're willing to pay the price.
Players run drills over and over again meticulously practicing every detail of a run route; learning the juke (spin move) in each direction to offset the opponent. They learn and practice where and when they should expect the ball to either be handed to them or to expect it to be thrown to them. They know full well that they will not be the recipient each time a play is called, but nonetheless they are expected to run the play exactly as practiced and with the determination and enthusiasm that they are the only intended receiver.
When a trader consigns themselves to the mental attitude that because “virtual” funds are no more real than dollar bills drawn on construction paper, they have immediately and with major consequence aligned themselves with failure. Because they have no ability to sustain life or advance wealth, it’s easy to hit the reset and start over.
In like, any football player who disregards practice as pointless because his skills are better refined in the real game and resists the often grueling repetition of running drills is not playing for the team, but only for himself.
In relation to the trader, a large percentage are trading with one sole purpose, to get rich as quickly as possible. This is flat out delusional greed that serves only to bankrupt the trader both financially and mentally. Successful trading means setting realistic and rational goals.
“The quality of a person's life is in direct proportion to their commitment to excellence, regardless of their chosen field of endeavor.”
(Work + Time) = (Success + Perseverance) = Wealth
The order of this equation is not reversible in any fashion.
“Leaders aren't born they are made. And they are made just like anything else, through hard work. And that's the price we'll have to pay to achieve that goal, or any goal.”
“Once you agree upon the price you and your family must pay for success, it enables you to ignore the minor hurts, the opponent's pressure, and the temporary failures.”
The second section dealing with demo trading:
They are directionally biased.
This is something that very few traders are aware of. They automatically assume that once you learn to trade that taking a SHORT is just as easy as taking a LONG. For the few who already have the mental discipline and skill, this is very true. Whereas for those who don’t, going “against the grain” of their mental bias is often an event they liken to mental torture.
If they are mentally biased toward LONG positions and they actively trade the EUR/USD, they will often cite reasons why they insist on LONGING perceived bottoms repeatedly while side stepping the enormous wealth available while trading with the trend due to that bias. They will pull headlines from any website or currency analyst that immediately fits their paradigm and puts at ease the mental anguish of denying their obvious shortcomings.
“It's easy to have faith in yourself and have discipline when you're a winner, when you're number one. What you got to have is faith and discipline when you're not a winner.”
Being directionally biased often leads to placing opposing position STOPS too close, not allowing enough room for price to move before being hit. Often they will take profit immediately once positive because they fear that at any moment, the demon haunting them caused by their own directional bias will suddenly appear and they will lose.
They will often quote, “No one ever went broke from taking profit.”, while realistically and historically the opposite is true. You can go broke by taking profit too soon just as easily as you can by not using STOPS altogether.[/font]
It has similar symptoms to traders who have a strong fear of failure.
“The real glory is being knocked to your knees and then coming back. That's real glory. That's the essence of it.”
Fear. We say the word so often we lose the impact is has on us.
Fear in relation to trading is in direct relation to pride. We fear losing because we fear loss. We gloat and boast of our successes, but rarely admit to our losses.
Fear can manifest from a sense of preservation. Not only of life, but of perception by others.
The most highly admired traders often suffer from a sense of perception preservation. Destroying that perception would be akin to immediately being labeled a failure. Being viewed as a success, however, feeds our ego and pride and hastens our likelihood to hide our failures the next time around.
Granted we can’t obviously stereotype all highly regarded traders as fitting into this peg, but there are certainly those who do.
Fear of lose is indicative of attachment to the monetary value of the money being traded. In trading, you must stay impartial to the monetary value of money otherwise it will cloud your judgment and cause poor trade performance.
Fear is an emotion that if allowed to fester, will birth greed. Greed will birth more fear and then the trader is defeated wholly.
“Success demands singleness of purpose.”
Singleness of purpose. This statement implies that emotion and attachment from the monetary value degrades purpose. The successful traders mind is concerned with one purpose: consistent growth and the preservation of capital.
“Confidence is contagious. So is lack of confidence.”
When a football team enters the field of play, each and every player has been mentally prepped by the coaching staff and each other to believe that the game is already won even before the coin toss.
No successful foot ball team has ever walked on the field admitting the possibility of defeat.
Why as traders are we any different?
You must believe that with each trade, you will be successful. Belief is a fleeting mistress. She can empower you or leave you feeling helpless in her absence. She retreats from us at the slightest hint of doubt.
I will say this much honestly. If you cannot empower yourself through belief in your ability, then you should not be trading. And by ability, I don’t merely mean the ability to trade. Ability applies to self control, self denial, confidence, humility, reason, and calm.
You should plan each trade with confidence while maintaining a reverent humility before this beast that is the currency market.
If you are not successful with the trade, then make the trade a learning experience. Don’t rush into another trade before you have examined the play by play to determine where weakness is hiding.
-What did I do wrong? Analysis? Entry? Stop Level?
-Was the market not in the proper state to enter a trade?
-Did I violate my own rules in taking this trade?
-Did I underestimate my leverage Vs. the market volatility?
Successive loses cannot be explained by market noise or volatile fundamentals. At some point the blame for failure needs to rest on the shoulders of the only person responsible: the trader.
“Once you learn to quit, it becomes a habit.”
It’s hard to admit fault and responsibility. Especially if you’ve enjoyed a string of successful trades by skill or just by dumb luck. We’ll quickly blame the market, blame the broker, blame the “lagging” indicators for not allowing us to succeed.
Some are so adapted to losing that it comes as a complete shock when they do win. It causes them to become overjoyed and celebrate every small victory.
The trader does not accept defeat. He recognizes it and learns from it when it comes, but it should never be your constant companion. He stays guarded against it through diligence and self denial of the tendencies that feed defeat. A well fed enemy is a hard enemy to do battle against.
“Show me a good loser, and I'll show you a loser.”
If you opened a trading account assuming that the market was obligated to treat you fairly, then you bought into a dream that doesn’t exist. From the start of your first trading day till the end of time the market is stacked against you to succeed.
But where do we get the idea that the market is fair? What makes us think that trading is an easy endeavor that brings success and leisure?
It’s true that it is peddled by numerous websites claiming easy profits and life of luxury and leisure. And for a few hundred dollars you can buy into this market and start making money today!
While there are cases of people who have made fast, easy money and become rich according to a recent CNBC article that number is less than .09% of the total wealth of the country.
The other 99.01% earned their wealth through hard work and discipline. They created something you bought, they traded something you bought, and they grew something you bought.
If Bill Gates had believed IBM’s comment in the early 1980’s that PC’s would never be needed by home users, then he would have never needed to market the Windows operating system.
Fortunately for him, his belief in his ability to create a product that people would want to buy was stronger than his fear that IBM was correct.
Earlier in this post, I mentioned those that I have met that I could immediately see the ability to succeed in. These people are highly motivated and have a strong competitive spirit that drives them. They may not succeed immediately and they may suffer loss along the way, but as long as that strong fire burns in their gut, I honestly would place a wager in their favor. I’ve vouched for many of these even while they were still “green” in the trade because of that fire burning deep down. And several have proven me right by becoming well respected members of this forum.
I hope you have enjoyed this first post and take away from it the conviction of excellence. Success and failure rest solely on you and no one else. Diligence in learning, diligence in practice, and diligence in execution are vital to success.
Examine why you want to trade. Take away the greed and the laziness that accompany most descriptions. If you merely want wealth and a life of leisure, you may stand better odds spending your money on lottery tickets.
The trader is a warrior.
He fights the battle because he loves the competition. He loves that the odds are against him; for when they are, the better to demonstrate his skill and self control. The trader knows what he wants - Success.
With that, all the wealth in the World is contained.
What do you want?
“I firmly believe that any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - Victorious.”
*Adapted from Vince Lombardi’s quote, “The Green Bay Packers have never lost a game. They’ve only ever ran out of time.”
ALL QUOTES BY VINCE LOMBARDI
Capital Preservation is key to long term wealth accumulation
