In this article we explain some of the market environments that every trader must experience directly before they can experience constant success.
Risk management trading and investment graduate
Before you expect success as a forex, futures, and stock trader and investor, you need to master risk management. Like trading and investing, being proficient in risk management is a function of time. In our live trading classes at our online trading academy, we always emphasize that learning how to trade is time-dependent – it is not an “overnight success” thing. It takes practice, time, self-understanding, continued education, and passion.
When we started trading forex, futures, and stocks, it took us a few years before we began to have a comfortable feeling of being able to trade well. And yes, now you even enjoy the luxury of internet research, attending online trading classes and online trading courses, networking on social media to share our trading ideas, or having trading mentors who are willing to share their trading ups and downs with you. Learning, presently, may take only 12 to 18 months. While you may think it's longer than usual, we advise that you get set for a journey and not an overnight success.
To trade in the trading arena goes beyond learning a system. Almost everybody can learn how to buy and sell. However, one needs to be a professional to know how to manage risk effectively; otherwise, trading in the financial market may not be a long-term possibility for such a trader. An aspect of the learning experience is to understand how to react to some market situations. You can listen to as many trading classes as possible and read several trading books; if you haven’t experienced these situations, you can’t know the exact way to react. Below are environments in the market that every trader must experience directly:
Money has different meanings to different people. In the end, no one would like to lose money. Trading doesn’t come with a paying guarantee. It's even worse when you invest magnanimous effort yet still recording trading losses. However, it is quite unfortunate that until one experiences one or two trading days of losses, such a person may never understand the role his or her personality traits play in situations like this.
Some forex, futures, and stock traders become revenge traders, aiming to never relent until they and the market get even. This makes them start making reckless and careless traders, all in the bid to win their money back. They fail to realize that the more they trade this way, the more their account is under risk because they have abandoned their trading plan.
Other traders and investors will know that something went wrong and understand the need to stop trading for a while instead of examining the situation before putting another capital at risk. This set of traders are those who have a deep understanding of risk management.
A trader who experiences loss will know when to react to such loss-causing situations next time, making them even more prepared to anticipate other similar experiences.
Do you know profits may be a bad thing too? This happens if such a profit comes as a windfall, and you are totally oblivious of how to handle your emotions with the extra cash. If you still experience this windfall after breaking your trading rules, you have found yourself in big trouble. Every time a trader wins after breaking his or her rules, there is a somewhat automatic feeling that overwhelms them, making them think that it is fine to break such rules. A popular saying in the market, “You can break the rules once in a while, but eventually, the rules break you for not respecting them.”
Excess money in the account of a trader may cause such a trader to take careless and unplanned trades, which ultimately leads to the loss of money. The loss of money may cause the trader to panic: when panicking because of your losses, you are at a greater risk of losing more with bad trades. We call this trading for the money and not for the markets.
Forex, futures, and stock traders who understand risk management will withdraw money from their trading accounts monthly to take the account back to its initial capital base to trade the next month. By keeping minimum equity in their account, a trader is forced to trade more selectively and be more patient when setting up a trade. The capital that is drawn out of the trading account is used to pay the trader while the rest is kept in a wealth-building account. Many traders leave their profits in their trading accounts and then give it all back later with the attitude that the profits were house money.
The ruin caused by this type of day is incomparable to others. Many individuals were trained to work hard daily for salaries. But as a trader, you will spend several hours with no trades because the market isn’t conducive enough to your trading plan for that particular day. A better percentage of newbie traders do not have this amount of patience for such an endless wait. They start to make up trades, abandoning their trading plans. When traders start losing money because of such bad trades, they begin to overleverage themselves with small contracts and overtrade, thereby ultimately turning their small losses into an extensive one.
These days are such days that traders must experience to discover the kind of person they become during those days. However, it is quite unfortunate that it takes time for days like this to show up. Hence, the reason we believe that traders need about twelve to eighteen months of trading experience before they can be expected to trade well.
Recently, we received an email from a trader who is interested in enrolling in our online trading academy – we replied too:
Dear Bernd Skorupinski,
“I have not been able to achieve any consistency. I have been trading for about a year and my trading results have been hovering between break-even to down 5-10%. I have a stop loss and a profit target with every trade I enter. However, when price hits my stop I would always feel extremely frustrated and find it very hard to continue trading on that day even though it is only a small loss. Furthermore, I would also feel very angry with myself if I missed a good trade. I feel this is my biggest obstacle to consistency and I am feeling a little lost on how to resolve this.”
We could see the frustration in the trader. Regardless, we were impressed with his risk management skills. He made us know that the aspect of risk management under trading is adequately under control. See our response below:
"First off, congratulations on your trading success. That's right; I said success. After the first year of trading, if a trader can be around break-even, they have an excellent chance of becoming successful. Remember, overnight success is extremely unlikely. It will take even more effort on your part to continue this success.
Being around break-even after the first year shows that the trader has excellent risk management skills. During this first year, you have now had a chance to see how you will now react to certain events in the market (losers or winners). Many traders turn into revenge traders when they have a loss and eventually blow up their trading accounts. You simply walked away and knew something was wrong and did not continue trading when it was not working.
I do not know if you have a written trading plan; I hope so. If you do, it is now time to start re-evaluating to eliminate some of the problems and find ways to increase your trading edge. This may involve learning more about selecting levels to trade at, where they are on the curve, changing where you are placing your stops, etc. Plus, are you trading the same market all the time? If so, try another market and see if it works better for you.
Don't give up, and don't be so hard on yourself. Everything you are going through is what every trader goes through. The difference between a losing trader and a winning trader will be how you decide to resolve this issue. You have already shown you have good risk management skills, which is extremely important. Now just focus on learning how to make better trading levels. This, too, take time because even though it is very rule-based, it is also a form of art and not a science."
In our opinion, we think that this young man’s self-confidence will soar once he perfects his supply and demand trading strategy. Of course, he will still experience losses, but we believe he will discover that with properly placed levels on his charts, he won’t be stopped out often. He has also proven that he can allow his winners run. This way, he has survived his first year of trading, enjoying good winnings and small losses.
If you want to learn more about professional trading and investing across multiple asset classes such as forex, futures, and stocks, please sign up here for free at our online trading academy www.onlinetradingcampus.com and get access to a free three-hour introductory course.
Author Bio: Bernd Skorupinski teaches the undiluted truth about trading and investing at Online Trading Campus and takes you through what it takes to be a consistently successful trader. His favorite moment as a trading mentor is the way peoples’ eyes light up with excitement and confidence when they understand how Supply and Demand trading strategy works and how it can help win in the trading arena. He believes in building core values and discipline that ensures his students do not succumb to the pressures and temptations of the market. He very much believes in following plans and strategy through. If you want to know more about the author Bernd Skorupinski please read here