– Negative experiences are often more important than positive ones. For example, to understand that emotional haphazard trading is the way to nowhere. More precisely, straight to ruin. This most valuable invisible asset will help you all your life.
– We will develop unnatural skills: courage where you want to be scared, and vice versa. Patience is where you want to do everything as quickly as possible. Do not expect psychological comfort. There is simply no such thing in trading.
– Constant self-study, market observation, comprehension of what you saw. Independence in everything, in trading, in analytics, in discipline. You need to learn to be a teacher and a boss for yourself.
The most valuable asset ofВ trading
Most people will probably answer the question of what is the most valuable thing in trading – money. This seems obvious. The larger the size of the trading account, the greater the profit, the better. For example, 1% of $1,000,000 is $10,000-a pleasant amount in all respects. However, we will try to show that there is something much more valuable. What we almost do not pay attention to.
InВ fact, money inВ trading is not aВ unique, renewable, secondary asset. They are an effect, not aВ cause. Working material: aВ bricklayer builds aВ house out ofВ bricks, aВ baker bakes bread from flour, and aВ trader seeks toВ multiply money. The attitude toВ the material (stone, flour, money) should be professional. And aВ brick wall, and aВ freshly baked loaf, and aВ bundle ofВ money are only the result ofВ the right actions.
It takes time to learn these actions. It is our most valuable, unique, non-renewable asset. Paradoxically, it is time that a novice trader values the least. Hours, which make up days, weeks and months, are spent on hypnotizing the price in the trading terminal. To search for and copy other people’s trading systems. To the endless monitoring of news reports, in which there is nothing new in a couple of minutes.
Real trading experience cannot be replaced byВ anything.
Let’s explain with an example: let’s say your trading system is based on following the trend. If you are not taught by experience to ignore volatility (“market noise”), if price fluctuations excite you to a cold sweat, if you have not developed the skill of patience – this strategy will not bring you any benefit. Time will simply kill this trading system. If experience has not taught you risk management – similarly – your deposit is doomed.
Experience is born only out ofВ time.
There is such a mathematical action – multiplication by zero, which zeroes everything, and the value of the second multiplier does not matter at all. One multiplied by zero and a million multiplied by zero are no different in the end. So, the skill of wrong actions in the market, lack of experience, inability to trade – this is your “zero” in the world of trading. If you have a million dollars on deposit, but you don’t really know how to trade, it’s only a matter of time before you go broke. It’s like a wall built by an inept bricklayer, without cement mortar. It will inevitably collapse, no matter how many bricks it takes.
From other side, if you have ten dollars inВ your cent account, but you know how toВ trade, developing this skill better and better, then increasing your trading account and making aВ profit is inevitable inВ the long run. Learn how toВ make aВ dollar out ofВ ten dollars first. Then ten dollars out ofВ aВ hundred, then aВ hundred out ofВ aВ thousand dollars, and so on. Everything else will come inВ due time.
A key skill in trading is the ability to melt negative experiences into positive ones. Get back on your feet after bumps and falls. Learn every day. Have you leaked the deposit? It doesn’t matter. Consider this your payment to the market for training. An inexpensive payment for invaluable experience, investments that will definitely pay off in the future.
Recommendations:
– Novice private traders, as a rule, do not have much capital. And there is not the slightest reason for despondency, fear, discontent. Because you have something much more valuable – time. Spend your time wisely and the money will come after him. You don’t have to worry about that.
– Trading is impossible without constant self-education. Read high-quality professional literature, instead of mindless nervous monitoring of the price in the terminal or reading anonymous articles on the topic “How to get 1000% profit per month”. One book a week is an absolutely real task – if desired. Fifty books a year (well, let it be twenty, or at least ten) is already a serious theoretical basis. One hundred books read are already expert level. Your capital, which is always with you.
– Set yourself real goals: first, survival in the market. If you don’t lose money for three months, it’s not bad. The first, the most important and difficult step, you have made. Stability in the long term is of critical importance. By analogy with chess, a child can also take someone else’s pawn. But winning the whole game is quite another matter. It’s the same in trading: to accidentally catch a powerful trend and take 10% of the deposit is about nothing. It is much more difficult to consistently show a result of 2% profit on a monthly basis.
AВ few words about brokers
Any advertising is characterized byВ aggressiveness and exaggeration.
“Drink Coca-Cola!”.
Drink and don’t think. Don’t you see in the ads that those who drink this soda are insanely happy surrounded by cheerful friends? Having calmly judged at least a couple of seconds, it is obvious that a can of lemonade will not make us happy. And this drink also does not have the property of attracting new friends. And that’s for sure. Therefore, a person needs to be emotionally “stunned”: to throw into the consciousness and subconscious attractive images that are not always connected with reality.
We will talk about advertising financial services.
A familiar advertising image: a sad depositor is not satisfied with the amount of interest offered by banks. But then – oh, a miracle! – kind and generous brokerage companies are rushing to help. You are offered to install the application on your smartphone and immediately start trading stocks, bonds, currencies, oil and other financial instruments. Do I need to explain that money should immediately fall from the sky, in bundles of dollars or euros, who likes what? It’s a small matter – you just need to open a brokerage account and poke the buttons in your smartphone. Arbitrarily.
And now let’s get back to real life.
Brokerage companies (hereinafter referred toВ as brokers) are intermediaries between aВ person and financial markets. Trading on exchanges is conducted inВ lots, for example, one standard lot for the EURUSD currency pair is $ 100,000. It is clear that the vast majority ofВ private traders do not have such free money, which means that the road toВ the exchange is closed for them. Brokers earn money on this byВ offering aВ person so-called leverage or margin trading. AВ person opens aВ relatively small account, say, $ 1,000. The broker sets the leverage ofВ 1: 100, there are options more or less inВ the account settings. And aВ person can trade one lot ofВ $100,000В on the exchanges.
The question is that the broker does not cease toВ be just an intermediary. Which is not responsible for the results ofВ your trading, does not guarantee profit, does not protect against losses. This is not aВ bank, although large banks often combine banking activities with brokerage. This is not aВ bank that is responsible for the safety ofВ your money, although large banks often combine banking activities with brokerage. But aВ brokerage account is byВ definition an account for independent trading. It is simply stated inВ the smallest letters inВ the contract or public offer, inВ legal documents that few people read and understand.
Therefore, do not try toВ be someone who you are notВ yet.
If this morning you are not an investor or a trader – this is not bad and not good – it’s just a fact. You may also not be a neurosurgeon or a translator from Chinese. And it doesn’t matter how much money surgeons or translators receive, you just don’t have that competence yet.
“Wanting a lot of money” is not a profession.
This is aВ desire.
Which inВ itself does not bring money.
It is important toВ understand that without proper preparation, you will get lost with aВ scalpel inВ the operating room or inВ front ofВ aВ stack ofВ pages with Chinese text. You will also get confused on the stock exchange, where prices change every second and most often do not go where you would like. Trading is generally one ofВ the most highly competitive professions inВ the world, according toВ statistics, only about 2% ofВ participants earn steadily on the exchange.
InВ conclusion, we will say about those cases when the broker has an offshore registration. You will not be informed about this inВ advertising, you need toВ read the notes typed inВ microscopic text yourself, on the website or inВ the contract. If you see any Virgin Islands or Saint Vincent and the Grenadines (often the English text is not translated toВ impress the client with solidity, toВ present yourself as an international financial company), know that this broker is outside the jurisdiction ofВ your country. You will not be able toВ apply toВ the court ofВ your country, they will not accept aВ statement ofВ claim from you, or they will refuse later.
Therefore, double-check the selected brokerage company according toВ these criteria, it may save you aВ lot ofВ time and money.
Skill levels
Unconscious incompetence
The ancient Greeks said:
The beginning is half ofВ everything.
Indeed, the importance of starting in any business can hardly be overestimated, and trading is no exception. Let’s try to figure out what these first steps should be.
From personal experience – I am a private trader in the Forex – I will say this: the first step should start with the truth. In the first place, you should put the correspondence of the chosen type of activity (in our case, trading) to your personality, your character. If we are going to engage in trading professionally (at least – to earn, and not to lose money; at most – to get rich), then let’s think about whether this profession is suitable for us at all.
The question is not as simple as it seems at first glance.
This apparent simplicity (I thought a little, saw a trend, pressed the “buy” or “sell” button, opened a deal, closed a deal, withdrew a profit) is deceptive. Rarely anyone writes about the “dark side of the Moon”, about the strict requirements for the profession of a trader. Most likely, you will not see this in the advertising company. For example: “Put a hundred dollars in the account, get a bonus, buy a trading robot and don’t worry about anything else”. You will not read about this in numerous self-help books on trading, with titles in the spirit of “How to make a million lying on the couch” or “It’s easy to play on the stock exchange”.
It’s easy to play – it’s hard to earn money.
There are a great many professions in the world, but not all are suitable for you. Let’s consider for example three of them: a doctor (surgeon) and an athlete (boxer) and a sniper.
Not every one of us will be able to become a surgeon. Six years of intense study. The study of complex disciplines (Latin, etc.), anatomy lessons in the morgue. And the prospect of cutting a living person (even under anesthesia) and performing some manipulations in his body will not suit everyone. There are also adults who faint from one type of blood – and the surgeon must work for hours in a blood-filled incision… If you don’t squeeze an inconspicuous blood vessel in time, the patient will die, and the doctor will answer. In trading, it is about the same – you will not stop losses in time – the matter will end with the drain of your deposit. Your money. According to statistics, this is exactly what happens to 98% of traders, during the first three to six months of trading.
Or the craft of a boxer. With all the attractiveness of championship belts and high fees – not every person, by nature, will agree to earn a living like this. To stay in the hospital for a long time after concussions and many other injuries. Spit out broken teeth into the boxing ring. To train when you don’t want to. Continue the fight when you can hardly stand on your feet. There is something similar in trading – if a person is not ready to fight and go to the end – it is better not to start.
A sniper needs natural shooting abilities (sharp eyesight, calmness, etc.). Daily training for many years. You need to know your weapons thoroughly. By itself (psychologically), a shot at a living person is not easy and many cannot do it. Psychologically, a shot at a living person is not easy and many people cannot do it. The shooter is sometimes forced to lie for days (for example, in the snow), tracking the target, and all this for the sake of one accurate shot. Professionally engaged in trading, you will sometimes have to “lie down” (waiting for entry into the market or exit from it) no less.
Having made the wrong choice ofВ profession initially, people then regret it. Work turns into aВ daily torment, devouring all the time, money and nerves. God knows how many arrogant traders who dreamed ofВ big and fast money could not earn. IВ have heard about trading for 20В out ofВ 24В hours aВ day, when aВ person has no time toВ go toВ the toilet. And the results ofВ these guys, as aВ rule, are not high.
They burn every day in the fire of greed, then fear. They spend long hours trying to guess where the price should go. What and to whom the price should be, we will talk more (the correct answer is to no one and nothing). Making up to 500 or more trades per day, these people eventually come to the loss of savings and burned nerves. And it’s also good if these are your savings, excess money. It is much worse when it is the last money in the family or borrowed funds. Acquaintance with collectors or bailiffs – you will not wish the enemy.
There are four levels ofВ skill (competence):
Unconscious incompetence (amateur level)
Conscious incompetence (student level)
Conscious competence (professionalism)
Unconscious (intuitive) competence
This scheme resembles a ladder (climbing from a complete amateur to a real master) and it is applicable to almost any field of professional activity of a person. You can’t immediately get to the third or fourth floor by jumping over the first and second floors – you will inevitably fall and break. As the Russian artist Ilya Repin said:
At first, the artist draws simply and poorly.
Then it is difficult andВ bad.
Then it is difficult and good.
And only then it is simple and good.
It is important to understand: that being at any of the levels of professional skill we have named is not good and not bad in itself. It’s not a shame and it’s not scary. This is just a fact, the current state of affairs, a reference point. And the worst thing you can do here is try to deceive yourself. To try to appear, not to be.
For example, a five-year-old child suddenly decides to drive a car himself. With a high degree of probability, the case will end in an accident. And this does not mean that the child is underdeveloped, or the car is no good, or something is not working properly. This only means that the person has taken up the wrong business. He took on something that he can’t do yet.
Let’s briefly list the characteristic features of a person who is at the first level – “Unconscious incompetence” – in relation to trading. We repeat that there is nothing to be shy about, in itself it is not bad and not good.
So, from personal experience, IВ went through all this myself:
– The lack of a clear action plan for any of the possible options for the development of the market situation. A set of simple algorithms “if… then …". Example: a trader expects a bullish trend for EURUSD, and the market (as always – suddenly) goes down powerfully. You need to know what to do. And what not to do.
– The illusion of having any absolutely working laws on the market: “Now it looks like the end of the third wave, which means that the price should… there is good news on unemployment in America, which means that the dollar will go up… statistics on Europe are worse than the forecast, so the euro is sure …". A person who has traded for at least a couple of weeks himself knows the real price of these “laws”. You can’t rely on them completely.
– Fear, based on nothing, at the exit of the trade in the “plus”. With a minimal decrease in profit, the trader recalls the proverb “A small bird in the hand is better than a big bird in the sky”. And he closes a profitable deal with his own hands. Thereby cutting off profit. Which is why we come to the market.
– Intuitive hope (for a trend reversal, for reducing losses without your participation, etc.). All these endless “I think… I think… I think”. Paradoxically, many people can look at growing losses for days, weeks, months. Without taking any active actions, as if under hypnosis, or with his hands tied. Because there is hope: “it seems to me that the trend will turn around”. Sweet false hope.
– Not understanding the importance of commissions paid to the broker (spreads, swaps, etc.). In the long term, these small amounts, cents and dollars, can grow significantly. And to nullify even profitable trading.
Perhaps these five signs are enough. If you have noticed at least one, know that you are only at the very beginning ofВ the way. The most interestingВ way.
Conscious incompetence
If you are still interested inВ trading after all this, go ahead.
Let’s talk about the second stage – conscious incompetence.
I think many people have heard about the organization “Alcoholics Anonymous”, at least the name. Recall: this is a non-profit partnership that helps people suffering from alcohol addiction. It helps with phenomenal efficiency. This method is based on the “12 steps” program.
We sometimes see it in the movies. The person gets up and says: “Hello, my name is Jack, and I’m an alcoholic”. The most important first step is to admit your powerlessness in front of the problem. Everything else later. There will not be this first correct step – there is nowhere else to go. If a person sincerely does not see the problem, says: “I sometimes drink, it happens every day, but of course I’m not an alcoholic…” – it won’t work. Many people get drunk and die without finding the strength to admit the obvious.
Let’s draw an analogy with the levels of competence of a trader.
You are aВ beginner, you are only taking the first steps. Gradually realizing that for some reason there is no permanent profit. InВ the market, you lose much more than you earn. You make mistakes inВ your forecasts every day. You are tormented byВ panic fear, then animal greed, unwillingness toВ lose even one dollar. As soon as you open an order, aВ bearish trend instantly turns into aВ bullish one, and aВ bullish one turns into aВ bearish one. The market seems toВ have taken up arms against you personally, does not allow you toВ earn aВ single cent, constantly deceivingВ you.
Is this aВ problem? Without aВ doubt.
What should I do? To begin with, recognize the problem – incompetence.
Everything else later.
The beginning of recovery begins with the recognition of the disease. Any ambulance doctor can tell a hundred stories when people really died, trying, for example, to cure pneumonia – paracetamol, an acute attack with a ruptured appendicitis – aspirin, chronic bronchitis with laryngeal edema – warm milk with honey, etc. These people did not want to admit their problems and paid for it.
Most traders are eliminated at this level. Surprisingly, people can take the “ostrich position” for years. Lose whole fortunes, but never admit to themselves that they have real problems with trading.
The next trap on the way of a trader who realizes that something needs to be changed is the most dangerous illusion that someone will do this work for you. Let’s explain: more competent people can really help you, suggest something, teach you something. This is absolutely normal. But they can’t become a trader instead of you.
But trusting people are beginning to subscribe to paid signals, buy (sometimes very expensive) indicators, look for investment managers (who will earn them 100% profit per month), connect trading robots, the principle of which they do not even understand… This is the way to nowhere. More precisely, to a quick or slow loss of money. Do you need it?
Trading signals will start to fail when the market changes (for example, from a quiet trend to a volatile trend). An anonymous manager will suddenly disappear after draining your deposit. Trading robots will start making losses instead of profit, and you will not even understand what is the matter. Bill Williams wrote in “Trading Chaos” that if there really was a trading robot that consistently brings profit always and everywhere, it would be rented out for at least $ 30,000,000. Per hour, of course. We will make an adjustment for inflation (since the writing of the book) and estimate the cost of this hypothetical lease at $ 50,000,000. For a non-existent robot.
Imagine the following situation: you are in a foreign country, and for a long time. And you need to live and work in these circumstances. What to do? Learn the language of this country. By myself. If you want to survive. Textbooks, dictionaries, translators will help you – but the main work is still yours.
