Things You Should do Before Trading for A Living

Everyone wants to know how much money they can earn if they learn to trade. Can they fulfill their financial goals and make trading for a living.

Trading as a Business offer flexibility in schedule, working from any part of world, there would be no hassles with customers or employees and low overhead expenses ie. a Laptop with charting software having live feeds.

Most of traders  want to know  whether or not it was possible for them to achieve their financial and personal goal through trading. I have been asked the same type of question many times and this question is always on the mind of many new and starting traders.

The question broadly stated is: Can we trade for a Living ?

The truth is that no one can predict or answer this question accurately or correctly for any new trader. Unfortunately, many misleading book titles, software vendors and unscrupulous trading educators market their services and products creating unrealistic expectations and making false claims.

No Guarantees in Trading

Let me get the fact straight “there are no guarantees when it comes to trading!” In my years of experience as an trade and educator, I have found that it is actually much better to understate expectations to yourself rather than to inflate them. Never think of making 100% return in short time, rather understate the expectation. When you realize that it is an uphill battle, you are better prepared for the challenges of trading and the psychological rigors involved.

When you understand that trading success is neither easy nor quick, they are more likely to be patient and persistent. Having realistic expectations about their trading journey allows them to plan better, to persist and persevere on the path to success. As a matter of fact the vast majority of traders that usually fails or gets discouraged do so as a result of their false expectations of ease and immediate success.

Trading is an extremely challenging endeavor; it requires an extraordinary level of discipline and psychological emotional control. Learning to read and understand the market is a piece of cake compared to the psychological challenges involved. The psychological obstacles are especially difficult to overcome if you are trading with money you cannot afford to lose or trading to generate money to meet your living expenses.

Don’t Ever Get Overconfident

While a good education certainly helps to put traders on the path to success, traders need to understand that even with the best of education and coaching it takes time and practice to become consistently profitable. Naturally, the time it takes to become successful as a trader will vary from one individual to the next. However, as a new trader if you are profitable after your first year of trading count yourself among the lucky few. You need to realize that you are probably doing better than 98% of all other traders that started at about the same time.

The more realistic you are about your trading goals and expectations the more likely you are to succeed. In my approach to trading education I use a goal post approach or milestones for the learning process. Students must first learn basic trading concepts, once mastered they begin to practice using paper trading, once consistent profitability is established with the paper trading drills they are ready to begin trading live with very small positions. Once they are consistently profitable with small positions, students start to gradually increase their position size. Students are taught to continually document, evaluate their performance and work to refine and improve their results. One of the biggest challenges I continually face with new students is that once they are armed with new knowledge they are overly eager to rush and implement it in the live market.

Knowledge without discipline and skill is extremely dangerous in the market. Confidence is a great virtue but overconfidence can be devastating when it comes to trading. Overconfidence leads to carelessness, poor risk management and sloppy execution. Successful traders are always humble and continually aware of the markets risks and dangers. I always instruct my students to focus on learning properly first before they begin to ask questions about how much money they will make in the market. Once you begin to learn and practice you will be able to determine for yourself how much money you can reasonably expect to make in the market. Allow yourself the time to learn, to practice and to develop your skills as a trader before you count your profits. Manage your expectations according to your own performance and pace. Preservation of capital, Patience, Practice, Persistence and a Positive mental attitude are the five “Pees” or key pillars of success.