Despite what you see on social media, trading is a game where over 90% of people fail. So why do most traders fail to become consistently profitable?
A primary reason is due to their belief systems. Most of these traders lose because they do not have the correct belief systems needed for trading success. After working with 1000's of students, this is one of the biggest reoccurring issues with struggling traders. In this article, we are going to give you the 3 core beliefs needed for profitable trading.
Profitability Does Not Happen Overnight
Becoming a profitable trader is no different than mastering anything else in life. You need to put in the requisite amount of hours, and you need to make sure these hours are productive. The “10,000 rule” is applicable in trading as well. If you do the math, it takes about 5 years working 40 hours a week to get 10,000 hours of experience.
If you had just started playing basketball 3 months ago, is it rational to be disappointed you are not playing in the NBA right now? Of course not. All NBA players have put in well over 10,000 hours of practice throughout their lives. When you see the work ethic of successful traders and athletes, you realize that their success is no accident. Do not go into trading thinking it is an easy way to get rich quick.
You don’t necessarily need that many hours to consistently extract income from the markets. But you will definitely need to be in the 1000’s before you hit any kind of consistency in your profits. If you are not putting in the screen time, should there be any confusion about your mediocre trading results? Would you expect your free throws to improve without ever practicing them outside of the game?
The advice here is more than just saying you need to work hard. You also need to work smart. If you are a center with a poor free throw percentage, does it make sense to only practice your 3-pointers outside of the game? You need to actively focus on your weaknesses that are hurting your trading results. Don’t just work on things you are already good at.
Others’ Results Don’t Matter
The biggest mistakes new traders make is that they compare their results and progress to others. They see someone who is making $2000 a day and feel like they are inferior because they are only making $200 a day. Comparing doesn’t have any productive purpose on your trading journey. All it will do is make you feel insecure and inadequate.
Everyone was a beginner at some point. There is not a single profitable trader who picked up trading as soon as they got started, despite what Twitter tells you. “Don’t compare your Chapter 1 to someone else’s Chapter 20.” The person who is making $2000 a day probably has put in the 10,000 hours, while you are still under 1000.
Don’t Blame Others For Your Results
An external locus of control is a loser’s mentality. The biggest mistake you can do after a losing trade is to blame it on anyone else but yourself. You didn’t lose big on that trade because Citron tweeted and “crowded” the stock. You took a big loss because you didn’t stop out when you were supposed to. Winning traders have to deal with the same market makers, algos, institutions, and all other market participants. They are not an excuse for your poor trading results.
At the end of the day, trading is a game where all of your results are dictated by when you decided to buy and sell. No matter what else is going on in the market, you are the only one that decides when you buy and sell your positions. Once you take responsibility for your trading results, you can do what is needed to improve them.