You’ve finally get started trading with real money. You may have struggled a bit, in the beginning, transitioning to real capital, but you have started to finally a bit of consistency. For the first time in your career, you start to put in consecutive days or weeks where you’re in the green.
Unfortunately, complacency will always creep in at this point, as you make money from the stock market with apparent ease. In order to become a consistently profitable trader, you have to learn to overcome the inevitable complacency that accompanies winning trades. Complacency can be deadly to your trading career, and today we will talk about how you can overcome it:
Short Periods of Consistency
As a trader, you will inevitably have winning streaks and losing streaks. Making money for a few weeks does not mean you are a successful trader. You feel like you’re unstoppable, and that trading is the easiest profession in the world. You trade with confidence and without fear. Almost everyone that tries trading stocks experiences this at some point.
Profits in the short term do not mean that you can just quit your day job and go trade full time. Most people who try trading give back the money they make, and then give up. You have to prove that you can be consistently profitable over the course of months. A few days or weeks of green does not mean you have made it. Neither does a few days of red trades mean you are a failure. Your big picture PNL is what matters.
Making money in the stock market will inevitably lead to complacency. Complacency will result in you slacking off and becoming slothful. All of a sudden you stop updating your trading journal and reviewing your trades. You start waking up 30 minutes before the market open. You stop putting in the extra effort that got you into the consistent phase in the first place.
Sometimes you will even fail to stop out of positions when you are supposed to because you become so overconfident in your trading abilities. You lose regard for risk and end up losing a significant portion of your trading capital. Overconfidence is the cause of many blown up accounts.
Identify The Source of Your Consistency
When you are making money consistently for a period of time, you need to figure out what is causing you to make money. Is it the setups you are taking? Is it your risk management? Or are you simply getting lucky?
When traders hit the first winning patch, they will often fail to look inward and make assumptions about what is causing their success. What you need to do is be diligent in your trade journaling to understand exactly what behaviors of yours are responsible for your positive and negative trading results.
Staying in a comfort zone is not an option for a successful trader. Becoming a consistent trader is about consistently doing what you afraid to do. Complacency inevitably leads to a rough, losing spell in your trading career. This is the next phase in your trading journey, where you realize that you are not as good as you thought you were. You have to learn how to deal with large trading downs, which is inevitable at some point for all traders. Learning how to do deal with drawdowns is the biggest obstacle to becoming a consistently profitable trader. Tomorrow we will talk about how to deal with this difficult phase in your trading career.
If you missed yesterday’s post about the educational phase, check it out here.
Free Trading Webinar
Over the next 2 days, we will do an article about each of the next 2 phases so you will know exactly what to expect during your trading journey. At the end of the series, we will do a free webinar showing you exactly how to get past whatever phase you are stuck on.