As new traders begin their trading journey, they run up against four key problems.
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Below are those key problems and how to overcome them.
Key problem #1: They feel overwhelmed.
The more they look to learn, the more they see how much there is to learn. Risk management, indicators, chart patterns, system creation… as new traders explore those areas, they get overwhelmed. Lots of them eventually give up because of this feeling. Others decide to throw a dart and trade despite their lack of knowledge, which is a big mistake. (That’s me with my first investment about 20 years ago. No idea what I was doing!)
Solution: Focus on one thing.
Yes, it’s true: there are so many things to learn, and yes, it can be overwhelming. But you only get overwhelmed when you look at everything at once and think, “Damn, do I have to learn all of that?”
If you think about it, this true of life itself — there’s so much to see, do, and learn. No one can ever do it all. So we must carefully choose where we place our attention because if we just stand there and let ourselves get overwhelmed by everything there is to do, we’ll never do anything. All we can do is one step at a time.
So instead of focusing on all the innumerable things to learn, focus on getting started. That’s the most important thing you can do. Then, ignore the rest, and learn everything you can about what’s in front of you.
What small area can you study and improve upon right now?
What little area can you explore today? What small thing can you learn which will then compound over time?
Instead of doing nothing or playing the game cluelessly and unprepared (because you feel too overwhelmed to learn) just do something even if it’s small. This will be one step closer to your goal.
Don’t look at everything you have to learn. Just be in this one place –just study this one thing. One small step at a time, a few small steps each day. That’s how Rome was built!
Key problem #2: When they lose money, it feels bad.
In trading, loses are part of the game. There’s no stopping that. But new traders, don’t understand that yet, and they come in trading expecting to win on each trade. So when they lose, they feel bad.
Solution: Flip failure on its Head.
Have you seen how babies learn to walk? It’s truly amazing because it’s all trial and error. Every single step is a lesson. They wobble, fall down, until they get the hang of it.
That’s also how they learn to talk, to feed themselves with a spoon, drink, etc.
That’s basically our story. All of us! But unfortunately, at some point, we start to fear failure, and that fear gets bigger with time and holds us back.
But failure is really just part of the process of learning. Every falling down when we’re learning to ride a bike, every loss when learning to play chess, every heartbreak after a break-up, all those are lessons.
So instead of looking at failure as “bad,” we can instead learn to see it as an opportunity to get better and stronger.
Of course, this doesn’t make the pain go away. But when failure smiles at you, the best thing you can do is smile back, while acknowledging that the lessons that stick are those that hurt.
More on the importance of failure in these two articles:
Key problem #3: They feel like they’re just treading water.
In an ideal world, trading would be as easy as breathing, and new traders would learn it at a breakneck pace. Unfortunately, in reality, it doesn’t work like that. As they learn and learn, practice and practice, a lot of the time, they’ll feel they’re barely getting any better while other people will seem to be learning twice as fast. This can be super discouraging.
Solution: learn to love the process.
It’s really tough when we feel we’re not making any progress, or that things are moving too slowly to our liking. We want to get to expert level as quickly as we can, but when it takes ten times as long, we can get desperate.
In my experience, this feeling of being desperate can actually hinder progress even further. The solution is to forget about the pace of your progress and just focus on enjoying the process of learning.
It’s like when you go on vacation and you’re fixated on getting to your destination… but it’s a journey, and when you get frustrated by how long it’s taking, this makes the journey stressful, uncomfortable and not enjoyable when it needs not be the case. Instead, focusing on the journey itself and enjoying the ride is a better way of traveling. Wouldn’t you agree?
When learning, instead of focusing on where you want to be, you can enjoy and can be grateful for where you are, grateful for having the opportunity to learn at all.
It’s also important to have a realistic idea of what the journey will likely be: It will likely take time for you to become a proficient trader because trading requires a set of mental skills that most people don’t have. And it takes time to develop those skills. It doesn’t happen with the snap of a finger.
And when you acquire those mental skills, you have to constantly practice them, refine them, so that you can be and remain a consistent and rational market participant.
It’s very much like going to the gym: you don’t just head to the gym for 6 months and then stop. If you do so, you’re not going to keep the results you’ve been getting. It’ll all fade away with time. In trading, it’s the same thing: working on your mindset is an ongoing process, and you have to learn to love that process.
Key problem #4: There’s a strong feeling of uncertainty.
Humans don’t like uncertainty in general. We’re afraid of it, and do our best to avoid it. But at some point in the new trader’s development, he/she finally realizes that the market is almost all uncertainty. What the market seems to give, it can take back in an instant (plus more). New traders learn that pattern X or indicator Y is not as reliable as they once thought. One doesn’t really know what will happen next. This feeling of uncertainty causes a lot of people to proclaim that “The market is random. All the success stories are made up.”
Solution: Learn to appreciate Uncertainty.
Here’s a fact: The market can be random or non-random, it doesn’t matter, you can make money trading the market. And consistently so.
One undeniable truth about the market is that there are trends. And because there are trends, there is a way to profit.
Now, you can approach trading via strategy, or you can do it extemporaneously.
A strategy, when applied consistently, gets you consistent results.
An unplanned, unmethodical approach gets you random results.
With conscious practice, you can change your feeling about uncertainty. You can start to find the joy in this place of not knowing, of not having solid ground under your feet, of not being in complete control…
Let’s see an example:
You keep putting trades on and keep losing. This is your fourth trade and you don’t have any idea how it’s going to turn out. But you’re hoping that this one is going to be a winner.
This is a good place to practice. Can you enjoy this process of trying something and not knowing how it will turn out? Can you allow yourself to be open and curious about what might happen? Can you see each trade as an exciting opportunity to experiment, to explore, to conquer that part of you that is always fearful? And above all, can you trust your proven system, let go of your need for control and just accept what the market hands you?
So you see, uncertainty can be turned to your advantage if you can just change your perspective from that of being closed and rigid to being open and flexible.