“By failing to prepare, you are preparing to fail.”
He wakes up early, around five thirty in the morning. Immediately he puts his training clothes on and goes to the gym. The morning workout is as important as the previous night’s sleep. The mind has to be rested and energized, alert so that opportunities can be spotted. Quick breakfast and the morning coffee at the desk as the work day has begun. He’s prepared the day before, he knows what he’s looking for and where a quick win may be on the screens. Time to make some money, lose the ego and learn. He is a trader.
Romanticized by many people, depicted as the ultimate job by trading gurus and educators, becoming a trader and being a trader is a path that many attempt but only a few get through. Trading is a vocation that requires no degree, recognizes no gender, nor color. There are no barriers to entry and everybody can become one if he has the grit to develop the skills and knowledge for the job. Trading is a business, the trader is the business owner taking full responsibility for the ups and downs of the business. Solid foundations in business practice are required. Hard work focused in the appropriate direction where systems are put in place and setups can be recognized. Patiently waiting for opportunities yet constantly studying and researching to find them. Managing the high points of big wins and the low points of maximum drawdowns is inevitable challenging the trader mentally. Like life, up then down… then back up, maybe.
Trading is a one-man business operation. A person with a laptop, internet connection and a chunk of capital. Anywhere in the world. Capital that represents his monthly expenses, a house, a holiday, an inheritance or somebody’s life savings. Full responsibility and weight upon his shoulders, only the matter between his ears to control it. Unlikely other businesses, he doesn’t get paid for the hours put in trading. The trader gets paid for the output based on performance no matter the hours put in. He gets paid for the hours it takes to find the right opportunity, at the right time, deploying capital, managing the risks and winning. Or losing. It’s between his ears however it comes.
Trading is not like gambling. Gambling is playing a game of chance, taking risky actions without proper rationale. No risk management, no strategy, no plan, no documentation of individual behavior, performance and emotions. Maybe emotion, just emotion. Black or White. Win or Lose.
Trading is more like fishing. One has to prepare the ship and gear, study fishing grounds, brave the deep seas and the unpredictable weather. Then one can catch fish, or not. Sometimes fishing is great other times one can’t catch anything even if the weather is good. The seas and the markets are unpredictable yet generous and abundant. Factors out of ones control to influence the seas and the markets. The boat might have a mechanical failure, a storm may hit, or one can catch loads of fish, but the prices will slump due to lack of demand. The markets may experience economic turmoil, liquidity and volatility may dry out, or the internet may cut off. Being a trader means being able to keep composure at the highs and hold on through the lows. Learning to be ok with outcomes exactly as they come.
Fishermen and Traders don’t have fixed working hours or monthly schedules. Although, they are always preparing and following a plan of action. Preparing and planning in life, in fishing, and in trading are key factors to success. Putting together proper trading and business plan prevents overtrading, defines clear strategies, setups, frameworks, decision-making, risk management, psychological management and avoidance of common pitfalls. Developing a daily routine according to a trading plan and having the discipline to follow it day in and day out would distinguish winners from the losers. If the market allows. Mastering a trading plan means mastering yourself. One can never fully master the markets, but one can master himself, in and outside the markets. Following a plan can strengthen discipline and help develop patience. Through perseverance and persistence, the trader can build up experience, knowledge and have a very high probability of catching some fish.
Despite an abundance of knowledge, trade setups and capital to trade, if the psychological management and emotional intelligence are not up to par, the trader may be set for failure. The ability to control emotions when winning as well as losing. Self-awareness in regard to strengths, weaknesses, and personality. Everybody is unique and acts differently in equal situations. There are many ways to make money from the markets as there are many different personalities that can employ different strategies with different instruments. To get an edge as a trader, he needs to discover who he really is and what type of markets and strategies will work individually.
Know thyself and knowledge of the stock market will soon follow. Ego and emotions determine far more of investor’s stock market decisions than most would be willing to admit. Traders who manage to act opposite to the mood of the crowd and against their own emotions are best positioned to earn money in the financial markets. Financial risk and emotional risk correlate inversely.
Independent and critical thinking that can withstand peer pressure and external noise would define decision making. The results one gets will depend on one’s actions and the amount of work put in the markets. A trader that tries to play the markets, will get caught sooner rather than later. The player got played. He pays with risk capital for the lack of work and preparation. Patience, discipline, and work are pillars in trading. Being patient timing setups, entries, and exits make or break the bank. Learning when to act is as important as learning when to do nothing and simply sitting on one’s hands. Trading teaches patience and self-awareness. It’s about learning a craft and getting better at it.
The one who succeeds does so after numerous years of trial and error. Putting money at risk and winning can lead to benefits. From having the limitless freedom to spend one’s days and earn ones income as he pleases. The trader exerts his personality in the strategy that is successful and brings in rewards. Through self-expression and creative thinking, a trader can earn their income under their own rules. The fascination for the markets and independent daily practice and learning leads that way. He has made it. Or not. It doesn’t matter. He has developed emotional intelligence. Through introspection and self-study, the trader has discovered his strengths and weaknesses building a profitable strategy and plan around it. The trader has taken responsibility for his losses without blaming others or judging on the basis of outside factors. He is not motivated only by money but also by becoming a better person developing self-confidence, self-reliance, decisiveness and growing a thick skin. Money itself is a fringe benefit. One of the greatest motivators for traders comes from the ability to leverage money for time. The trader can leverage a certain amount of capital that can bring much more benefits than swapping time for money. Wealth is a key to freedom. More wealth buys more time. Time is precious as one never knows how much he’s have got left while everybody gets the same amount each day.
In this new technological world, everybody has to take ownership of their finances and assets as the tools for this are already out there. Blaming one’s country, investment fund or financial advisor for financial losses rather than taking extreme ownership and responsibility for the personal capital is what’s prevalent. Taking control over one’s money is taking control of one’s living. Most times people delegate their savings, pension plans, and investment to other people that don’t necessarily have their best interest at heart. Becoming a trader can help one to take control of finances and investments. Moreover, one can learn to let go of the ego and constantly be curious, open to change and never stop learning. Markets change by the second, as life does.
There is no magic formula. The trader stays committed. Trading isn’t something that can be picked up overnight or even over a year. It’s not a sprint, it’s a marathon. It’s not the fastest, but the one who has the grit to persistently endure that reaches the finish line. Trading is an activity without a beginning and an end. There is always more to learn and absorb no matter the expertise, credentials, capital, and knowledge. The markets are one of the biggest puzzles there is.
Be humble and always be learning.