Kick Start Your Day Trading Career – The Right Way
In second part of this series, I proposed a new paradigm to think of trading skills development and the related expectations on trading performance. By accepting the new paradigm, traders can handle changes to their trading performances from a better perspective. As oppose to beating themselves up for not doing as good as they expected themselves to be or jumping with joy for sudden performance gain, they can take a step back and look at their progress much more constructively.
In this part of the series, I will explain what can be done to properly kick start your day trading career or rebooting it should you need to do so. Evidently, I could not finish the series yet, so there will be a fourth one.
Note: This is 3rd Part of the eBook Is Day Trading For You
Ditch Your Pride
As mentioned in the first part of the series, trading is not a job. Aside from the ability to handle uncertainties well, trading is also one of the activities that requires the person to be consistent mentally inside and outside of trading. Everyday life behaviour and character weaknesses can and do interfere with trading performance. One of the biggest enemy of trading, and in particular day trading, is pretentious behaviour.
An example of behaviour outside of trading that has terminal effect on trading performance is the habit of showing off. Take the example of young guns recruited by trading firms. Many of these new traders find that being called a trader for a firm has many advantages. Feeling more knowledgeable of the financial markets among friends and family is definitely one of the perks. The show off behaviour outside of trading shaped their minds over time into inflexible and arrogant attitude towards other people’s opinions about the markets and eventually the markets themselves.
Make no mistake though, this is called pride. It is also where self-righteousness grow from. When being obsessive enough it can turn into superiority complex. Any one of these mental conditions can ensure the failure of a trader.
From Truthfulness To Humility
To achieve stellar trading performance, the number one priority is to be truthful to yourself. That means you have to accept the fact that you would never know exactly how the market works. Full acceptance of the truth is necessary because only from that starting point you will be able to embrace uncertainty, accept trading mistakes as part of the trading cost and willing to change your trading decisions immediately when evidence says so.
From being truthfulness to yourself, humility will develop. It is the power to see and feel what others are thinking. Markets are the gambling dens of people expressing their opinions. When you can see through what all others are thinking of, you will understand the aggregated intention of the market with ease.
Humility being a requirement is unique to careers dealing with uncertainties. The markets are forever changing because they are created by people. As the players changed so do the markets. Although we know market participants pretty much behave in a similar fashion throughout history, the markets they have created do not behave exactly the same. Hence there is no such thing as certainty or 100% sure. Uncertainty is always a part of any market thus one must be humble and observant all the time to stay on top of the trading game.
People coming from backgrounds of putting up a front with confidence to do their jobs are the ones that are likely beaten hard by the markets. It is important for these traders to develop a completely different mindset as early as possible in their trading. Without one, many bad habits in trading will be formed that will be very negative for their trading performance.
Mindfulness In Centre Of Chaos
Trading decisions, trading model designs to overall understanding of a market takes an objective mind with a balanced view to accomplish excellence. I have explained in Having A Trading Edge Is Not Enough why it is important to recognize the edge in trading is yourself, not a particular entry method or trading strategy. To be able to make sound decisions in a chaotic market environment, mindfulness is a necessity.
Some people can gain balance in their minds through meditation. Some people find rigorous exercise help them keep a clear head while trading. Some others, like many philosophers and scientists in the past, love to take long walks and lost themselves in thoughts.
All these activities are tools that can help one gains a balanced mind. Just like any other activities, it takes time for these training activities to produce positive effects on you. Until the desired results become part of you, your mind will still be in a disadvantaged position during trading. Thus it is important to stick to your routine, making it your habit, so that you can benefit from your training.
Drop The Linear Performance Belief
For traders who have been struggling with their trading performance, the performance tree provided us a clear picture why it is so difficult for these traders to have a trading breakthrough. The answer lies in the fact that they are bounded at the lower performance level because of the combinations of their trading methods and core beliefs. In order for these traders to get to a higher level of trading performance, drastic changes to these combinations have to be made.
Not everyone can handle drastic changes well. Humans in general are not built for that. The worse part is that the original trading techniques the trader has developed over a long period of time will interfere with their new approaches in trying to improve their trading performance.
It is easy to arrive at the wrong conclusions on the reasons behind failure in trying out new ways to trade. Traders often shut the door to better trading methods because they do not see results immediately. Traders also confused that several trades in a row not making money is a sign their new ideas are bad.
In short, they mixed up how they feel about a trading method with the evaluation of the validity of a method.
To resolve this problem, traders have to learn to evaluation changes to their trading style or methodology as if they are dealing with a completely new approach to trading. Such radical approach may sound overkill but it is necessary as there is no way to tell if any changes made are minor or not. Only after thorough investigation that one can tell from evidence what components within a trading method are major (or minor) in importance.
To conduct complete evaluation of a trading method is not as difficult as you think. It is just tedious. It also gets easier if you keep doing that all the time. The expertise you gain from these thorough studies will add to your understanding of the market itself and what parts of a trading strategy is more important than the others given certain design directions.
As a summary, no change to a trading strategy is just a refinement until it is proven to be true.
Clean Slate Approach For The More Open-Minded
For those who are willing to start from scratch learning about trading, this hardworking approach is the one that can payoff quickest.
By reading historical data in chart format as they are with no indicators, no support resistance lines and no coloring, you made an unbiased impression of history into your mind. The more vivid you remember the historical data on an as-is basis, the better you are able to replay the data in your mind with various trading methods applied onto the data. This is how objective evaluation of trading techniques can be accomplished.
It is not necessary to be blessed with photographic memory. But you must work hard to make it happen. Similar to the path in becoming a grandmaster in chess, the hard work on studying the important chess games in the history is a necessity, not an option. The good news is that day trading is much easier in comparison, you just need to beat the other 99% while being a grandmaster in chess you have to beat the other 99.9%.
For those who have problem doing that, the alternative is to conduct lots of historical study through the use of statistical analysis. By knowing the nature or the characteristics of the markets you are going to deal with, you will not be blinded by the trading methods you would like to use in the future. You will be able to see on a meta level if a trading model or technique fits the data you are dealing with.
This path to accepting the markets with indifference is not as strong as the manual way but that does not really matter nowadays thanks to the technology we have access to.
Since trading is not chess competition or poker tournament, it is not against the rules to use your computer and analytical tools to trade. This use of computer technology to assist in learning can deliver results quickly if the trader works diligently to explore the behaviours of the market they are dealing with. The key to success with this approach is the ability to accept scientific evidence over personal beliefs.
The Stubborn Ones Will Face Their Shock And Awe
Not everyone can change the way they behave. Humans are defined by their personalities and sum of their experience. Changing oneself is a very difficult task because humans are created to be stubborn with their identities. Major change in personality traits can only be resulted from extreme circumstances. And there is no guarantee that one will change for the better.
For those who are not compatible with trading and in particular, day trading, sooner or later they will have to face the disastrous consequences. It can be complete wipe out of their accounts. It can be loss of tamper and ruin their relationships with their families. It can also be loss of the will to live. Unfortunately, all these outcomes happened to many people who attempted to trade and they can happen to you too.
When all hopes are lost, there is a choice to make. Learn to accept your failure and consequences is the first step to get yourself out of the mess. Essentially you are forced to go back to step one to Ditch Your Pride. At this point, you may not have a chance to trade anymore but it is also not necessary a bad thing.
There are famous stories of dramatic personality change in the trading world. Those traders who blew their trading accounts successfully changed their way of thinking. Eventually they managed to make it all back after their disastrous experience. Success stories like that are moving because they seldom happen. The usual outcome is that the person is broken mentally and financially with very slim chance of recovering.
Something one has to remember is that if you are pitted in such a situation or planning for a comeback, your chance of success does not lie in your ability to accept your failures. Many people can do that. That is the minimal requirement for a chance to turn things around. The truth is that there is really not much you can learn from understanding your failures because there are so many ways to fail in trading. Knowing what not to do is not enough to turn you into a profitable trader.
To successfully turnaround the situation, the key is to go beyond acceptance of failure and dig deep for those moments where you were able to make money from the market. Identify those experience that you win by skill, not luck. Those are the most precious things you learned from the market that you know can be done because you already did. If you can keep repeating only those good trading moments, you are one step closer to trading success.
At one end, not everyone starts out with the right combination of personality traits and beliefs for day trading. Those who are able to adapt to the right mix of personal beliefs and characters will eventually become profitable. Even if you are talented in trading, it will still take time to sharpen your skills and shape your core beliefs properly.
At the other end, not everyone can trade successfully, let alone day trading. Although it is possible to force trading performance to happen even if you do not have the personality traits mentioned here, the chance to success is slim and the consequence of such daily struggle against yourself will eventually lead to bigger problems with health and other issues.
Do not make trading a struggle for the rest of your life. If you cannot accept what trading requires, don’t do it.