Investor, trader, player. Greed is bad. Sergei Riazantsev
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signals will start to fail when the market changes (for example, from a quiet trend to a volatile trend). An anonymous manager will suddenly disappear after draining your deposit. Trading robots will start making losses instead of profit, and you will not even understand what is the matter. Bill Williams wrote in “Trading Chaos” that if there really was a trading robot that consistently brings profit always and everywhere, it would be rented out for at least $ 30,000,000. Per hour, of course. We will make an adjustment for inflation (since the writing of the book) and estimate the cost of this hypothetical lease at $ 50,000,000. For a non-existent robot.
Imagine the following situation: you are in a foreign country, and for a long time. And you need to live and work in these circumstances. What to do? Learn the language of this country. By myself. If you want to survive. Textbooks, dictionaries, translators will help you – but the main work is still yours.
It’s the same in trading. You have found yourself in a new environment (financial markets), where you need to first survive (not go broke), and then succeed (make a profit). Learn a new language for you – the language of the market. There is no other way.
Recommendations:
– Never despair. Having realized your incompetence, think about the fact that you have just made the right first step. The majority (up to 99% of traders) could not do this either. Further improvement is absolutely real. Stable profit generation is possible and achievable. Go forward.
– There is nothing to do in trading without serious self-education. Again – do not look for easy ways – they do not exist. Don’t chase flashy headlines from anonymous authors: “Eight myths… ten facts… five simple steps… a new indicator… a strategy that gives 310% per month…” and similar information garbage. Most often, such nonsense is written not even by traders, but by copywriters who have not earned a cent on the market. Don’t let them earn money from you. Learn to earn money yourself.
– Constantly read professional literature. Without haste, thoughtfully, making extracts, performing exercises. From my personal experience: I realized myself as a professional after about a hundred books I read and several years of constant work on myself. And who said it would be easy?
– Don’t rush things. Don’t set any hard time goals: “I have to become a trader in a year”. This will take as long as it takes. A doctor, before performing the simplest operation, studies for at least six years. Who said that the profession of a trader will be easier? Why on earth would a market with a turnover of trillions of dollars start sharing profits with dilettante? Think about it.
Conscious competence
Let’s imagine a first-grader who wants to get a job and start receiving a salary. For example, to the investment department of a large bank. The desire itself is laudable, but infinitely far from reality. He needs to finish school. Then finish the institute. And when you have some knowledge and experience in your head, tested on numerous exams – then get settled wherever you want.
Everything is the same in trading. It takes time to achieve a professional level, of course, provided that constant efforts are applied. And you will not be able to jump over these steps, do not even try, do not waste your time. Even a capable seven-year-old child will not understand anything in integral calculus, logarithms or Ohm’s law for a section of an electric circuit. And this is normal. He will understand in due time.
However, many novice traders do not understand these simple things. Downloading a trading terminal and reading a couple of books (or even anonymous articles), for some reason, are considered quite a sufficient condition for obtaining a stable profit. Only serious money likes a serious approach. They are indifferent to naive dilettantes.
You need to spend a lot of time and effort watching the market, noticing market vulnerabilities. You need to trade, try, make mistakes. Read and reread the necessary books. And only then, for those who did not give up, who found the strength to get up after falls and disappointments, a new facet of skill opens up.
It is typical for a modern person to count on the rapid achievement of goals. Advertising actively exploits this psychological vulnerability. We are offered to become slim and muscular in a couple of weeks by buying a subscription to a fitness club. Or chew a new piece of gum and immediately get rid of caries. Or be insanely happy by drinking lemonade of a certain brand.
This primitive cunning is also present in trading. Just today I saw an advertisement for training a trading strategy, the use of which is allegedly able to bring 4000% (!!!) profit per month. The person who receives such a profit is an incredibly modest guy, he was even ashamed to open his name and lay out the trading history…
Learn to set real goals, do not chase millions and billions of dollars at once, everything has its own time. Your initial task should be to survive in the market. Everything else later. If you have not lost money for several months in a row, you can congratulate yourself – after all, you have reached a level that 95% of traders cannot overcome. This is a great result for a beginner.
After reaching the break-even stage, start working on gradually increasing profits. Again, thinking about the real size of earnings, and not about money waterfalls. A profit of 1% per month is a success. Even a stable monthly profit of 2% is an excellent result. This is how much Warren Buffett earns from the 50s of the last century to this day.
Or are you smarter than him?
When calculating interest on interest – without withdrawing funds from the deposit – the progression generally works wonders. Check yourself on the calculator, taking your trading account as a starting point. How much can you earn in five years at 10% per annum? And in ten years? Surprised?
For your information, investment managers of large hedge funds and major banks are simply happy if they manage to earn 15% per annum. As one major investor said:
“Their names are forever in the financial hall of fame”.
Recommendations:
– Do not relax, even after reaching the level of conscious mastery. There is always somewhere else to grow. Even steadily making a profit, from month to month, from year to year – never consider yourself smarter than the market. This is the most dangerous mental trap. Repeated financial crises every ten years (or more often) can suddenly and crushingly correct such self-confidence. Traders who survived the crash of 1987 recalled that the market then opened far beyond the level of the established stop-loss. Just “jumping over” them all in one fell swoop. In such a stalemate, stock market players can only look at the losses.
– You should never stop working on improving your trading system. This is by definition an infinite process. Markets tend to change, and what worked perfectly yesterday may not work at all today. Observation, constant self-education, creative thinking – can not but give birth to new trading ideas. You will begin to notice more and more new market vulnerabilities. And use them to make a profit.
– Do not try to embrace the immensity – to profit from every price movement in any direction. It’s impossible. Our task is to get a decent profit on obvious trends. It is enough to be on the right side of the market even for 50% of the “life” of the trend. For example, if a short-term bullish trend lasted for a week, and you held long positions for two or three days – great. This is more than enough.
Unconscious (intuitive) competence
Once upon a time, a young Russian scientist Peter Kapitsa (future Nobel Prize winner in physics) I was at an international technical exhibition. It was in the first half of the XX century. Then the United States presented a technical novelty – a complex electromechanical device. Suddenly, right during a demonstration in front of the public, this pride of American engineering broke down. It was not possible to perform repairs on their own.
And