What if I told you that you’re learning to trade the wrong way? Well, in most cases I think I would be correct. Most traders, including myself, started learning how to trade backward & in this article, I want to explain why that is and what we can do to fix it.
What do you want to get out of trading? I’m sure there are many reasons but at the end of the day, they are all centered around making a profit. The next natural question that we’ll typically ask ourselves as traders is “how do I make a profit?” The obvious answer to this question is “find a profitable strategy”. Now in a perfect world, all of our problems would be solved after we find one but unfortunately, the reality is that the next steps in this process are typically trading the strategy, struggling to make consistent profits (if any profits at all) from it, ditching the strategy for a new one (usually blaming everyone but ourselves), and repeating the process until we’ve completely bled our account dry. This cycle is due to two key factors. Very poor trading psychology and underdeveloped technical skills.
Trading psychology is THE MOST IMPORTANT part of trading & if anybody tells you otherwise then they are wrong. I say this because a profitable strategy is worthless if you don’t have the ability to consistently execute it. Probably an extreme analogy coming up but essentially it’s like a person trying to protect themselves with a gun, but they can’t actually aim it.
There are many levels to trading psychology and if you’ve been a follower of mine on social then you’ve read many articles, listened to plenty of podcasts and watched numerous videos of me explaining what they are. But at the end of the day, one of the main reasons traders struggle is due to a lack of trust in their strategy and lack of confidence in themselves.
Developing trust in your strategy is a simple fix. BACKTESTING. Backtesting is the process in which a trader goes through to insure their strategy actually works. The process can be long, lonely, frustrating, tiresome, etc. But when it’s all said and done the trader will know every detail about their strategy, with the main detail being, does it actually work. This in itself won’t make you a super-confident trader, only experience will do that, but it’s a damn good starting point to get that Belief → Actions → Results cycle in motion. Trusting yourself comes with developing a skill, which is something many new traders lack because instead of learning how to trade they jump straight into learning a strategy.
LEARN THE SKILL OF TECHNICAL ANALYSIS
Learning to trade is unappealing to many traders because it doesn’t actually involve trading. Since many new traders see trading as gambling or a get rich quick scheme I suppose the proper analogy would be it’s like driving to the casino to sit at a table and not actually play the game. However, we must remember that TRADING IS NOT A GAME, it’s a business and you never want to put any real money at risk until you have a fully developed business plan & you’re confident that you can execute it. But I digress…
The truth is, no matter what strategy you decide to trade, it’s important to know how that strategy works. Not only will that knowledge allow you to optimize the strategy and adapt it to the ever-changing market conditions over time, but it will also allow you to gain confidence because you know exactly what you’re doing instead of trading it blindly.
As traders, our main goal is to predict what price is more likely to do next. Therefore it’s important that we take the time to understand price. Having an understanding of it will allow us to be more confident in our predictions & therefore more confident in our executions. So instead of wasting months and years jumping from strategy to strategy with little change in your results, think about whether or not it would be worth investing your time in what really matters. LEARNING TO READ A PRICE CHART.
For more on this subject please check out the video below
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