If you’re frustrated by your trading losses, read this
Today’s Adventure in the Biz Opp Jungle:
‘In which Charlie finds out why some people make more trading than others.... reveals insights from a Market Wizard... and makes three top recommendations for wannabe home traders’
Hi
Bang bang bang...
Ah, it’s the sound of a home trader’s head whacking against a brick wall!
Another day, another loss....
And yet the system was working so well for you in the first couple of months!
Okay, you weren’t raking in thousands, but you were seeing some profit – and you were excited about your future.
SO WHY IS THIS HAPPENING NOW?
AND WHAT CAN YOU DO TO STOP IT?
I hope today I can answer both questions for you.
Now, I’m not a trading expert. Never pretended to be.
Yes, I’ve traded a bit in the past.... I’ve interviewed traders... I’ve helped create and market home trading courses... I’ve read many books and articles on the subject... and I’ve read countless manuals and programmes.
But to answer the two questions above with some authority, I needed to go to the highest level.
So I talked to Matt. He’s one of my best friends... who also happens to be a top City trader.
When I say ‘top’, I mean it. He and his team are like Top Gun fighter pilots (without the homoeroticism and moustaches). They work hard, play hard and make MILLIONS every day for the company. For this they get treated like royalty.
Matt owns 4 London properties and one in Devon.
He bought all of them with CASH! It’s like he’s going round the board in a live game of Monopoly.
Funny thing is, despite his vast wealth, he buys two-for-the-price-of-one t-shirts at Primark.... he’s happy to stay in a rubbish pub because “the beer is cheaper”... and haggles down the price of almost anything.
I’m not going to criticise. This is probably how he STAYS rich.
And by living a modest lifestyle, he keeps all his old friends without jealousy breaking things down... doesn’t worry about gold-diggers... and can store up his wealth like a squirrel stores nuts in winter.
So why am I telling you all this?
I want to show you that Matt isn’t a person who just ‘knows about trading’. Instead, he’s what the writer Jack D. Schwager would call a ‘market wizard’.... a guy in the top percentage of all traders.... part of a tiny elite who rake in multiple millions for their companies, and for themselves.
While he’s not a home trader... spread betting Forex... or fixed odds trading the FTSE... there’s one thing you both share...
Why trading psychology matters
Whether you’re a small fry home dabbler, or trading millions for JP Morgan, you need the same psychological skills and attributes to become successful.
In his book Market Wizards, Schwager identifies two types of successful trader:
· Breakeven Traders (32% of all traders) – use a systematic approach to make money, but have issues with consistency. They over-think trades. And by doing so they introduce emotional bias and delusion to their decision making, believing they are still following a ‘system’.
· Market Wizards (4% of all traders) - fearless and emotionally stable people, with temperaments like fighter pilots.
The bad news for you... it’s highly likely that you are NOT a natural Market Wizard.
Few people are... or ever will be.
Matt says it’s not something that can be learned. For him it comes naturally. He doesn’t plough through books and courses. He literally pushes a few buttons and millions flow from one place to another.
Recently he was thinking about leaving his high pressure lifestyle and doing something else for a living... being too young to retire, and not the sort to sit on a beach the rest of his life, he wants to find something fulfilling.
“But I can’t imagine having any other job,” he said. “I can’t imagine having to write a report, or understand a computer, or learn anything... I just look at screens and hit a couple of buttons. Then we go to the pub.”
For him, it’s genuinely ‘millions at the touch of a button!’
The sod.
So okay, you may not be a ‘wizard’... but you should certainly be at LEAST a breakeven trader (maybe this is the stage you’re at now)... and you can easily raise this to the level where you become a profitable trader.
Once you have a system. It’s all a matter of psychology.
Why most people start losing money
Mark Douglas is the author of The Disciplined Trader. In the book he claims that most new traders think about the ‘unlimited gains’ – the big money.
Few are prepared for the reality... which he describes as a "lonely psychological wilderness."
This is why most traders go through a honeymoon period with trading, but then get disillusioned, and start losing money.
I’ll give you an example...
Last week Matt was anxious because he’d dropped multiple millions. Not the usual few million.... but some serious, sustained, heavy losses. His bad run had lasted a few weeks.
Thing is, he wasn’t out of a job, not by any means. And he wasn’t – like I would be – running around tearing his hear out.
Losing is part of the business. Trading involves both profitable and unprofitable tradesAccording to Matt, it’s very possible to lose around 50% of your trades and still make money.
The problems come when the emotions from losing a few trades begin to warp your decisions.
Let’s say you have a strategy you believe will make money over the long term. You know this, because when you started paper trading the system the results were good. Trouble is, when you chucked in your own money, your results became steadily worse.
Doubts plague you. “Why is this not working anymore?” you think.
One reason could be that the market conditions have changed...
But this doesn’t explain with this phenomenon happens so often to newbie traders... they can’t ALL be entering the market at an ideal time.
So unless the system itself has changed, then the principle reason MUST be psychological.
Here’s how the psychology trap works
When you buy a system, you simply apply it, not really thinking too much. At the beginning you’re more curious than emotional.
Over the first weeks using your own money with higher stakes, you become 'aware' of the strategy. You get pleasure for every win... and pain when you lose.
The pain is always more unpleasant, and it’s what sticks in your mind. So when you lose, you begin to think, “I’m not so sure about this signal’.
What happens next is that many people – without being conscious they’re doing it – begin cherry picking the signals. For an expert, highly experienced trader... or a market wizard... this is fine and they can easily improve the strategy this way...
But it’s dangerous for anyone else.
Here’s why...
· When you get a good result by BREAKING your strategy, it reinforces your newly adapted system... without it necessarily being right. You then continue on a wrong path. When things go wrong in the future you won’t blame this adaptation.
· When you get a bad result from breaking your strategy, the opposite doesn’t happen... you don’t realise the error and go back to the original system... instead you feel doubt, panic and fear... and this creates more indecision... meaning MORE breaking, tweaking and selecting of the strategy.
It’s fascinating psychology, isn’t it?
This isn’t just what I’ve learned from my conversations with Matt and other traders I’ve worked with... this is pretty much the ‘big secret’ revealed in top books like Market Wizards and The Disciplined Trader.
Of course, none of this precludes you from continuing with your home trader... it’s just something very important that you should know whenever you start using a system.
Managing your expectations... recognising your emotions and allowing the logic of the system to over-ride them... that’s the key.
This is why following a system is absolutely essential.
Three recommendations for you
If you’re still looking for a place to start, here are three recommendations – these links will take you to my reviews:
· Forex signals and training
For just £97 a top Forex home trader will send you signalling software, instructions, video training modules, and access to a technical support team. Plus you'll also get a month's worth of trading data
feed:
· FTSE and DAX trading every morning
Here’s a trading system for people with any level of knowledge. Every morning at 8am you will trade the FTSE and DAX. You get spreadsheets to help you calculate the amount per point you should be using and how to increase this to notch up more profits. And remember you can paper trade this system until you’re 100% convinced.
· An evening option using Fixed Odds
If you have ten minutes spare in the early evenings, then this is for you. You can trade the Dow, FTSE, S&P500 or Forex. The aim is to accumulate amounts of £110... £78... £270... £209... £185... all using a controlled risk Fixed Odds staretgy
I hope all of this helps you in some way. I’ll be back later in the weekend.
Later alligator
Charlie Wright
The Biz Opp Jungle