Now, don't get me wrong, when I first started trading, I was susceptible to everything that could of been offered. You name it, "Systems for sale" "holy grail" "indicators" and not forget Signals on MT4. I mean, back when I started, I was not aware these "services" were available to me. I simply stumbled across them each time I blew my account. I was always looking to replicate the "way" that the traders in "Market Wizards" would trade. ( A Book i recommend all traders should read)
I probably have spent around £10,000 on courses, systems, robots. You name it. i have purchased it. But it was not enough. There was something missing and I came to that realisation only 4 years ago. Had I paid more attention, actually, if I only paid attention to Psychology in trading, I would have avoided the emotional roller-coasters, more importantly, I would have saved my self a ton of money.
Trading really does test you. Its not something that should be taken lightly. As with any business, there are processes you must follow to the T. Lets face it, would you start a business with very little capital or none, and assume it has a chance of at least surviving to make a profit in its first year? Would you think your business would survive if your costs were more than your revenue generated? You get the idea...
Trading is sold on the premise that you can achieve financial freedom. This sets up all newcomers into the mind set that minimal effort is required to trade and more so, its simple to do.:
My First Love...
My first experience of trading...Well what can I say. I was hooked when my mother first introduced me to the stock market. ( I trade mainly Forex now). She pulled out this book called "Successful Investing" It was a big book and she told me that " I could make a lot of money on the market" I became excited, I snatched the book and dug right in. Little did I know, my mother was also sold the idea of financial freedom, and unfortunately so was I.
I became a social recluse. I did not want to disengage from reading this book. After reading it, I started researching more and more about trading. I was mesmerised at how guys my age were making millions simply buying and selling stock. I needed to find out more. Then came IBD. Investors Business Daily.
This website was all about Stocks in the US. Now hands down, this website was fantastic for content. There was an approach to picking stocks based on the CANSLIM method, that was pioneered by William J O'Neil. I purchased his book and it became my bible. I read it several times, I believed I understood the methods he was teaching, the patterns I needed to find in each stock to determine whether I would go short or long, were they in accumulation or distribution, were the earnings accelerating over each quarter?
For around 9 months I studied and worked. I felt that all I had read was enough to take the leap. I wanted to put all I knew to the test ( Man I was so naïve). So I went to the bank, took out a loan for £25,000 and deposited into my trading account. £25,000 was a lot of money, but back then, because of how eager I was to trade, I opened an account with the first brokerage that allowed me to trade the US stock markets.
So picture this...I have been studying the market and the CANSLIM approach. I was so excited to trade, I had a lump sum of money and I was ready to take on the beast, I even thought I was going to be mentioned in the new Market Wizards book. I was euphoric, there was nothing else I wanted to do but trade.
My First Trade...
Everything was set up. Money was deposited. Screens on with live feeds. The ticker symbols were all flashing, the charts were showing the price fluctuations. I was thinking to myself: " I AM A TRADER, I'm going to make shit load of money".
The first trade I made, was in a company called Intuitive Surgical. This was a company that built robots to assist surgeons conducting intricate and complicated surgery. Now based on my analysis, I could see the chart looking like it was going to rise, so I purchased 100 shares at $50 a piece.
My heart never raced so fast. The emotions that were encapsulating my body from the moment I placed the trade, gave me such an adrenaline rush. I had made my first trade and it was going in my favor. I could see I was in profit and it was fluctuating between £90-£120. Now you can imagine how I felt seeing green numbers on my screen. I was thinking, "I'm a genius" 9 months studying as paid off. Then...Those little gremlins Fear and Greed rose to the surface.
"Welcome to Trading"...
For some reason, in my mind, I had the voice saying " your a genius, your making money off your first trade, just hold it and make more, its obviously going in your favor". Then the same voice would say: "Yo man, play this one cool, its your first trade, take what you can"
During this battle in my mind of whether I hold'em or fold'em , I closed the trade with a £289 LOSS. I never felt so sick in my life. Everything started to flash back to me. What did I do wrong? was it the methodology? why did I not close it at a profit? I should have won.
The emotional downward spiral that I experienced from that first trade created the monster, REVENGE. I had to get back my money, I was not taking my first trade as a loss. So, 1 hour later I entered again, this time I had a mission to get back what was mine...I couldn't have made such a terrible decision...I re entered long, thinking It would retrace back, and I simply watched my account drop to £19,000. WOW. I kicked my computer screens, stood up and trashed my desk. I was a force not to be reckoned with. I couldn't believe it. What happened? WHY ME?
Take A Breath...
So my first experience of trading was not exactly a great one. But looking back, there were so many faults with the way I approached trading. I was ignorant. I believed that I could simply just read about trading, follow a system and make money. I mean hey, I was in profit with my first trade, but then I ended up losing £6,000 on my first day of trading.
My brief story can be related to many traders when they first started out. No doubt, there are traders who never experienced this, however, there is always a time in a traders life where they experience the true reality of what trading is about.
I encourage you. Do not dismiss the importance of psychology in this game. My first experience broke every single rule there is about trading. I went in with an ego, I had expectations, I was envisioning where price should go because "my analysis told me". I was revengeful, I wanted what was mine, I was like the big kid in the toy shop screaming at their mother " I WANT THAT TOY NOW".
Do not enter into the arena of trading if your mind is not ready. You have to develop a state of mind that is in harmony with the markets. You have to let go of any assumptions, all expectations and trade what is being shown to you, not what you want to see.
I will leave you with a quote from one of my favourite Traders: Mr Livermore.
"The Game of Speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance, or the get -rich-quick adventurer. THEY WILL DIE POOR".