Now that we’re on the final stretch of the trading year, I bet a lot of you are already looking at the numbers and making plans to step up your trading game to finish the year on a strong note.
Before you put on your “trade of the year,” let’s take a reality check on some truths that not a lot of traders will tell you.
Here are five of the most uncomfortable truths about trading:
1. It takes money to make money.
While a lot of traders have been successful starting small, they’ve also had to deal with pitfalls involved with trading small accounts.
Trading with oversized and overleveraged positions, for example, presents greater risks of a margin call.
Being more invested in the P/L of each of your trades can also drive you to make more trading psychology mistakes than if you had a larger account you could afford to lose.
Don’t get me wrong, you certainly CAN start trading with only a small amount of money. And bad traders can blow a large account as fast as they can a small account.
But trading is not a hobby. It’s a business. And like most businesses, it takes capital to earn a substantial amount of profits. Don’t expect to earn hundreds of dollars per week with your $50 account.
2. You have to be where the action is.
One of the more common trading advices is to maximize opportunities during the time of the day when you’re most available to trade.This strategy is fine. If you’re newbie who’s looking to get your feet wet.
If you’re serious about developing your trading skills and confidence, you have to trade when the market is giving you the most opportunity. For most traders, this usually means trading the London and New York sessions.
Just like how a doctor would see a wider range of illnesses in a tropical third world country than in a first world suburb, traders who trade the more active trading sessions will likely sharpen their skills faster than if they trade the quieter sessions.
3. You’re going to be wrong. A lot.
And because no single system can stay profitable through ALL trading conditions, even your tried-and-tested mechanical systems will be wrong a lot.
So, how do you stay profitable even when you’re wrong?
Remember that a trader doesn’t have to have a high win rate to be profitable. Some traders can be profitable with low win rates if their average win is high enough.
Instead of focusing on winning, focus on learning the art of “feeling” the market.
A trader who can quickly identify changing market conditions and who can manage his/her risk exposure while doing so is a trader who can stay consistently profitable.
Which brings me to my next point…
4. There’s no holy grail in trading.
In case you missed the 57,219 memos we’ve shared, let me repeat it for you:
There’s no “holy grail,” or one indicator, method, strategy, or system that would yield you forex trading profits 100% of the time.
Now write it down or write it on a T-shirt!
Just because there’s no holy grail doesn’t mean you can’t be profitable. Many traders are already trading full-time and even more are content to be consistently profitable.
The key is to control your risk. Since you can’t eliminate it, the least you can do is to control it with proper risk management.
5. Trading is NOT for everyone.
There are many reasons why at least 95% of new traders eventually fail.
For one thing, it takes TIME, EFFORT, and a lot of PATIENCE to become consistently profitable. Those who can’t or aren’t willing to provide all three will likely find themselves among the 95% before the year is out.
It’s also possible that a person is just not cut out for trading. This doesn’t count against the person or the industry. You wouldn’t force someone into the military or play the piano if they’re not interested or cut out for them, would you?
That said, you won’t know if trading is for you until you’ve tried long enough and made enough effort to try to become consistently profitable.
Luckily, the FX-Men and other BabyPips.com members are around if you need any help with your journey.