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If you are like the majority of people out there then chances are that you came across trading through a retail portal. You may have seen a programme on television which showed a trading floor buzzing with activity or read about a trader who had recently made an obscene amount of money on a trade. Perhaps you knew someone who worked for a hedge fund or investment bank. Whichever one of these it was, the end outcome was the same – a seed was sown in your mind telling you that you could become rich through the financial markets.
Trading Places….
My first introduction to trading was watching the movie “Trading Places” with Eddie Murphy! Remember the scene at the end? Basically, the Duke brothers were buying Orange Juice futures on the expectation of a bad harvest. Billy Valentine (Eddie Murphy) and Louis Winthorpe on the other hand were short as they knew the harvest had been good so were expecting the price of orange juice to fall. Prices indeed dropped and Valentine and Winthorpe made a ton of money in the process while the Duke brothers lost everything! I was fascinated by this for a long time and kept wondering what had actually taken place. Hence a seed was born!
Phase 1: The Starting Point:
The most important part of the journey is knowing why you want to be a trader. Why do you want to do this in the first place? What do you want to get out of it? Is it just a money thing? Is it a passion? Is it something that has been at the back of your mind for a while? It’s crucial that the reason why you’re doing this is much more than just money. The reality is you won’t make money for some time so you need something deeper to keep you motivated during those times. The most successful traders I know are people who simply love the markets and are perpetually fascinated by trading. For them it’s not even a job but a passion which they leave breathe and eat every day.
Your why…
Every trader will be tested and the difference between success and failure can come down to your reason why. Remember 95% of traders fail so in order for you to be in the top 5% who make money, you need to think differently and one of those areas is in having a rock solid reason why. If someone says “I want to do this so I can make a lot of money” I know that 12 months later this person is likely to move onto something else. If on the other hand they say something like “I am fascinated by the markets and believe I have what it takes to be a successful trader. I want to provide the highest level of income I can for myself and my family and am ready to do whatever it takes to make it happen” then I know this person has thought through things much more seriously.
Phase 2: The Initial Period
The initial period is where bad habits are normally formed. This is the first 6-12 months where you will typically spend countless hours reading forums, trading articles, books, strategies and trading. Make no mistake, trading is addictive and you could easily spend 10 hours in front of a screen without noticing it! Most people at this stage will be looking for the Holy Grail or some magic trading strategy which will make them instant millionaires. Your trading results will be mixed at best or very poor on average – you will either be loosing money and not understanding why or just feel like you don’t get it.
Is It All About Strategy???
Most traders in the Initial Period are strategy focused and spend their time searching for the perfect strategy. You get an email telling you a new strategy has been released which is giving 30% return a month and you jump on it. You soon discover that this is just marketing gimmick and struggle to make money from it consistently. You then come across a forum where someone is describing their trading strategy for free and willing to help other newbie traders. This person sounds experienced so you drop everything to follow him/her. A few months in and you are still struggling to understand what this person does and how they do it as they apply a lot of discretion that you simply haven’t yet developed.
This cycle of searching for something new and then finding it doesn’t quite work leaving you to search for something new can go on for years. It only stops once you realise that you need to learn how to do this properly from a professional. It will probably involve you paying for a proven system or some training so that you can develop an edge rather than looking for short cuts.
Phase 3: The Trial – Give up or Continue?…
The third phase is the trial period. This is where you are tested to see how badly you want this. Is it just a get rich quick scheme you’re looking for or are you willing to put in the time and effort required to master your craft? What if this takes you many years? How long and how deep are you willing to go on for until you get your prize? It is at this stage that many people give up, they spend a year or so trying to figure the markets out and eventually decide they can’t do it. They then tick trading off the list of money making ideas they tried and move on to the next thing.
Earn Your Stripes!!!
What a lot of people fail to realise is this – trading takes years to master. I don’t know a single person who trades profitably that did so in a short period of time – it just isn’t realistic. Why? Because you need to understand the business you’re in. Every time you trade you are basically competing with someone else who is willing to take the opposite side of your trade and so you need to ensure you have an edge. How can you expect to take on the big banks and institutions who have more money than you and more brain power to throw at the markets without dedicating a proper amount of time to the craft yourself? Now obviously I’m not saying that you won’t make money for years and years, but I’m just highlighting the fact that you need to treat this business seriously because the big boys you are up against take it very seriously.
Part two of this article will be published next week. Meanwhile, if you need any help with any aspect of your trading then simply get in touch with us as there is nothing we love more than helping other traders to become profitable! You can also find out more about our auto trading systems which are delivering consistent profits to our traders and allowing them to realise their financial trading goals stress free. Email us as info@enigmasignal.com or visit us at www.enigmasignal.com.
How true, how very true. A most interesting article. I can’t wait ’till I receive the next one. I have had an interest in the forex market for some years and only now am I beginning to feel confident. I have finally found my system with which I feel comfortable. There is no quick path to riches! There is no holy grail but just a hard slog with no guarantee of success. In my case as a pensioner it enables me to keep the old brain ticking over. The prospect of a small win or two is very attractive. What i find appealing is that skill is an intrinsic part of the operation.
I cannot do the 4 minute mile anymore but this gets me up in the mornings