BELIEF AND MIND-SETTING FOR NOVICE TRADER
“Every great man was once a baby, every great traders was once a newbie.” – Unknown
My friend…my journey as a novice trader did not go well at the beginning.
Just like most beginners out there, I committed a lot of mistakes and lost a huge amount of money in the process.
I endure red ports for a very long time. I was drenched by fear, doubt and discouragement.
And most of the time I was tempted to throw the towel and accept that trading in the financial market is not my craft.
Good God, it didn’t happen. I persevere and kept on calling the trade…
Realizing that failure, doubt and disappointment is all part of the game. You need to overcome all these challenges if you want to commit on long term trading.
From our mistakes we tend to learn more. We get wounded..yes! However, from that wound it creates a scar, and that scar will turn into a mark, and that mark will signify that you are indeed a true warrior.
We strive more if we are being challenged by any adversity. Some will make it through, while the majority will break.
And that, my friend, what separates the winners and the losers.
Belief and a proper mindset is everything. You may have the best strategy, large capital, good trading system but with wrong belief and mindset you will not make it in long term.
Getting hyped, gambling, unnecessary losses, not being able to execute your trading plan…these are just some of the issues that traders struggled with every day.
Our beliefs about trading, the market and ourselves will direct our thinking and subsequent action.
As Dr. Van Tharp puts it…
“You do not trade the markets. You can only trade your beliefs about the markets.”—Van K. Tharp
BEGINNER’S BAD LUCK
Hopefully my journey will inspire the young Filipino traders, especially beginners. So here’s the terrible mistake I made when I was just beginner in trading.
I thought trading was an easy game. I opened an account, deposited my capital, bought the hot stock everybody was talking about and follow the stock reco from venerated market guru and here we go.
Sitting in front of my laptop with mocha flavor coffee on the side. Thinking, I am now ready to make my first million.
Here comes the rumor… “buy more of this stock, sigurado ito…double, triple bagger”.
As a newbie trader, I easily fall on the trap.
Without a second thought I added more funds and increased my position. This is it, one big move and I’ll be on the easy street. Live and trade anywhere – coffee shop, beachfront, anywhere in the world while earning six..seven figures from my trading account, doing the things I love, living my dream lifestyle…Damn! Who would not want that kind of life?
Easy money right? “Pera sa hangin”, as what my stockbroker friend calls it.
No big capital.
No monster boss.
No traffic going to work.
Just you and the market. Life is good!
And from there, I started thinking how proud I was trading actively in the stock market and pitied those who haven’t started yet. Excited, determined, I am now ready to conquer the world!
Several months later…
No first million was made. Only huge losses and a bloody red portfolio in front of me with a mocha flavored coffee on the side, which I did not drink because of over-thinking what have gone wrong.
As an engineer by profession, I do analyze things. Putting all the pieces together, studying the series of events, and the company just to see what went wrong.
I was possessed with thinking that it was all my broker’s fault, It was the social media group I was following fault and it was my friend’s fault for not telling me the whole story etc.
Everything turned against me because of this, because of that..and there comes the blaming game. Yikes!
Blaming others except yourself on your trading outcome is a wrong mindset every trader should avoid.
One must take full responsibility of his/her trade. The market don’t owe you anything, the world in general don’t owe you anything.
Except of course to the officemate whom after you lend some money have the guts to never talk to you again. Damn!
But hey! Do you know the Pareto Rule? It says, we have 90% control of the circumstances and the remaining 10% is what makes life more exciting, right?
You cannot control the market, nor predict its direction. But we have a full control over our emotions, our trading plan, the method we use, and the position sizing.
Now back to my story… with huge loss, red port, though disappointed I am still eager to take my losses back.
Now, given up to that thinking at that very moment, I started to treat trading as sort to gambling.
Revenge trading as what they call it. I lost money and I want to take it back..right now and then…
The problem is when you were emotionally consumed by “revenge trading”…the logic was gone.
You are now trading recklessly… no plan, no money management strategy, just you driven by your emotions to get your money back.
My friend, that exactly what had happened to me….
Throwing several trades hoping to recover my loss I ended up chasing the stock price. Well, it gives me some results. A “gambler’s results” as I call it, and the result was not very comforting.
I lost more money on that gambler’s trade…more red ports and now I am really disappointed.
THE NEW BEGINNING
So I took a short break from trading and start analyzing and contemplate about myself, the market and trading in general.
That’s when I realized, “Hey! I did it all wrong from the start”.
So I start searching for ebooks on amazon.com about Trading to equip myself before the comeback.
I came across with these two books: Super Trader by Van K Tharp and Trading for a Living by Alexander Elder.
Luckily, a friend of mine who’s also a trader have these books and lend those to me. No need to buy from amazon. Yay!
Those books were an eye opener. In my opinion, everyone who just started or wants to start trading should have these two books.
Reading Van Tharp and Alexander Elders craft gives me not only information but also realization that Trading like any business needs expertise, thorough planning and commitment.
So I ask myself…
Why did I not give enough time to know myself and the market first…
Why did I not start setting my goals and planning a strategy to achieve it…
Why did I not invest first with my knowledge… “Aral muna bago invest”, I always come across with these words in the internet. How stupid I am to ignore it.
If you treat the market seriously, it will give you serious money. The problem is if you’re not serious with the market…the market remain serious… seriously taking all your money.
You get my point? Your success on trading will depend entirely on your beliefs and ways of thinking.
So start it right or you will suffer big.
What is your goal?
Why you want to trade?
Is it to buy your dream house or a car?
For your retirement?
Or only a hobby?
Always start with your “WHYs”. Then create a trading strategy to achieve it.
Plan your trade, and trade your plan.
How much capital do you have? How much capital are you willing to risk? What trading methodology will you use that fits your personality and lifestyle?
Those were just a few questions a novice trader should ask themselves before entering the market.
Honestly, it took me some time before I realized all those things mentioned above.
It took me some time to realize that the battle should be first fought within. My mindset about trading, the markets, and about myself.
I learned my lesson. Entering the market with wrong belief and mindset gave me a hard slap in my face. Wapak!
What about you? What is your novice trading belief and mindset when you just started your trading journey? Share them below in the comment section.
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Photo credit: Anne, Alessandro Bonvini, Gil,