The Steps of the Trader Towards Consistency
Since the beginning of your career as a trader, there are many stages that you have to burn. You will not make money consistently overnight. If a job needs its time to be successful on it, the trading is no less.
The society has establish the route that you have to follow to be a doctor, architect and lawyer. It is entirely defined. But not to be a trader. You can not go to a university and study the trader’s career and then go out with your degree and earn money. There is no branch for trader or speculator.
That’s why you only have the experience of other fellow traders, those who have achieved it, those who are investigating day by day.
Basically and with its nuances, all traders go through the same stages if they do not stay first down the road:
The apprentice trader starts in trading world to the heat of the information of the hot day. (the following day in the news media especially when the stock was news of cover). It is clear that the novice comes in a mass when newspapers and TVs are appearing. And that holders such an index or such action has raised by a very high percentage.
Usually in times where the country’s economy is going very well. Thus, people have money left over in their accounts. The novice is willing, believes himself capable, and takes his first steps in the world of the stock market. He goes to his bank and buys shares, usually mackerel or horse mackerel, which is little appreciated. Because he sees that his quotes are the cheapest. And he doesn’t know it that one of the characteristics of mackerel is that. From time to time, they have or may have, dramatic rises. This may multiply their prices several times in a few months.
The crucial problem is that they may also be falling for decades. He does not perceive due to lack of training, why some values are worth more than others.
As I said it is usual that the volume of small shareholders is greater in the market in times of boom. Because the stock is immerse in full growth any stock they buy and anytime they do it will go up. This trend completely hooks them up.
Each time they have more and more profits, IPOs appear advertising on TV. And they go for them with all the money they can spend. Some even borrow money from the family (they also involve it in the bargain of the stock market). Additionally, they may even ask for a loan to the bank to buy Actions.
_ “When the shares are raised enough, I close and pay the entire loan.”
They are loans that ask you for up to 25% interest.
What’s more, I can win much more than that …
Unfortunately, those who earn the most when they raise the bag are usually the ones who lose the most when it is low. Even they do not know what it is to put a stop. They may have heard of just their own, but they do not put it.
_ I do not need a stop, I close mentally; otherwise I know where I put it and I get it …
If you do not use a stop to say about money or risk management.
How boring is this about money management. I buy and sell … no more, I’m a crack.
Crack the one who will have to put up with your account when the tortilla is turned around.
Well, as stop-loss does not go with them and if they put them in do not respect them. After a first downgrade in which their EGO does not let them sell, other harder will come. And since in stock does not materialize the loss until you sell. (Unless the value breaks or excludes it from the stock market) will keep the shares in the portfolio for centuries of centuries. Or until you have to sell because you need the little money you have left.
_ But did not they say that long-term stock market is not lost?
Many do not go beyond this phase. And those who continue because they continue to generate money in their usual work will continue to “play” the stock market. Thus, and will have to endure several more bankruptcies before moving on to the next stage.
The trader, who persists, likes trading and considers something more than an expensive hobby. Starts reading books and attending courses. He wants to know more about that dangerously addictive world that has hook him so much.
It begins to understand individual programs of graphs, that these are composed of candles. And that in turn exist formations or patterns that repeats historically in the charts. The search for the Holy Grail begins at this stage.
Spend hours and hours testing indicators, oscillators, moving averages, etc., He starts to do backtesting. Overpopulates his systems until he observes that he may already have found the philosopher’s stone. As the results that on the paper shed backtesting are very hopeful.
It moves the system to the real operative and turns out to be a new fiasco. At this stage, many traders are left looking for the system that gives them 100% success.
Those who realize that there is not and that there will never be a 100% reliable technique will make the leap to the next stage.
At this juncture, he begins to stay with a series of techniques. Which he believes to have worked best and adapt to his personality (he suspects that there is a particular psychological bias in the trading). And he finally becomes more out of necessity. Than for another thing in the annoying and irreplaceable part of the trading called: money management.
During this stage, he begins gradually to glimpse the different parts of which a good trading system is composed, that said the system is not only consisting of purchase orders but must apply a stop-loss and respect it. And more important if it fits Even to calculate the number of shares or contracts with which you must open a position based on the total money available in your account to operate.
Notice that I speak not only of actions but of contracts. This response to the fact that it already operates through platforms adapted for the operation of the computer and that the actions are a mere residue in which it only enters the face of the long term in particular moments and very favorable where the current situation at that time so Requires.
He has moved on to the best financial instrument he can find to become financially independent: derivatives.
The derivatives allow a high leverage and above all operate up and down. He does not worry about catastrophes or the economy going bad. What’s more, he knows he can make a lot of money even when the markets go down.
He becomes, as it were, a trader who speculates in markets. It dominates all the markets of the world from its screen: currencies (forex), raw materials and the main exchanges.
At this stage, you will meet with fans who have jumped on this stage without having first burned the previous ones. They are newbies who approach the world of futures, CFDs, etc., because they have heard that they can become rich in a short time. But as they open and close positions according to what their meaning dictates, without a technique of entry and exit, and without adequate money
management, they quickly check what the leverage and the margin call is. Surely they will not come back here. It produces a new sieve of novices and traders who are not to pass finally to the next and definitive stage.
This stage can be called the psychological or discipline stage.
It is called that because the trader realizes that the market is driven only by the psychology of all who participate in it.
Learn to be meticulous, disciplined and disengaged by money. He knows that if he is in this profession only for money, he will not go far, notes that it is his passion. Although it has passed and passes through a hard sacrifice, this does not seem to him like that because he has decided to accept the trading as his philosophy of life. He does not want to share it with anything else.
And it persists and continues; notice that it gives 100%. It has correctly defined a system that not only tells you when to buy and sell but where to put the stop, how much money you have to risk the total of your account, how many contracts you have to open the position and psychological rules that help you Control your emotions. It manages to act mechanically, and a loss causes in it the same reaction as a gain: none.
He has learned to control fear and hope, the two greatest evils of a trader.
He knows what he has to do, and he knows that after having established his trading rules, he has only one last step to live on, to succeed in the goal he has set, to reach the target: the practice continues in real. As if it were a juggler, practice and practice in the real market until he achieves total detachment, he forgets everything learned and makes it automatic “entering the zone” every time he operates.
He has pierced the thick line that separates theory from experience, no matter how much he divulges it, no matter how much he teaches his rules. No one will be able to operate with it in the same way and with the same efficiency as him because TRADING IS AN ART AND ART IS WITHIN EACH ONE OF US.
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