Mindset of a Successful Trader.
Hello Steemians, it is my pleasure to be here once again to write about trading psychology again. This is going to be the second part of the previous post and I'm happy to be doing this as it helps us a lot to make a good investment decision. This time around, I will be focusing on key facts and mindsets traders newbies are supposed to have about the market before thinking of becoming a trader.
Many newbies come into the market with fantasies and the mindset of coming to make fortunes in a couple of days as if they kept money in the market. Well, it's not their fault because the media and influencers out there have made it look like trading in the financial market is easy and there's no risk involved. For this reason, everyone wants to become a trader without having any understanding of the market. This is why 90% of newbies blow their trading capital in less than 90 days.
This post is basically from my 5 years of experience in the financial market. I started with forex trading before I got to know about cryptocurrencies. When I started, I watched a few videos on Youtube and took the trading lesson from Babypips.com. After completing the trading course from Babypips, I felt like the market wasn't ready for me 😂. I felt like a pro and have imagined how trading will change my generation in a few days.
Funny enough, I didn't backtest any trading strategy not have any good knowledge of proper risk management. I went straight up to fund an account with Fxtm, added 3 indicators on the chart and then boom. From what I learned from using the RSI and Bollinger bands, I saw the setup on the chart and took the trade with confidence. I have already calculated how much I'm going to make from this trade if it goes in my favour.
I funded the account with just $100 using 500× leverage back then and I used 0.1 lot size to open 3 positions. This means that 1 pip price movement gives me $1 and my take profit was 30pips on each position. Calculating this, I knew I was going to make $90 from the 3 positions
I felt like I have already taken the $90 even before placing the trade. I traded a high volatile pair with a spread of 12. So immediately after I placed the trade, I have already gone into drawdown 🤣. Then price went in my favor and then I went into drawdown again. I was losing $30 ok all the positions and instead of closing the trades, I adjusted my stoploss hoping that the market will reverse and go in my favor. This is one miracle that hardly happens in the market. To cut the whole story short, I lost $55 on that trade and my emotions and psychology never remained the same. I have never felt that way in my life after that loss.
Ok yeah, I have lost this money and I needed to make it back. I jumped right back into the market and opened another position. This time with a high lot size because I needed to recover what I have lost in the previous trade. Bloom, this is how one ended up blowing up my account.
The fantasies, my ego, and every other mindset I had about trading were all humbled by the market. I then decided to invest in my education and learn how the system works. I learned technical analysis, and trading psychology and followed professional traders on youtube. I also joined trading live sessions and invested heavily in my knowledge.
I went back and funded an account again. I blew the account again but this time took longer than the previous. To me, I felt like I have made some progress 🤣. I never gave up on my trading goals, so I went back to studying again to understand what I'm doing wrong. Well, every day is a lesson and consistency is key to becoming a better trader.
So from all these experiences, I had as a new trader and also all these years in the market, I will talk about a few key things that you know should know and expect from the market. The truth is that nobody will tell you about this especially the influencers online who want to bring you in and take a commission from the broker. They want to make money and they don't see reasons for telling you the truth about the market.
Permit me if I have said too much. Let's look at the facts about trading in the financial market.
True Facts About Trading
Trading is Simple but not Easy
Most newbies are being deceived to believe that trading in the financial market is as easy as possible. I remember a popular broker here in Nigeria OctaFX that pays almost all Instagram influencers and content creators to advertise the company. The most annoying part is that they try to convince people that your life will be changed as soon as you download the app, fund your account and start trading. Another is the copy trading feature they normally deceived users with. Telling you that you do not need to know anything about trading before you can start making money. If it's that's easy, everyone will be a trader.
Trading is beyond what we see on social media or the adverts. What makes trading simple is that you can start anytime, anywhere and a minimum of $10 to start trading. Also, a lot of features are provided like leverages, copy trading, etc which gives you the advantage to capitalize on the market. But all of those are not what you need to succeed in the financial market. Before becoming a successful trader, you need to be good at the following.
- Be good in technical and fundamental analysis.
- Understand the factors that affect the price of the asset you are trading.
- Understand Supply and demand.
- Understanding trading psychology and also how to manage your emotions.
- Understand risk management.
- Understand trading terms like leverage, lot size, spread, etc.
Some of these you need to learn before you start trading while some learn with consistency. Trading will be easy when you do the right thing and respect the market. If not, you will be humble and give up on your dream to become a successful trader.
Your Predictions are not Always Correct
One thing we need to understand is that the market will not always go in our favor. Our predictions won't always be correct and every trade must not be a winning trade. Some of us allow our emotions to eat us up when we have a losing trade or when the market is going against us after making a good analysis and opening a position after a good setup. It's a normal thing in the market and you need to understand that. A lot of factors affect the price of the market and also the big players also manipulate the market to take your money away from you. For this reason, you need to be careful and maintain proper risk management. The most important thing is managing your risk and that protects you when you have a losing trade.
The trade position must fall under one of the outcomes listed below.
- Close in Profit.
- Close at loss.
- Close at Breakeven.
Your discipline and psychology determine the outcome of your position. Most traders expect miracles and price reversals when the market is going against their predictions. Instead of closing their position, they stack more positions to make extra cash. And then the market keeps doing its thing. You can't control the market to your prediction and you can't compete with the market. If you notice that your prediction is wrong and the price is going against it, just close your positions early enough and wait for another set-up in the market.
The Market also wants to Win
This sounds funny but that's the truth. You are coming into trading to make money right? That's correct. Also, your broker and the big players manipulating the market want to make money. Everyone wants to make money and the only way they can make money is when you lose 🤣.
Since we are just retail traders and our funds can't move the market, we trade and compete against the big players and whales who are manipulating the market to take our money. You must have witnessed price hitting your stoploss and then reversing back to hit your take profit. Also, fake breakouts in the market are ways the market is manipulated for you to lose. If you are ignorant of this, you will keep falling into the traps of price manipulation.
Never Bring your Ego to Trading
I have discussed this in the previous session, set aside your ego when trading in the financial market. Understand that you will have losing trades and the market will not always go in your favour. I have seen professional traders that have a 4-day losing streak and still maintained their discipline. Those losses are minimal because they maintained proper risk management in these trades. When you manage your risks properly, your winning trades will always outweigh the losing trades and you end up making a profit. The most important thing is to be a disciplined trader and maintain good risk management.
Conclusion
We have concluded this post. I'm not trying to scare you or kill your dreams of becoming a trader. This post aims to give you key facts you need to understand about the market. Don't let anyone convince you that trading is easy. Even professional traders with years of experience sometimes have difficult moments in the market. But I believe with adequate knowledge, discipline, and proper risk management, you can become a successful trader.
Cc: @reminiscence01
You have really said well here. I must admit that I have learnt a lot just by carefully reading through this your nice piece.
I have also had similar experience. I blew up several accounts atfer taking course from babypips but that a regard as a starting point for me but ever since I have grown to become more successful through applying more discipline and consistency.
You have deliberately highlighted on the essential key factors we need to consider before initiating our trading positions.
Of course, ego, emotional control, fundamental and technical analysis, proper risk management, as well as adequate research about the underlying asset to be traded or invested in are of more relevance when it comes to crypto trading, therefore they should be taken in consideration.
Sorry for your $100 lost and the subsequent losses you encountered as a beginner before you invested in attaining more crypto knowledge.
I believe now you are making the best out of the market with the knowledge gained.
Thanks for sharing this relevant information with us, I have learned a lot from this article.
Truely this has been a very beautiful Read.
I also trade forex and for real this market will humble you.
But in the long run we will all learn from our mistake.
I used to lose 10 20 dollars on forex and be sad
The first vday I traded option I lost $200
Bruhh I couldn't eat I felll sick.
But the next day there I was ready to go again