7 Signs You Know You’re Maturing As A Trader
Often times, we measure our success as a trader by our account value, whether it has grown, perhaps doubled in size, or whether we have lost and are under water. Unfortunately, this is really a myopic way of measuring our success in trading. If this was the true benchmark, then for my first 6 mos of trading, I must have been a rock star turning 3k into 83k. How did I do it? Over-leveraging to the hilt and having the most unbridled approach to the markets. If you measured success by my account,then no doubt after the first 6 mos, I was a successful and mature trader.
But then, if you looked at the next 6 mos, I would have been the biggest failure of a trader in history, losing almost all of the 83k (save for 12k) in a period half that time. What happened to that really mature, successful trader just a few months back. Where did he go? Which one was the true measure of me? Which one was the most accurate description of my success as a trader?
The answer is neither, and that is why I am writing this article which I think you will find informative about how your trading process is going, where you are at, and how you can gauge your development. So here are 7 signs you know your maturing as a trader.
#1 First You Manage Risk, Then You Manage Reward
The entire 2008 financial crisis was built upon the opposite of this principle, seeing reward while missing the inherent risks of one’s actions. Some people were smart and were able to see the upcoming cliff ahead – not by looking at what they can make, but by what they were risking by taking on such an investment. Don’t fall into this trap.
So many traders in the beginning stages of their trading process decide whether to get in a trade because of the ‘potential‘ profit. They think, ‘this trade has a huge profit potential and its going to win (optimism bias) so my risk doesn’t matter too much’.
The problem is when you see the end of the rainbow and chase after it, you often fail to see the cliff you are about to fall over. It causes you to miss things in the chart which may be alarm bells or subtle details this trade is going to fail. It causes you to have tunnel vision while crossing the street in rush hour traffic. It can also cause you to take trades outside your trading plan and deviate from your discipline – all of these are disastrous to your account, and to building discipline which is the foundation of successful trading.
You will know you are maturing as a forex price action or ichimoku trader when you first look at all aspects of risk, (% equity, time risk, event risk, etc.), then start looking at your upside.
#2 You Are Completely Relaxed When Making Trades
Good trades, bad trades, mistakes, perfect entries, eventually they all blend into the same thing and become just another trade. You don’t feel like it’s do or die with each trade. You do not feel like your entire success or failure as a trader is bound up in this one trade.
If you made a really good trade, sure your happy, but it’s nothing special and your still relaxed, calm and focused on the market.
If you make a bad trade, your not berating yourself, not labeling or defining yourself as a failure of a trader, not thinking this is the end.
Make a trading mistake? No worries since your as calm as a hindu cow and don’t panic at all – you’ve been there before. You simply analyze the situation and find the best solution out of it. Think of how an experienced war pilot would deal with challenges – they analyze the situation, assess the key difficulties, then find the best solution. This is what you do and your relaxed regardless of the trade.
On the flip side, you don’t feel the need to brag or inflate your ego after making a good trade. You don’t feel the need to show your friends, or make a video about it, you’ve been in the end zone before, and you know you’ll come back again. Shortly after you’ve made a big winner, you get back to business because you have more work to do and know the next danger could be right around the corner (or the next opportunity).
#3 You Don’t Force or Chase Trades
If you miss a trade, so what, you know there will be another around the corner and your not thinking ‘this is the big one‘ like Redd Foxx in Sanford and Son. You also don’t chase trades that you missed, getting a worse price. No, you wait for your price, and you’re willing to miss a trade to do this. This allows you to trade on your terms, not the market luring you into a position whereby you have to get a poorer entry or take on more risk just to get it.
You don’t force anything, and just wait for the trades that come to you. The market will be there tomorrow, another great trade will be there in a few hours, or the next session. You’re not feeling like you’ve lost the mother lode every time you miss a trade. If you see something that comes on your radar screen, you jump on it and don’t let it pass you by. If you happen to miss it for any reason, you let it go – your not a dog chasing a fire truck.
#4 Trading is Not Your Daily Adrenaline Fix or Entertainment
I cannot tell you how much I felt like a junkie every time I would trade the markets in my early days. It’s understandable – such a new thing, you can work from home, you can make more money then you are now (a lot more), you don’t have to wear some stupid outfit or do what some mediocre boss tells you to do. You can trade on the beach (although your battery might run out soon), you can make money real fast, basically…you can do a lot of things never possible with some ordinary job.
The markets are not for your entertainment – casinos, movies and sports are, not trading. The market is a very serious business and I guarantee you, your competitors who are making money day in day out are taking this very seriously. Trading successfully, especially after thousands of trades will almost become boring. Not that the markets don’t present a fresh challenge each time, it’s always something new, and always a puzzle.
But don’t make it your source of entertainment or adrenaline in life. You know you are doing this when you feel a huge loss of energy when the markets close on Friday, as if your being cut off from a life force. You know your doing this if making a trade with big lots feels like your jumping off a bridge.
Trading is an arena to make money, to face yourself in the mirror, to build a successful trading mentality, all while challenging your discipline and ability to find opportunities day in-day out. That is all. When you stop making it an emotional/adrenaline bungie-jump/daily entertainment, you’ve settled in the saddle.
#5 You Follow Your Trading Plan
Day in-day out, you follow your trading plan. Whether you’ve had a series of losses, or had a massive series of wins, your discipline remains the same. You trade like a sniper taking out one target after another. You don’t count your chickens because you know nothing is certain in this market and the winds can change on a dime. In as many situations as possible, you are patient, disciplined, and rely upon your trading plan.
Yes, your systems will not catch every opportunity out there – so what? No system ever will, and that is now what you are trying to do. You stay focused on your system, and learn how to leverage the edge and strengths of your system, like a driver that knows his race car – what are its limits, what are its weaknesses, and what are its strengths. Every time your discipline wavers, you put your trading and account at its greatest risk. Every time you follow your trading plan, you put a stone in the pillar of your success.
#6 You’ve Stopped Looking For The Holy Grail
It’s convenient to think there is one solution to all your money problems, one solution to your inability to follow a trading plan, one solution to your inability to deal with the uncertainty of the markets. How convenient, how rosy a world this would be. I cannot tell you how many times I hear from prospective students, ‘I just need a system that has an edge, that makes money…if I had this one system, I would be fine.‘
Anytime I hear this, I realize this person doesn’t realize what trading is about. So what do I do? I give them the same systems I have to other people who have made money from it day in-day out, month in-month out. And what do they do? They lose money while my other traders are making money.
These people have tried everything, looking for the holy grail, looking for that one thing that will solve all their problems. When you have spent as much time experimenting with systems as you have your own psychology, discipline, and trading plan, then you’ve matured as a trader, because you realize there is no holy grail. You realize your edge more often lies in risk management (the risk of ruin tables you should know), and a successful trading mentality. Once you’ve stopped looking for the easy way out, you start to do the real work.
#7 Your Worth as A Trader and Your Worth as A Person Are Two Separate Things
You know you have really matured as a trader when you realize your success or failure at trading has little to no reflection of your worth as a person. You do not tie your worth by how much you have in your account, and you do not accept yourself only if you are successful, while berate yourself for any failures. Trading will never be a reflection of who you are as a person, nor will the size of your bank account. There are many people with bank accounts to last them lifetimes while being the most empty beings in the world, bereft of any sensibility, humanity and kindness.
Because you do not tie your worth as a person to your trading, you are free to embark upon the adventure whole-heartedly. You’re willing to really risk free from all the psychological complications and emotions which bind you. You’re willing to fail, and because you are willing to fail (and you will), you are willing to learn, to not take it personally. When you stop making it personal, or are willing to fail, then you can really put all of you into the experience because nothing is holding you back. Then your trading can truly take flight.
I hope you enjoyed this article and found it a useful reflection of where you are in your trading process, how to avoid the mirage on the horizon that disappears once you approach it, and how to keep your eyes on the target, constantly looking for growth and development as a trader.
I welcome your comments and feedback.