In this post, I want to share 15 trading truths that I’m sure you’ll find helpful.
But for starters, let me say this: Trading is hard.
It’s not hard because you have to stay glued to your screens while placing orders, adjusting positions…
It’s not hard because of the research work that you have to do prior to entering the market…
In fact, when you’re advanced and have a well-oiled process, these things take minimal time and effort.
Trading is hard because it requires that you live a life dedicated to growth.
That’s why it’s hard.
As a trader you’re basically a risk-taker and rider of uncertainty… but perhaps above all, you’re a smart worker and a life-long learner.
This is part of the job description and it must be understood and accounted for as you venture into this field.
That being said, here are 15 other trading truths every trader needs to hear.
Trading a business
Trading is a business. This means that you must treat it as such and take it seriously.
If you run your trading business without a plan, without structure, without rules, without best practices, you might make money here and there on a trade or two, but you will not make consistent money and be successful in the long run.
But if you plan and run your trading business the right way, you essentially have the keys to freedom in your hands.
Losses are part of this business…
Another trading truth is that risk is very real and should be respected.
The best-looking set ups will sometimes work against you and result in losses.
When that happens, you must cut your losses quickly and not give second chances.
Second chances tend to turn into third chances, and next thing you know, you’ve dug yourself a deeper hole because you were trading your emotions not your plan.
So, never give second chances. If one of your risk management protocols is triggered, you get out and move on to the next trade, pronto!
A good attitude will smooth your learning curve…
Be grateful, even if you lose.
You might say “why would I want to feel grateful for a loss?”
Here’s why: a loss is a learning opportunity.
You’re gaining experience –you’re either learning what works and what doesn’t, or you’re learning to be more accepting of losses as part and parcel of trading.
So, learn to keep a good attitude–even when things stink.
Delayed gratification is paramount…
In this field, one of the ‘secrets’ of success is to become good at saying NO to yourself.
NO, I won’t remove that stop-loss.
NO, I won’t be defeated by a loss.
NO, I don’t want to be right, I want to make money.
Learn to say “No” to yourself, and mean it!
Be a good student of the market…
As a trader, you are enrolled in an informal school called The School Of Hard Knocks.
Each day in this school you will have the opportunity to learn many lessons that will occasionally hurt – sometimes they’ll hurt real bad.
You may like the lessons or think them irrelevant and stupid, but how you perceive these lessons and what you make of them will either make or break you.
You do not control the market…
The trading game is all about strategic maneuvering because there is uncertainty in the market. And that’s why you need a proven trading strategy.
That strategy is meant to:
- Provide constancy in an uncertain environment
- Help you get out of your own way
- Leverage the law of large numbers
But it’s worthless if you discard it the moment you reap a loss or a series of losses.
It’s worthless if you push it under the rug when your favorite influencer jumps into a trade and your FOMO has you blindly follow them.
Your trading strategy only give you consistency if they stay with it.
You don’t need a crystal ball…
When a trend begins, it can continue for a while. That’s all you need to know. No complex chart reading skill is required to figure this out.
You may like this or hate it, but it is the truth.
Knowing basic support and resistance levels is enough, coupled with risk control in case the trend doesn’t materialize or quickly runs out of steam.
At the end of the day, you can make chart analysis as simple or as complex as you wish, but know that consistently profitable traders tend to keep things simple.
Short-term results don’t matter…
I’ll just leave these 3 quotes here:
Return alone—and especially return over short periods of time—says very little about the quality of investment decisions. ~ Howard Marks
Short-term trading is like navigating through a stormy sea. The waves of randomness will toss you around, but with a solid strategy, you can ultimately reach your destination. ~ Jack Schwager
Randomness plays a significant role in short-term trading outcomes. The key is to focus on the process and edge rather than being fixated on individual trades. ~ Ed Seykota
Epic trades will come when you least expect them…
As said above, people who tell you that they actually know what the future holds are just fooling you first and themselves second.
Understand this trading truth: Trading is not one trade, trading is many trades.
Here’s how you make it in this field: You stay engaged, you remain humble, and you do whatever you can to stay in the game long-term.
Eventually, you’ll catch one of those epic life-changing trades (or a couple of them).
And I mark my words: it’ll likely be a trade you didn’t have much expectation for.
But in the meantime, you gotta go through the grind.
You must think less and do more…
You must train yourself to respond in a way that leads to better outcomes. And in the market, this often means thinking less and trusting more (your trading strategy).
You can’t predict the future with 100% certainty, or anything close to that. But you also can’t control the past, and trying to do those things –obsessing over a future you can’t control and ruminate over a past that’s long gone– only removes you from the one thing you can control: your present actions right now.
Your staying power will bring you success…
Yolo-ing into a trade or investment can potentially get you rich quickly. But it can also get you broke even quicker.
In the market, to do well in the long run, you gotta have a strategy, you gotta trade it faithfully, you gotta trade small to not blow up, and you gotta think long term.
In other words, you gotta have staying power. And that staying power allows the numbers to work in your favor.
Hard work is overrated. Smart work is the way…
The market will provide you with great trade setups on its own whim and time. Have a watch list, identify your levels, have an action plan, and just relax already.
Also, whether you trade 24h markets or not, you need a time structure you abide by―ex: you only look for trades within a 2-3 h time window/ day.
I don’t think it’s very productive to trade round the clock as many do.
Decision fatigue is very real and causes all sorts of trading errors. Another trading truth that many don’t understand.
Your obsession with money is what prevents you from making any…
Money is surely the prime motivator for getting involved in the market.
Nothing wrong with that.
But at the same time, you have got to understand that obsessing over money will only spoil your performance.
And not just in trading. In fact, ask any pro athlete and you’ll get the same answer: Forget the money, forget the fame, forget the prize; instead focus on performing well.
So, size your trades correctly (keep it small) to keep strong emotions in check, and play the long-term game.
Your equity curve is a mirror…
Do you see months of consistent profitability followed by massive drawdowns?
This is a reflection of your own inconsistencies. Your equity curve reflects your own image.
You now know what you need to focus on improving…
If you can find a way to be behaviorally consistent, money will eventually take care of itself.
You will forget these truths…
Yes… you will forget these trading truths.
Try to come back to this post on a regular basis.
Repetition is key to remembering.