Preface: According to data provided by brokers, 40% of traders give up trading after one month, and after five years, only 7% remain active.
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When we communicate with any trading novice or friends who want to enter the trading industry, we do not hide the fact that it is very difficult and challenging.
Why is trading resistance so immense?
There are many reasons why people give up too early and do not see profits. However, the nine principles I will discuss can help us get through the difficult first year. Surviving the first year is crucial for novice traders as it lays a solid foundation for stable profits in the future.
Reasonable Expectations
Many beginner traders like to ask, "How long does it take to turn $1,000 into $1 million?" We have always emphasized that this is the wrong question to ask.
Making such a large amount of money in the market is possible, but in the first year, without any knowledge or experience, aiming to earn $1 million is a very long journey with countless potential losses along the way.
This process is lengthy and fraught with numerous losses. You should instead ask, "How can I avoid losing too much?" or "How can I survive in this market?"
It must be reminded that in your first year of trading, you are very likely not to make any money at all. Even if you break even, you will have outperformed 99% of people. Do not start with false expectations, as such expectations can lead to fast abandonment due to the confusion and anger they cause.
What Should You Focus On?
If you haven't made money in the first year, what should you do? Strengthen your understanding of the market, grasp the rhythms and patterns of its fluctuations, and master trading skills as much as possible. You should also choose a method that suits you and stick to it.
(This is an online learning curve for traders: Frequently changing trading strategies will only slow down your profit progress)
Understanding Loss Categories
Before trading, you must understand that losses are normal, just like profits. Even good traders incur losses.
Next, distinguish between "normal" losses and "stupid" losses. The former means that during the trading process, your execution was not the issue, but the market went against your expectations.
The latter refers to losses caused by your own mistakes, rather than a problem with your system, but rather an issue with your mindset.
What Is the Best Age to Become a Trader?
Many people feel anxious and think they might be too old to start trading.
If you enter the market with a get-rich-quick mentality, you will likely be negatively influenced by this mindset, resulting in poor trading habits such as always feeling the need to make money quickly, leading to overtrading and excessive risk. Remember: Trading has nothing to do with your age; it is suitable to start at any time.
Learn and Master Your Trading Tools
Frequently changing systems is a bad habit. Moreover, before deciding to change, you should use and observe a trading method for at least 6-9 months.
Additionally, you must learn to make good use of trading tools. Many traders do not fully understand their indicators and trading methods.
A mature trader utilizes all available resources and trades diligently. This applies to any industry; as long as you are very professional in your work, you can outperform most people.
Find a Trading Mentor
I know that many people now dislike "trading mentors" because there are so many charlatans in the market. So why do I still suggest finding a mentor? Pay attention: Almost all profitable traders have modified or adjusted their systems to better suit their styles and characteristics.
An excellent trading mentor will help you form an overall view of trading and analyze your psyche, helping you understand your strengths and weaknesses better.
An excellent trading mentor is not someone who promises "guaranteed profits." Do not be deceived by them. In addition to a trading mentor, joining a group of traders who share your philosophy is also essential. Stay away from forums where people constantly emphasize their own methods and even argue with others.
How to Improve Yourself?
Do you remember the last 10 trades you closed? Do you know what caused the most losses? Do you know which settings brought the profits? Are you managing your trades correctly?
If the answer to these questions is negative or vague, I suggest you start keeping a trading journal immediately. Its purpose is to help you analyze past trades, gain valuable insights, and understand your problems, ultimately assisting in your improvement.
You Know What to Do
In most life circumstances, we know what to do. Theoretically, we should live healthily, exercise, maintain good relationships with those around us, learn, and work. But "knowing" and "doing" are two different things.
Doing anything is not easy; it is not as "fun" as imagined and requires strong self-discipline.
Many traders know it takes time and effort to make money, that they need to analyze their trades, back-test strategies, and avoid trading without a signal... but they just can't do it.
Simulated Trading?
Simulated trading is very useful, especially for beginners. When you start learning to trade, you should spend at least a few months on simulation trading and back-testing to quickly familiarize yourself with trading and the market.
However, do not use simulation trading for too long, as it can have adverse effects. Since simulated trading does not involve your own money, you won't experience emotional fluctuations, and there is no real market pressure. Another point I often mention is that simulated accounts do not have liquidity, meaning they do not produce slippage and freezes, so success in simulated accounts does not guarantee real account profits. Simulation trading is meant to familiarize you with trading, but after a few months, switch to a small real account for practice.
Recently, due to some personal matters, I have not updated in almost a month. Today, I found some free time to answer a question raised by some trader friends, to express a few of my personal views. I hope this article can help some traders reduce their losses.
A beginner trader's primary goal should be to "protect capital, protect oneself." It is crucial to avoid excessive losses at first. Do not focus on profits initially, as it is hard to predict what the future holds in 5 or 10 years.
