If you have been around for any length of time like I have, there is no doubt you have seen countless strategies, tricks, tips, loopholes, hacks, indicators, and magic recipes to make you wealthy through trading. In this article, I’d like to take some time to bring the concept of trading back to reality and dive into the real truth about trading any market.
But that’s a hard thing to do. It’s hard because it IS true that trading can make you wealthy. That you have unlimited earning potential when you open an investment account. Yet, at the same time, 90% of traders expectations are in the clouds.
So how do I go about grounding traders in reality when the truth is that all those crazy expectations actually ARE possible?
Let Me Try To Explain the Truth about Trading:
First, it should be recognized that a small percentage of traders hit it big. Regardless of the market you trade, there is a mainly silent minority of traders who are gobbling up the vast majority of the profits to be had.
If you’re an aspiring trader reading this article right now, there’s a pretty good chance that you’ll NEVER be one of the few percent of the 7 figure traders on planet earth (how’s that for the cold hard truth about trading?).
But it gets worse:
Even if you are one of the few, it’ll likely take years and possibly decades before you break through into that top tier.
And while I am being honest about your chances, let me honest about myself:
I am NOT a 7 figure trader. See, most of the “gurus” out there pretend they are million+ dollar traders and almost none of them are. But that’s not what this site is about. I am coming from the perspective of someone who’s struggled a lot and am on my way up the ladder–I am financially secure, I make a healthy profit from my total investments but I am definitely not trading a 7 figure account for 7 figure profits. I hope to get there some day.
So with that said, let’s talk about point #3:
Even IF you are successful in your trading, you’ll have periods of very unsuccessful trading.
How do I know?
Because I do. Warren Buffet Does. And every other investor and trader on the planet does.
This fascinating business of trading has the highest earning potential to be found; but consistency is not one of the offerings of trading the market. No strategy or plan works every time, every week, every month. etc.
It’s a wild game where you must take the good with the bad. The good days with the bad days, the good weeks with the bad weeks, the good months with the bad months, and even the good years with the bad years.
This is one of the hardest things for the average aspiring retail trader to grasp. Most have fantasies of finally discovering a model that makes them money every week or even every day–it’s just not reality.
This is one of the reasons I HIGHLY suggest a diversified portfolio which is something I’ll dive into in a later article.
If you want to be a successful trader over the long haul, you’ll have to cope with the fact that success comes in waves and that my friend is the truth about trading. Both in the level of success that you’ll have and the chronological series of how that success is delivered.
Let me give you a real estate example of this as it’s fresh in my mind…
In July of last year, I sold a home that I had purchased and flipped for a profit of just shy of 100% of my total investment. I doubled my investment in 6 months!
I don’t care who you are or what investment advice you’re following, that is a great return!
To be honest, I felt pretty great about it, kinda like all my investment mistakes from there on out were over and I had finally achieved the expert status of investing. What I had forgotten for a moment, was that even experts have mistakes and take losses…
I was quickly reminded of that when my most recent home purchase was appraised for LESS than my total investment in it — ouch!
So instead of just dealing with a low ROI on my time, I am actually looking at LOSING money after all my time, effort and resources. That hurts any way you look at it.
So my options were this:
- I could be upset and refuse to take the loss (leaving my money tied up and killing future investment possibilities)
- or I could sell the house quick, understanding that the profit from last July still put me way ahead on my investments and selling the house frees up my cash for my next big win
And that’s how you take the good with the bad. And that’s what I am doing.
See, being a successful trader or investor isn’t about the perfect strategy. It’s not about a win percentage or a risk to reward ratio. It’s definitely not about an indicator or strategy guide (though all of those things can be utilized and make a big difference in your trading).
At the end of the day, it’s about running a successful business. Understanding the truth about trading and the nature of the business you’re in is first and foremost.
Once you do that, you can more appropriately deal with wins and losses. You can be more patient during the bad stretches and take advantage of the good ones. And, you can keep your eyes up–focused on the long term–so that you don’t fall into the trap of thinking that a week of bad trading should define you, as a trader.
Not everyone who opens a trading account is going to be a successful investor. But if you can come to terms with the fact that you won’t always win and that losing is part of the process (ie the truth about trading any market), you’ll dramatically boost your chances of being one of the silent minority who siphons the majority of the profit from the market.
And I hope you’ll join me in that journey.