Beginner’s Luck: A Siren Song for New Traders

photo by author

Most trader’s journey seem to start the same way: with a stroke of beginner’s luck. You dive into this thrilling new world and, gets thrilled on how easy it is to make money. Couldn’t be so unfortunate.

At first, it seems easy. You think you’ve got it figured out after some backtesting, watching a few YouTube videos and reading a technical book. You feel ready to play the game and enjoy the ride!

But beware; this is a dangerous game, not just due to money loss. While financial losses are a risk, a bigger danger lurks: addiction… Many start with a strategic approach, but the allure of quick profits and failure to accept a stop loss can morph into an obsessive pursuit of returns.

Unidentified emotional mistakes can lead to a cascade of poor decisions. You chase nonexistent entries, leave the trade before the take profit target, move your stop loss, increase the risk to try to recover from previous losses, or worse, add to the position and remove the stop. Your plan does not exist anymore.

If you still fall into any of those patterns, I have to tell you

You are a gambler, not a trader

And you might even mask that behavior saying: “I am a scalper”. That’s why you keep losing when real money is on the line.

WHY ARE YOU HERE?

If you’re in it just for the money, you’re setting yourself up for disappointment. You might have some good streaks, but bad habits emerge during prolonged losing streaks. You increase your risk until the hole you’ve dug is too deep to climb out of.

The market will test you, and you’ll eventually face a losing streak long enough to challenge your resolve.

Eventually, you will blow up your account. This is the worst feeling: losing to yourself, disrespecting your money and time, failing to stick to the plan and keeping your word. How many accounts have you blown already?

HOW TO BREAK THE CYCLE

I prefer to lose doing the right thing than to win doing the wrong ones

Read this until it becomes part of you. Why? Profitable deviation is a trap. If you win with bad behavior, you will repeat it. You may get away with it for a while, but when you lose, it costs too much. It does not pay off.

So putting on a trade outside your strategy plan is already bad, but earning from that is the worst type of self-sabotage. Just reinforces the worst in you without you noticing.

It might feel like a win, but it undermines your discipline and reinforces bad habits. Resist the urge to justify risky behavior with short-term success.

How many times have you promised yourself this was the last time you would do something? Did you repeat it?

You need to fix bad behaviors. In order to be a good trader, you must rebuild yourself.

THE MENTALITY

You are in it for the long run.

Each trade is its own event. The same pattern might make you money today and cost you tomorrow. That doesn’t mean you did anything wrong.

The outcome of a well-executed trade is out of your hands.

If you have done your research and trust your statistics, stick to your plan regardless of the results. Your new goal should be to execute each trade as perfectly as your studies indicate. Do it because it’s the right thing to do. The money will follow.

If you find it hard to stay disciplined, hide the monetary values on your trading platform. Don’t check your balance until the end of the month.

If you can’t do it, you are still in it for the money and probably risking more than you should.

When the month ends, review your performance, and come back to share your results.

Consistency beats luck!