Think Like A Trader Blog

Thursday, 21 February 2019

What Happens When You Hit a Tough Month - Student Experience

Reading Time - 5 Minutes

Hello Traders.

In this blog post I want to go over something that is normal for a trader, but can seem like a huge problem the first time it is experienced - almost like hitting a brick wall.

Instead of simply explaining it, I am going to use a student's experience and will include the email he sent to me initially. We will simply call him 'D'. D has been profitable for 7 months now. He has been doing very well. His particular approach and what suits his trading personality is that he stops trading each month after he hits 6% growth. For the past 7 months he has been doing just that. And on quite a few of those months, I have been surprised by how quickly he reaches his target!

D follows his plan and is very disciplined in what he looks for and how he then executes the trade. He does a lot of work mentally as well as physically to make sure he is in the right place for trading each day he sits at the charts.

And then came this month - February. His trading environment has been more unforgiving and he has found his results to be more choppy. And a couple of days ago he had his first 'emotional trade' in 7 months, where he deviated from his plan and was rewarded with a loss.

Now for D, when that happened, it seemed like the world was coming down around him. It was a glimpse of the old trader who was learning and making silly mistakes regularily. He even questioned his approach to trading.

So what is this blog post really about?

It is to let you know that no matter how well you do at trading and how spectacular your results are, you are going to hit tough periods. It is part of the game of trading and unavoidable. There are times when the most professional traders slip and make a stupid mistake. It is normal.

I always like to say to people that anyone can take winning trades. But a trader is made during the tough periods when the month is tough and you just can't seem to string together your run of winners. That is when people start making mistakes and it all falls apart.

However, D only made one small mistake. A lapse in judgment which he instantly caught and didn't let snowball. His month has been a tough one in that he is down by 2 full position losses. At the time, when you are going through a tough month, it can seem like everything is collapsing around you. But it is vital to get some distance and realise that it is a very small 'blip' on the radar.

Making no money for trading a long period of time is very tough to take. It weighs on your mind and makes you doubt yourself. But it is normal and you are going to experience it as a trader. The most important point is that you don't allow it to pull you down into the depths of making repeated mistakes, changing your plan, your profit targets and just about everything else you can think of.

A good way to do that is to look at it as a whole. So, referring back to D, we would look at seven months of 6% growth in a row. That is 42% in only seven months! And in reality it is more because of compounding.

Then, when the tough month comes, you don't think - I have lost 2% so far this month! You think, OK, I've made way over 42% here and it is time to give some back to the market. This would be me paying my rent and staff wages if I was running a 'normal' business. Or this would be my quiter period if I owned a store.

The danger as a trader is to start thinking you can just have clear skies ahead and ride off into the sunset. When that happens, tough periods can have a much bigger impact. Just follow your plan and maintain your discipline. If there is a mistake, realise that you are only human and it is normal. The key thing is to pounce on the mistake and stop it from becoming a bout of emotional trading.

So, before beating yourself up too much as you run through a tough trading period, instead step back and have a look at what you have achieved and what the tough period actually means in the bigger picture. A trading mistake is not the end of the world and happens to us all. Catch it and don't let it spiral out of control. Tough months happen. You don't have to look very far to see traders out there who have regular 20% and even 30% drawdowns. Now, I could never deal with that and continue forward. But that is my weakness. However a 2% drawdown after 7 months of consistent gains is nothing.

I have copied the email below. Realise if any of you are struggling that it happens to everyone. No trader is perfect. The ones who show you nothing but gain gain gain and say it is easy for them are, quite frankly, full of shit.

I hope you're all having a good trading month.

James Orr

Thursday, 10 January 2019

Stick to Your Grind in 2019!

Hello Traders.

I hope you all had a great Christmas and New Year.

We are on the 10th of January already. And I know that so many of you entered this year with the best of intentions. You pumped yourself up and you determined that THIS year was going to be different. Your goals wouldn't be things you planned out in December and then abandoned as soon as you hit a few roadblocks.

Well, this year can be that year. It can the the 365 days where you pull yourself toward whatever it is you want to achieve. But it isn't going to be easy. It never is.

I don't care if you want to learn how to crochet. If you are determined to start a new business. If you are desperate to learn how to trade. Whatever it may be, 365 days is a LONG time to stick to something and continue to put in your grind day after day after day.

What normally happens? We smash into January and we power through the first couple of weeks. Then we get into the latter half of the month. February starts to rear its head. You're busy and you're tired and you are finding out that working toward your goal is a lot more work than you expected. It's so much more difficult than you could have imagined.

And what comes next? You take your goal and you slide it under your bed. You shove it back far enough that no light can get to it. You leave it there to gather dust, until it is coated so thickly that you can't even see it any more. You forget about it, forcing yourself to do it.

But it doesn't ever really die, does it? If you are honest with yourself. It's always there, a gentle whisper in your head. You still want to do it, you just don't know if you CAN. Because it isn't easy. So, it's better to decide that you can't be bothered, rather than finding out for sure that you just weren't able to do it.

2019 doesn't have to be like that, though. This can be your year. It can be the time when you don't shove your goals aside and instead continue on in your routine as if you're trapped in some hideous version of Groundhog Day. You just have to make sure, absolutely certain, that you keep making progress, day after day, even when all you want to do is curl up and forget about the whole thing.

How do you do it?

You start by making a deal with yourself. Right now. You tell yourself that this year is different. You tell yourself that no matter how hard it gets, you are going to continue on until at least the end of the year. And if you get there and you still want to give up, well then that's just fine. But you'll get there exhausted and knowing that you gave it your all.

And do you know what will happen when you get there? Most likely you won't want to give up at all. Because you'll sit back and you'll say to yourself 'look how far I've come!' And you'll learn something else - it was only difficult when you stopped to allow yourself to think about it. The rest of the time you were too busy to let it bother you at all.

Make the deal with yourself. Superglue the goal to yourself by going one step further. Speak to someone close to you - Mum, Dad, sibling, brother, sister, boyfriend, girlfriend, whatever it may be. Tell them what you intend to do and here's the important part: ask them to ask you for regular progress updates. Once per week. And whever you feel like quitting, ask them to tell you that you promised yourself that this year would be different.

Get to the end of the year and just don't feel like carrying on? Fine. But at least you'll know that you did it, that you stuck to your grind and you proved to yourself that you can keep going when everyone around you is shoving their goal back under the bed for another year.

I hope you are all having a great trading week!

James Orr