Denying your trading problems is the most dangerous step in trading. At one point or another, all traders go through this “denial stage” with their trading problems, and how quickly do they go through this or if they go through it, that’s what determines when they get on the path to profitable trading, if ever.
It is widely known that the first step in the 12-step program of Alcoholics Anonymous (AA) is the simple recognition that a person has a problem with alcohol or substance abuse. If you can’t bring yourself to admit your problems, whether it’s a drinking problem or a trading problem, you’ll never win or overcome it. Unfortunately, not acknowledging your trading problems can be just as disastrous for your trading account as alcohol problems are for the health of an alcoholic. Denying your trading problems means you will keep making the same mistakes over and over again until you either lose so much money that you are forced to stop trading or you finally wake up and smell the roses.
In today’s tutorial, I’m going to offer a “6 Step Trader’s Program” that will help you cure your trading problems and hopefully get you out of the trading rut you may be in right now…
Step 1 – Admitting Your Trading Problems
Time to swallow your pride. Check your ego at the door. You need to understand right now that the longer you keep trading in denial of your problems, you will continue to struggle and lose money. I know you don’t want to fight and lose money in the market so you need to do this…
You are going to take a piece of paper and a pen, don’t do it on the computer or “in your head”… you need to write it down physically, otherwise the exercise won’t work properly:
You will write: “I, the John Doe, acknowledge that I have repeatedly deliberately made the following trading mistakes…”
Mistake 1 – My discipline is bad. I rarely stick to my trading strategy. I make trades that don’t make sense according to my method. I trade too much and I know it, now I finally admit it.
Mistake 2 – I don’t have a trading plan. I know I have to do one, but I always put it off. I finally admit it.
Mistake 3 – …….
You get the idea, you fill in your own trading mistakes here and list as many as you can think of. Be HONEST with yourself and swallow your pride or it won’t work. Get it all down on paper and save the paper, you can make it part of your trading plan (more on that later).
Step 2: Take a break from trading to cool off
After you finally admit your trading problems and bring them out into the open, you need to take some time away from the markets to reflect and return to a balanced state of mind.
Especially if you have just experienced a big drawdown due to overtrading and making stupid trading mistakes that you didn’t admit to before, you need to refrain from trading for a while. This time will allow you to reflect on your trading mistakes and really “own” them. During this time, you should be thinking and planning ways to prevent the same trading mistakes from ruining your trading account again.
Step 3 – Make an Action Plan
So you’ve acknowledged your trading problems and thought about them, now it’s time to make a plan so that you actually make meaningful changes and don’t make them again or fall back into your old habits.
For each trading mistake that you wrote down in step 1 above, I want you to take a second piece of paper and write down the appropriate way to correct that mistake.
For example, if one of your trading mistakes was not having a trading plan, then you wrote down that you needed to make a trading plan. and I promise to do it.
After you write down all the ways to solve your trading problems, you need to start actually fixing them. It is not enough to simply say or write that you will fix your trading problems, you must make a conscious effort to do so, otherwise nothing will change.
Step 4. Stick to your plan and maintain constant discipline
Perseverance means that you keep doing something even in the face of difficulties or adversity. In trading, persistence is a key ingredient to success. If you can’t have the discipline to stick to your trading plan and your trading strategy, you won’t be able to make money.
Once you have compiled your list of trading mistakes and their corresponding solutions, as discussed in the previous steps, you need to commit to implementing the solutions.
Remember that follow-ups have the persistence to stick to your course of action, even if you don’t want to.
Traders who become successful are those who enter a trade and don’t close it at the first sign of “danger”. They don’t let “forced trading errors” ruin their trading accounts. Instead, they work on self-control because they know it’s the only thing they can truly control in the market. Whereas amateur/failed traders try to control everything else and in doing so lose control of themselves, the only thing they can really control. This obviously ends up in wasted money, wasted time and a lot of stress, anger and frustration.
So, if you don’t have the constant discipline that is required to be successful in trading, you won’t even be able to solve your trading problems or get on the path to making money in the market.
Step 5 – Stop trying to control everything
It is imperative that you understand that there is inevitably a certain amount of randomness involved in trading. In other words, you never know what the market is going to do “for sure” no matter how confident you are in any given trade.
Traders often get in trouble for being overly committed to trades because they are “confident” in what the market might do next. Overconfidence and arrogance have no place in a successful trader’s approach to trading. In fact, I would even argue that if you are naturally a bit more arrogant and “overconfident” than the average person, you will probably find it more difficult than usual to make money as a trader.
You need to be humble and accept that the only thing you have complete control over is yourself. You can control how often you trade and how much you risk on each trade, these are two huge benefits you have as a retail trader so don’t overuse them.
Step 6. Dedicate yourself to learning a simple yet effective trading method
Many traders try to trade without having a real trading method, they just trade “the seat of their pants” and enter/exit the market randomly. If this is you (and you know you are), you need to stick to the trading method, because you won’t even be able to start your trading journey until you do.
If one of your biggest trading problems right now is that you feel like your trading system or strategy is too confusing and your screen is full of messy indicators, then the solution to this trading mistake will be to learn how to trade with price action. Price action trading should be the method you learn if you want to simplify your trading and learn how to trade on the “cleanest” market data; price.
As you can see from today’s tutorial, you need some structure for your trading and you need a methodical approach to solving your trading problems. It would be nice if trading was almost effortless and if you could make a profit just by entering the market randomly and doing whatever you want, but this is not the reality of what it takes to be successful in trading. Taking action by adhering to a simple trading method based on price action is the first step to a methodical approach to your trading.
To get started, check out my price action trading course here.