I am effectively a self-taught trader. When I was learning to trade I read book after book on trading, I watched hundreds, if not thousands of videos, I did interviews with top traders. I built my skills through these channels, modelling the trading excellence of others.
In the initial stages and whilst I was learning I was also practicing trading. I noticed that there were a lot of common beliefs amongst less accomplished traders that were simply limiting beliefs.
I’m always up for a challenge, and when someone says that something cannot be done then I try to prove them wrong. It is the contrarian in me! These shared beliefs held me back in my trading until I disproved their theories.
I want to thank you for taking the time to read my work and I want you to have the best possible chance of success in your own trading, so here is my frank and honest assessment of these beliefs:
The lies in trading
These amateurs portraying themselves as professional traders hold these beliefs as if they were true. They believe them to be true, talk about them as facts, however they are not the truth, they are not facts and they are mostly lies that the traders are telling themselves to give them excuses for their lack of success. A bit of a brutal assessment, however, I believe this to be true.
If you are one of these traders then STOP and take a step back. You are lying to yourself and costing other innocent traders money!
If it is possible for someone in the world, then it is possible and therefore the opposite is a lie.
If someone says “you can’t do such and such…” however someone somewhere has done it, then this is a limiting belief.
If I want to do something and if that something is possible for someone else then I want to find out what it is that they are doing and how they are doing it and do it myself.
We adopt limiting beliefs from other people and if it is convenient for us then we unconsciously share these beliefs. It is convenient to have limiting beliefs about trading because it is a tricky skill and we don’t want to blame ourselves for losing money.
However these lies and limiting beliefs that we adopt hold us back. In the end they provide us with excuses for giving up, for not making a success from trading and for only making half the money that we should be making.
As I learned and traded I tested every theory that I could find about trading and here is what I discovered:
Lie – You can’t make money on short timeframes
You can make money on any trading timeframe. There are always computers, institutions and professional traders taking short-term trades in either direction.
Some trades last milliseconds, other trades last years. What timeframe should you trade? It all comes down to finding a trading timeframe that suits your lifestyle, budget, objectives and personality.
Some people are not suited to trading short-term timeframes. They find the shorter timeframes stressful and they haven’t got enough thinking time to make their assessment of the trades and manage them successfully.
It is fine to have a trading strategy that includes or excludes the shorter timeframes depending on your own preferences.
Lie – You can’t dip in and out of the market – you need to study it full-time
Once you learn how to read the market price action then it is quite possible to turn on your computer at any time of the day and start trading.
All you need for a good trade is the right context (price in the right position on your chart) and a good signal (a good candlestick bar), then you can take a trade that has a good chance of being successful. If you turn on your computer at a time where there is good context and a signal then take a trade.
The key is to know sufficient about price action and trading to know when the context and signals are right.
Trading is a game of probability not certainty – this is a truth! With a good trading system some you lose, more you win.
Lie – You can’t learn to trade, you either have the ability or you don’t
Rubbish! I lost money at first, the same as all new traders. I learned what I needed to learn to become consistently profitable and I now execute and teach others.
Lie – You can’t be successful if you only have a small trading account
What is a small trading account? £100 or $100 is too small if it is the only money that you have in the world. However with £1000 or $1000 then you can be successful. Read Market Wizards and you will discover some of the richest traders of all time started with less money.
The key is to manage your trades so that you protect your capital. As long as you have the minimum position size for a trade with your broker and that amounts to 1% or less of your trading capital then you can be successful.
The best traders protect their capital as their primary objective and let the winning take care of growing their account.
Lie – Automated trading algorithms and black boxes run the markets
They do account for as much as 70% of all trades done nowadays on the larger markets, however they do not account for the majority of the volume. Large institutions with real life traders make up the largest part of the trading volume.
Nobody runs the markets. There are professional traders and institutions taking the bull side and bear side of trades on every second of every day and each of them is probably making money over time.
As home based traders we are basically hanging onto their coat-tails. We aim to pick and trade with the winning side!
Lie – Large institutional trading makes it impossible for small traders to win
See above. As home based traders we actually have a great advantage over most of the larger traders. Our trade size is so small that we go unnoticed in the market. Larger traders have other larger traders taking the opposite side of their trades.
A trader is in one of three positions, long, short or on the sidelines. Our advantage as small independent traders is that we can sit on the sidelines until we see an opportunity and then we can pounce. Large traders are bound by the rules associated with their funds and often have to take a long or short position, sitting on the sidelines is not an option for them.
Lie – The Efficient market hypothesis
The Efficient market hypothesis states that the market price includes all of the information about the market and thus there are no ways of gaining an edge over the market.
Presumably they also claim that markets that are in channels act randomly when price hits a channel boundary, also when a perfect double top appears on a chart or when price persistently bounces between a support and resistance level, maybe that it random too? These things are not random. They are created by trader psychology and action!
Warren Buffet said “Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value.”
Lie – You can’t Day Trade successfully with no experience of trading longer timeframes
I read this several times in the first few books that I read. It definitely spurred me into Day Trading action.
True, day trading is a big challenge, however in my experience the more practice that you get at something the better you will get. The more times that you see a Head and Shoulders top or bottom the more that you will recognise one appearing on the current chart in front of you. It is just how the mind works, it learns to recognise patterns and symbols. If you only trade end of day then you may have to wait days, weeks, or months for a trade to work out.
At the rate of one or two trades per week it is going to take a long time to gain expertise. Day trading means trading regularly, this also translates into regular practice. I recommend using a demo account at first as you practice so that you make your mistakes without it costing you money, however the more mistakes, the better the practice, the more that you will learn. Trade regularly, make your mistakes, learn from them and you will get better quickly.
It isn’t more difficult to day trade than to trade longer term, it is just a different skill.
Lie – You can attend a 2 day trading seminar and walk out a successful trader
Getting good at trading takes time. Getting good at anything takes time. You can’t expect to take a two day seminar and become a fully qualified surgeon, so why would you expect to be able to be a professional trader after a two day seminar?
Trading is very very competitive. Some of the brightest minds in the world are competing against you. Some of the richest people and organisations in the world are competing against you.
You will be able to trade after 2 days and if you have the discipline to stick to just trading one particular chart pattern, Double Tops for example then you can be profitable straight away. It is normally gaining the discipline that takes time.
Having a trading system that is workable for you and fits your personality is the key to successful trading. It will take you a few months studying and playing in the markets to gain the experience to become consistently profitable as a trader.
The above are all lies. They are all beliefs and they will be true for whomever wishes to indulge in them. Make sure that your beliefs support your goals.
Truths about trading
There are however a number of truths that are told about trading, so I think that it will be worthwhile going through some of them also.
Truth – You will lose money sometimes
Treat your trading a your business. A business has regular expenditure, marketing, training, coaching, salaries, tax etc. Your trading business also has expenditure – your training and your losses.
Trading is a game of probability not certainty. The probability of a successful trade is normally between 40% to 60% given the typical market conditions. Sometimes we can get near to 70% probability but we may have to increase our risk to get that. That doesn’t mean that you can’t have a winning percentage of 90% or higher, you can. It just means that something will have to give in order to get that winning percentage, either you will need to take more risk or you will need to reduce your expected reward (target).
In our Trading Training Courses we teach you how to enter trades only with a winning Traders Equation. We can’t avoid losses, however we can make sure that we start with a mathematically positive traders equation. This is the starting point for successful trading.
Truth – You will lose money as a beginner
When you are a beginner in trading you do not know what you are doing. Sorry, but you don’t. You may think that you do but you don’t. You will lose at first. We all did. Consider this as an investment in yourself, the cost of training for your new career or in your new business.
Truth – Psychology plays a huge part in trading
Fear is the main problem for traders. Whether it is fear of losing money, fear of being wrong, fear of making a mistake or fear of missing out on making some money (greed).
The keys to conquering these fears are making sure that you always enter a trade with a good traders equation, sticking to your system, accepting that you can’t be right every time and accepting that you will have losing trades.
The trading systems on our trading course are designed to give you the resources and skills to trade with confidence and conquer your fears.
Truth – You will lose in the long run if you aren’t prepared to admit you are wrong and take losses
The world conditions us to want to be right 100% of the time. In trading you cannot be right 100% of the time. Just accept that you will not always be right about the future direction of the market and this will help you.
You can only be right about things that you have complete control over. The market is not one of those things.
The thing that you can be right about is taking the right trades according to your trading system. If you get that right every trade then you will be successful in the long run.
Truth – One of the keys to success is to allow your winning trades to run and cut your losses
Fear encourages us to exit winning trades too early. We fear a winning trade turning into a loser, we fear losing some of the profits that we have gained on the trade if we let it continue to run.
If we have a losing streak then the temptation is always to “get out whilst we are ahead”. This is a losing strategy in the long run. We need to let our winning trades run. Trends can last far longer than you ever thought possible at first.
The trades where we gain 4x and 5x our risk are the trades that produce a major portion of our profits. If we do not have any trades like this and all we settle for is 1x or 2x our risk then trading will become a very tricky proposition indeed.
Truth – Nobody can predict the market successfully every time
Even Warren Buffet made duff investments. Enough said.
Truth – Trading is a game of probability not certainty
View each of your trades as having a 40% – 60% chance of being a loser. If your target is 4x your risk on a trade then you can accept a 60% chance of being wrong, still have a positive traders equation and be immensely profitable over a long run of trades. This is how the professionals trade and how they make their fortunes.
Nobody wins on every trade.
Truth – Money Management and preservation of capital are vital aspects to any successful trading system
Trading offers the possibility of financial freedom and an amazing lifestyle. It also carries with it risk.
Once you have no money then you have no trading capital and no means of income. Once you have no stake in any game involving money then you are out of the game.
Whilst you still have a stake you still have the chance of winning.
Never bet more than you can afford to lose and never bet more than 2% of your trading capital on any one trade.
I always recommend trading “I don’t care” trading size. If you are emotional over a trade then your position size is too big. Reduce your position size.
In our trading course I talk students through how to build your account and use sensible money management rules to ensure that you stay in the game and build your trading account gradually.
Truth – You must decide on a trading system that suits your personality and the time that you have available to trade
If you have a full-time job and work during trading hours then day trading is not for you. With day trading you need to be able to watch your trades in order to manage them.
If you crave excitement and the thrill of trading then end of day trading is probably not going to get you there, you may be better suited to day trading short timeframes.
If you like to be “busy” at work then having a single trade position on the go for hours at a time may not fulfil your needs and you may become bored.
Design a trading system that suits you. There are endless ways to trade, endless possibilities. Find a method that give you what you need.
Truth – You must stick to your system. Backtest it and then trade it. Never break your rules
As mentioned above, you cannot be right every time but you can make sure that you stick to your system. This is the only thing in trading that you do control. You control your risk, your target price and your entry and exit criteria. Manage these things successfully and you will be well on your way to successful trading.
Backtest your system by going back on your charts for a year. Notice which trades would work out and which ones would fail. Resist the temptation to ultra fine-tune your system. No system wins 100% of the time. Some of the most successful traders of all time have a trade win rate of 50% or less.
The thing that all good traders have in common is that they decide on a system that works for them and they stick to their system.
Truth – You must take responsibility for your own trading results and not blame outside influences
If you lose on a trade then you must take responsibility for that loss. You are the one who took the risk, you pressed the magic button.
If you take responsibility then you will learn from your mistakes and eventually eradicate them. If you blame anything outside of yourself then you give your power away to that thing and you will repeat your mistakes.
Losses are inevitable. Accept that. Learn. Move on to the next trade.
Trade a system that wins more than it loses and always trade with a positive traders equation.
Truth – All successful traders use a system that contains certain elements and strategies used by pro traders
As with any profession there are key strategies and skills that are common to the best performers. The best traders, the so-called market magicians all have certain routines, thoughts and actions that are similar.
If you want to be good at anything then find out what it is that the best people in the business are thinking and doing and copy them. I did and it works for me and for our students.
Trading isn’t complicated. It isn’t easy but it isn’t complicated. Learn to trade with Excellence Assured.
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