As a new trader, or as one who has gained a new vigor, to be successful we must understand that the road ahead of us will not be easy, nor will it be a quick journey. The path is filled with daily challenges that will test our skills, both technical and mental.
In fact, most traders do not even progress past the start up phase. They fail to:
- Learn to take a loss
- Learn to be wrong
- Learn that in fact, to succeed, this business is VERY Difficult!!
The one constant fact that all successful traders say is true, including Borselinno, Fisher, Jones and more, is that it will take time to become a successful trader. Borselinno says at least a year, Fisher says maybe 2 years, but they all say this business has nothing to do with instant success. Quite the contrary, as most successful traders say that Survival is the first key to success. "Love to take a loss" or "Keep the losers small" all give big clues that indeed we must survive in order to prosper.
As a business consultant, I have often been contracted to work with business owners, corporate executives, and decision makers to offer new fresh ideas on business operations. Throughout the years, I have documented specific cyclical patterns of businesses as they evolve. Below are some characteristics of the three identifiable phases that I, along with all traders, strive to conquer.
Typical progressions of the Start Up phase of a trading business include:
- The lure of Money
- Perceived low barrier to entry.
- "Peer Pressure" News Hype.
- A friend did this and that.
- We read a few books.
- We go to a few seminars, and get all that is freely available online.
- We find some speculative capital.
- We trade.
- We win.
- We lose.
- We lose.
- We need the right tools, but still think we can’t afford them.
- We think "I need to try something more difficult" even though we don’t understand what we just tried nor do we have the tools or the education.
- We lose more.
- We understand that we truly do need to work on "planning", and a way to shift our emotions from an adversarial relationship to a powerful force that guide our actions.
- Finally, we understand that it is ok to take a loss, in fact it is the first lesson we need to learn in order to survive.
Survival is actually the goal for the start up phase. Once achieved, we graduate to the Growth Phase.
Typical progressions of the Growth phase of a trading business include:
- The commitment to education.
- We actually learn something.
- We plan.
- We trade with better results.
- We decide to complicate for some stupid, unknown alien reason.
- We lose patience.
- We lose.
- We simplify again, refining.
- We now understand patience.
- We take more risk.
- The market humbles us, but bigger than ever before.
- We now have trouble pulling the trigger when the set ups are very clear.
- We now understand discipline.
- We learn the mechanics of trading.
- We learn the Life Cycle of a trade.
- We commit our capital as planned, utilizing strict money management.
- We get better.
- We start actually accepting responsibility for our own actions.
- We stop searching, start focusing and graduate to the Mastery Level.
Typical progressions of the Maturity phase of a trading business include:
- We are patient in our endeavors.
- We are disciplined enough to trade our plan.
- We understand leverage.
- We practice strict money management.
- We take less and less risk, preferring to use size on stronger signals.
- We learn how to handle huge dollar profits, but keep our perspective.
Return on Investment vs. Time to money.
- We truly understand the Life cycle of a trade, and can plan accordingly.
- We commit to a lifetime of education and learning.
- We now trade with auto pilot, choosing to participate when the best risk reward ratios exist, and our main priority is to trade our plan.
The bottom line is that many people have traveled this path, but very few have succeeded. I think it prudent as we follow the course to be aware of the natural progressions of ALL businesses, and how we can prepare for bettering our probabilities through planning for each phase.