Today I want to talk about a topic that could turn a lot of losing traders into profitable and professional traders. In our pro forum, I keep coming back to this topic quite often because I know about the importance and in the pro area, we have now seen many times that traders who follow this way of thinking, have a better chance of becoming profitable.
Learning vs. making money
I completely understand that this will be a tough pill to swallow but I always think that being honest and having realistic expectations is a key to trading success.
In trading, there is a time to make money and there is a time to study and work on yourself. When you are just starting out, you should not focus on making money and you have to completely detach yourself from the belief that you’ll earn a great living any time soon.
The first 1 – 2 years (sometimes even longer) are your apprenticeship period where all you should focus on is developing yourself into a better trader, work on your weaknesses and try to learn as much as you can.
Your focus cannot be on how much money you make because it’s the wrong measurement for your current stage. Instead, you must judge your development based on other things such as:
- Are you consistent in the way you place trades? Or are you all over the place?
- Do you avoid the gambling mindset? Are you consistent with position sizing and risk management?
- Do you have clear rules for every part of your system?
- Do you journal all your trades in your trading journal?
- Do you avoid revenge-trading and other bad behavior?
New traders should focus on those points exclusively and not worry too much about their account balance – as long as they are not losing thousands of Dollars. But the bullet points will almost guarantee that this should not happen.
A good process and a professional mindset will help you become a stable trader for the long-term. If you want to have a trading career, call yourself a professional trader and support your family with your trading, you have to get the start right and give trading the seriousness it requires.
Once you have checked all the boxes and you don’t make too many mistakes anymore and have a clear trading system, then you move from the “learning phase” to the “making money phase”.
Tips: Recommended study and reading material
I often get asked what you should read or follow. So here is a brief overview with important links and books for traders in the learning phase, or beyond
- Trading in the zone – Mark Douglas
- Pit Bull: Lessons from Wall Street’s Champion Day Trader
- Come Into My Trading Room: A Complete Guide to Trading
- ChatWithTarders podcast
- Dr. Steenbargers trading and psychology blog
- Do the Future-Authoring suite – highly recommended to create the life you really want
- The Bible of technical analysis
- The Edgewonk trader development program and journal
And, of course, our own book cannot be missed in this list: Technical Analysis Masterclass
The “making money phase”
Even though you have now graduated to the making money phase, there are a few things you have to be aware of to not lose your trading account immediately.
The general path for a trader in the making money phase is:
Lose a lot of money >> lose less money >> break even >> make a little bit >> make money consistently
It is so important to understand where you stand in your trading career to be able to understand what you should expect and what to focus on.
Keep your expectations in check and make sure that you do not forget all the good things you have learned in the first apprenticeship stage. A good process is worth a lot and a trader who approaches his trading professionally has a better chance of making it in this business.
Wrong expectations (aka making millions in a few years) will kill every trader because wrong expectations impact every part of your trading:
- High expectations cause revenge-trading
- It leads to forcing trades
- You over-leverage and take too much risk
- You abandon rules and take random trades
Keep your expectations low and be realistic that this will take a few years until you can potentially be a full-time trader. But also understand that a few years don’t mean anything when you still have 20, 30 or 40 years of your work-life ahead of you.
Below you see an equity curve from one of our pro students. He was following our free advice for the first 60 trades and on trade #60 he joined our pro area. The first trades were just a break-even phase where he was in the “learning phase” and he completely understood the implications of the learning phase. Once he moved to the making money phase with us, he saw a big improvement and now we continue to work with him in the pro area.
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