This is going to be a personal article and I am sure that after reading it many traders will realize what has been stopping them from achieving success in trading for all that time.
If you have been around and read our other articles, you probably know that we try to share a different view on trading and we always try to go deeper and find the root cause for why not more traders can be successful. This one today goes to the absolute core and discusses how many traders set themselves up for failure from the very beginning.
Not everyone can, should or wants to be a full-time trader
This hurts to hear and it’s probably not why you came to this website in the first place, but I promise that by the end of this article you will view yourself and trading in a much better light, so stick with me.
Trading is a lot like entrepreneurship with a few added downsides. Not everyone is made to be an entrepreneur which is why the failure rate of businesses is so extremely high. Here are some of the key points why entrepreneurship, being self-employed and trading can be difficult:
- Noone is telling you what to do. Whereas most people see that as an advantage at first glance, unless you have a clear plan, a great vision and unshakable confidence to push through hard times and overcome procrastination, this is where most people fail. When no one is telling you what to do, we quickly default to a “just do what makes you look busy” mindset and we then avoid the tasks that are hard but necessary.
- I love Sigmund Freud’s quote in this context as well which goes “Most people do not really want freedom, because freedom involves responsibility, and most people are frightened of responsibility.” and it is so true. Many people have a wrong idea of what they want, what it takes to get there and who they are. Being a trader means that you are fully responsible for everything that happens and, let me tell you, it can be stressful and cause a lot of pressure. When I talk to other traders, it quickly becomes obvious that they misjudge the goals they are after that and that taking complete responsibility is the last thing they want or are even capable of accepting.
- There is no free time. When you work for yourself, your work is only one swipe away and there is always something you could do. I know this from experience and I think twice when I have to choose between a lazy evening on the couch watching a mindless movie or putting in a few more hours of work. Work wins in 99% of the time because I always feel that I could do more and guilt easily creeps in. Work-life balance is a myth as an entrepreneur and you bring the work wherever you are. Most people do not really want such a life but are not aware that it’s a huge part.
- No paycheck is waiting for you anymore. It’s comfortable if you know that whatever you do and whatever happens, there is a guaranteed paycheck and a retirement fund waiting for you. Although many people say that they would prefer to get paid for their performance and not be limited by being paid by the hour, this is not true when we look deeper. The uncertainty of being a trader and not knowing if and how much money you will make can add a new dimension of pressure most people can’t deal with. Furthermore, it doesn’t even matter how good you are, sometimes the best setups just don’t work out and even though you think you traded perfectly, the market just doesn’t agree and end up going home with nothing after a good month of trading.
- Traders don’t contribute and they are not creating anything meaningful. This was a tough one for me and I struggled with this point for years. I was coming from the corporate world, working for a huge company where you can directly see the impacts of your work on millions of peoples’ lives. When you sit by yourself, alone at home, buying and selling a financial asset and at the end of the day, you have nothing to show for, it can be depressing for many people.
- The lack of social contacts is also a big downside. Trading is a very lonely job and unless you work in a prop firm or share an office with other traders, you are alone by yourself all day long. This is certainly not for everyone and I had many in-person conversations with traders who painfully realized that they weren’t made to be a full-time trader because they needed some real human interaction.
Ok, we can stop here, this is probably depressing enough and you might probably ask yourself, why I am writing such a downer of an article!? There are very specific reasons why it is important to become aware of the downsides of being a trader and knowing them can help you improve your trading, your happiness and your life significantly.
At the same time, it helps you step outside the darkness, into the light, when you finally realize what has been stopping you from reaching your goals.
1. Self-sabotage and the fear of winning
Whenever I talk about the fear of winning and self-sabotage, I first get weird looks and then, at the end, people have a complete revelation about what was stopping them from trading successfully.
Many traders are unconsciously aware of what awaits them if they “make it” and when they can prove to be consistently profitable. How often have you had long periods where you were able to show good and profitable trading results but then you somehow messed up and lost it all in just one or two bad trades? It’s a common theme for traders to regularly break all their rules even though they know that they should not do it.
The fear of winning and self-sabotage could be the reasons for such self-destructure behavior. If you have been an employee all your life and your social environment is only made up of employees, the entrepreneurial mindset is probably not very well developed. If you then realize that if you are able to trade consistently, you must quit your job, you can’t expect a guaranteed paycheck anymore, you have to pay for your kids’ education and take care of your spouse just with your trading, I probably don’t need to tell you how scary this will sound. Plus, what will your friends and family think of you if you fail? And will you be able to find a new job if trading doesn’t work out?
For most people, it’s easier and more comfortable to just break your rules and make it look like you are not ready to make the leap towards full-time trading than stepping into the unknown where the downside risk seems so huge.
2. The solution: a better role for trading in your life
Now, we can finally come to the part where we tie it all together and find out how to use trading to reach the life you really want. First, you must realize that being a full-time trader is not the only way out and for 99.99% of all people, it’s the wrong goal anyway.
I want to present a few different solutions to make you aware of how you could integrate trading into your life and improve the quality of your life without being a complete full-time trader.
- The part-time trader
If you love your job, there is no reason why you should quit it. Trading should then be a side-hustle, a way to supplement your income or help you grow your retirement funds quicker. It will also help you reduce the overall pressure and probably make you a better employee because you can act without fear or other worries.
It also puts you in a better position to negotiate and you can talk to your boss about changing your obligations as well. You can do more of the things that really interest you, even though it might result in less payment overall but to more happiness and satisfaction which then leads to more productivity and better results anyway.
- Trader and business owner
If you are a business owner or aspire to be one, then trading simultaneously can be a great fit. As I said in the beginning, being an entrepreneur or a trader can be tough because of all the uncertainties attached. But what if you could diversify your income by generating two separate income streams? This could greatly improve your overall approach and reduce the downsides of each path.
Reducing the pressure will then probably lead to an overall more relaxed approach for both the trading and your entrepreneurial endeavors where you don’t “have to make it” in any one field. At the same time, the loneliness of trading can be countered if you choose your business field accordingly.
- Rebalancing priorities and delegating tasks
Having trading as a side-business could also possibly allow you to delegate some of the unwanted tasks. If you are a business owner or work self-employed in any other profession, use some of the funds from your trading to hire an employee to do those things you don’t really like to do but are necessary. This will free up time, make you more productive and you will also be able to enjoy your work much more.
- Trader and a passion project
Another option would be to use trading as your main income source and also follow your passion or start earning money with your hobby. Many people have hobbies but don’t have the time to do them enough because they need to earn money. What if you could use your trading to cover most of your living expenses and then use your hobby to generate a little bit extra while doing something you absolutely love? If you are an artist, start selling paintings, give little concerts, create movies, or organize workshops for other people. If you are into sports, become a biking guide and take other people on an epic tour through the alps, or become a skydiving instructor or a personal coach to help other people achieve their goals.
As always, there is no one size fits all but it’s important that you become aware of different solutions and are open to new ideas which allow you to find the perfect fit for you.
You must create a vision for yourself and your life that actually motivates you. Look beyond the “I want to be rich and have money” mindset which most traders thoughtlessly throw out there. This is not good enough and it won’t be enough to keep you motivated and pushing during drawdowns and tougher periods.
The right trading strategy
Now, we must talk about trading strategies and how the system choice impacts your outlook. Most people randomly choose a trading system they think can make a lot of money but they neglect the underlying principles and mechanics.
I do not want to talk about technical analysis or indicator choice here but the general approach.
Traders usually choose between swig and day trading systems and both have their pros and cons. However, when mentoring traders I have seen that swing trading is usually the better fit for the following reason:
Less screen time. When you are currently tied up in our job, the higher timeframes (4H+) are usually a better fit because you need much less screen time and your daily trading time can often be reduced to 60 – 90 minutes. At the same time, the swing trader approach is also better suited if you don’t trade full-time but have a side-business, follow a passion project or are self-employed. You don’t need to be glued to the screen all day long.
This is also why I chose to be a swing trader myself and I teach my swing trading approach to our students as well with great results. Most students realize that swing trading is a great fit for their busy lives.
You can still make day trading work but it’s a different approach. You must block out entire chunks of time to actively trade a market. For example, a trader could decide to trade 2 or 3 hours of the New York session every morning or parts of the Asian session at night. He then schedules his daily life so that he can undistractedly trade those sessions and the rest of the day, he doesn’t do much for his trading.
However, it’s important that you actively and consciously make the decision which trading style fits best for your goals and your life and not just blindly follow some other traders’ suggestions.
A better approach to trading and life
Although this article turned out a bit longer, I hope you made it to the end because I feel that many problems that keep traders from reaching success in their trading are not due to the choice of a wrong indicator or price action setting, but because they have the wrong idea of what trading is for them and they lack the correct vision.
