The Addiction that is Holding You Back in Trading
One of the most important aspects of trading the markets successfully is breaking your emotional attachment to money, the most potent and addictive substance to human kind.
The day I quit my dependence on money was the most important day of my life, and proved to be the biggest catalyst for my trading success. It happened in 2007 at the New York Traders Expo. I was listening to a guest presenter when he shocked the crowd with his request, “Who has money to burn? Pause. YOU should! I need a volunteer with a $20 bill”, he said. Lucky me, I had it handy. I volunteered myself and walked up to the front with my crispy bill in hand. As soon as I approached the instructor, he provided me a lighter and said, “go ahead burn it, free yourself from the only thing holding you back from success.” I won’t tell you whether I did or not, partially because destroying money is a punishable crime, but the question is, would you? Could you?
In order to overcome your addiction you need to treat money for what it is worth, paper. Burn it.
It’s time to check in to rehab and quit your addiction today, cold turkey. Money is not the objective, just the reward. Making informed, disciplined and strategic trades is where you should be focusing your energy as a new trader and this means you must forget about money and break the attachment.
Here are the rules that I recommended to new traders to cope with addiction to money:
- Hide your trading balance. In fact, hide every column on your platform that shows a dollar value. If you risk 2% per trade, your goal should be to make at least 4%, not an x amount of dollars. 4% doesn’t make you think about the things you can buy with it and won’t set off your emotions like the dollar values! Percentages keep the greed, fear and temperament at bay. So hide all your dollar profits and losses for your trades and focus on improving your winning ratio!
- Don’t tell anyone about your decision to start trading. The more people that know, the more inquiries about “how much are you making?” you will start getting. Your answer should always be, at least 4%, because your trade plan should reward you $2 for every $1 you risk, and your stop loss is always 2%. Let’s try another one, “You’re trading? Wow, you can lose everything!”. Your answer? Nope, not everything, just 2%. Now you get it.
- Make your money disappear! When you start building up your initial trading account capital, treat each dollar that goes into the account as money that has perished. It’s gone. Accept that you may never get it back. You may not. Never trade money that is put aside for your well being and survival. Ever!
- Never borrow money. If you don’t have your own, delay your starting date. Trading with money you don’t have only compounds the negative emotions you are trying to eliminate altogether. Besides, this should not even be a consideration – you did read rule #2 right?
- Don’t even nibble the bait. There are hundreds of too good to be true claims out there, sign up and turn your $1 into ten trillion. Only Ben Bernanke has the power to print money like that! Trading is a business and you should not look for the easy way out, or a casino strategy. Cutting corners is for arts and crafts classes.
- Start for the money, but do it for the love. Trading tends to attract a lot of people who have financial problems and looking for the get rich quick scheme. That’s a pipe dream. It is okay to be drawn to the lucrative side, but make sure you only continue if it sparks a passion or interest within you. Trading is a huge time investment that requires passion, dedication and a desire for success. If you do anything for the wrong reason, you won’t get the right result. Trading is no different.
Follow these six rules when you are starting out as a trader and they will pave the way for a long and successful journey. Only about 5% of traders reach the point of consistent profitability and success. By making sure you are not blinded by the addiction to money and focusing on the planning and execution you are giving yourself a good chance to be part of the top 5. Focus on winning trades, the money will only reward you for it.
One of the most liberating moments of your trading career and life is when you realize that money is NOT what you need to be happy and successful, money is just the reward for being happy and successful.
If you condition, train and discipline yourself to be a performance machine, it is only a matter of time before you become successful. And when you get there, the reward is waiting. $