The harder we work, the more effort we put in, the more money and rewards we will get. The less we work, the less money we will make. A person who works three jobs will make more than someone who doesn't get off the couch. In commerce, this is not the case.
Virtually no effort is required to trade the market. Anyone can buy and sell stocks, currencies, or other market instruments, having gains and losses with no effort at all. If you don't believe that, tell your 5-year-old to push the buttons for you. He may ask when or how, but once trained, without any effort, he will buy and sell currency without any reason or thought. Some of these trades will make money, some will not. As you can see from this example, in the case of winning trades, would it be because a 5 year old was thinking through trend lines and reversal points? Of course not.
When the new Trader comes to the market ready to trade stocks or currencies, he has a mindset like most others. And this is a big reason why many don't stay there too long. They trade by making trades, winning and losing, with no effort at all. If they win more at first, they believe that trading is as easy as eating a piece of pie. How can anything be so hard? You only buy here and sell there. And until there is a string of losses or one big loss, they don't begin to rethink their thought process. If a trader loses and loses, he becomes convinced that trading is impossible and no one can do it. Once he starts a string of wins or gets a big win, that's when his belief begins to change and he thinks it might be possible. Notice how we had an initial belief based on certain criteria, or chains of memories, that created this. Once the various criteria were placed in the combined experience, the belief was somehow distorted or changed.
When stereotypes change
I myself started actively trading in 1997. It was a pretty strong bull market shares. It was easy to miss stops and still most of them came back to leave my account intact. The technology sector was extremely overheated. I could open a deal in one day, take my daughter to the pool, come back and see where I was. I didn't have any negative experiences. None of the stocks that went down went down for too long and eventually came back to make me a profit. I formed the confidence that all I had to do was buy and hold.
It was that easy. Then in 1998 I was faced with a deposit size requirement. This negative experience skewed my view that "trading was that easy. With the same momentum with which my portfolio was going up, it collapsed downward. It was at this point that I had to form a different belief, and that was what I "wanted" to change. I had to learn about the deeper laws of market functions and, ultimately, the psychology of trading. Obviously, the game was not just about buying, holding, and hoping. The market would find a way to take the money of those who traded that way. And it took out many, unfortunately, who thought that way. So, what is my belief about trading now? Trading is a game that involves a funny circle.
- I started by making money without effort
- I went on, lost money effortlessly (it takes no effort not to push the sell button)
- I went on, learning all I could about the market and myself (significant effort)
- And here I am, trading again, mostly with minimal "effort"
What was the difference? First, I traded effortlessly with no fear, because I had nothing that told me there was anything to be afraid of. The requirement to deposit instills fear. I learned risk and risk management principles, just as I developed my gut feeling about trading. I now have nothing to fear again. I don't feel that the market can ever take more from me than I am willing to let it. I wonder how a beginner and an experienced trader, can have the same faith, with a different understanding of the same market.