“You need a stubborn belief in an idea, in order to see it realized” – James Dyson
As human beings, we are naturally inspired by the stories of great heroes: people that have gone against the odds and come out victorious. This is something that goes against logical decision making, and yet many innovators in various fields (Galileo Galilei, Isaac Newton, Roger Bannister, Steve Jobs) which have contributed to our current way of life had to go against the odds, against conventional wisdom and against many difficulties in order to make our world a better place.
We all love heroes and in many paths of life, going against the odds is almost necessary (think about people that need to recover from grave illness). To become a successful retail trader, you too are going against the odds. The question is: is it really worth it? And even if you do succeed, what was the cost?
The Reality of Being a Hero
“The graveyard is full of indispensable men” – Charles De Gaulle
As Trading educators, a story we hear too often goes something like this:
“I started out investing just for fun…I initially made some money and then got hooked – I really wanted to become a trader! 6 Years have gone by and I have lost a small fortune but I have invested too much time and effort to give up. I need to become successful.”
It’s heartbreaking to receive these confessions but it just goes to show how people can really be led astray by an ideal – in this case the ideal of being a successful trader that can make money anytime, any place. It also demonstrates how vulnerable we are to our mental biases like:
- loss aversion “I’ve invested too much time & effort to give up”
- overconfidence “I got hooked to trading, I want to become a trader”
- etc
We really need to consider the opportunity cost of our endeavours. There’s a trade-off to everything we do and to every decision we make. For example, the opportunity cost of sitting in front of the TV during a nice sunny day is potentially enormous: you could be spending time outdoors for your own health (excercizing), with your family, or doing a hobby.
Most people just don’t keep track of how much they have to lose, in the pursuit of consistent trading results. The odds are stacked firmly against the retail trader. Those who make it are heroes in some fashion, because it truely is a daunting task. We’ve spoken about this before but here are some of the sacrifices that “trading heroes” have made in order to reach profitability:
- staring at screens, reading and testing for a number of years (usually anywhere between 18 to 36 months)
- reducing living standards given the lack of profits
- cutting out social activities due to lack of income and/or conflicts (for example hearing friends and family tell you it’s a useless pursuit and you’re better off doing something else)
- potentially throwing thousands of dollars at the market
- etc.
The main message is: don’t be a hero. Be astute. Here’s how.
Beat The Odds at a Reasonable Cost
Experience has taught me (the hard way) that getting help is the best way to save time & money. Find someone who has “been there & done that”, learn from them at a gradual pace, and then go at it solo. After all, is this not the way we usually obtain knowledge and learn in any other field? Before innovating, every genius needed to emulate first.
- Trading successfully, from the retail side, isn’t about reinventing the wheel. It’s about finding a model that works, and working the model successfully.
- Trading successfully from the retail side is about diversification. Learn whilst working a day job. Trade around your day job. Find a model that suits your needs – not the other way around.
- Ignore all the fancy logos, banners and youtube videos advertizing 500% gains per year. That’s a double whammy: your mind focuses on the money, and on a particularily outrageous return. In this job, it’s the tortoise that wins the race. The hare blows up, sooner or later.
- Trading successfully from the retail side is about gratitude. Always keep in mind what you have achieved in life; do not place trading ahead of your family or your own health. If you learn how to trade, but lose all your friends and/or health in the process, that’s not a victory.
About the Author
Justin is a Forex trader and Coach. He is co-owner of www.fxrenew.com, a provider of Forex signals from ex-bank and hedge fund traders (get a free trial), or get FREE access to the Advanced Forex Course for Smart Traders. If you like his writing you can subscribe to the newsletter for free.