Objective: to make a living from Trading!
Trading is not easier than any other profession. And despite everything, even before having placed the first stock market order, far too many think they can make a living from Trading. For comparison, it’s like planning to be a professional footballer (out of the wages of the best) before you’ve even bought a pair of cleats and finished your first game.
You must be aware that making a living from Trading even before having a flawless method, rigor, experience, psychology, and having crossed all types of markets, is impossible. Do not believe either after having won once € 500 in 30 minutes, that this is it, you will be able to trade 30 minutes per day and earn € 20,000 per month, before taxes and duties. Keep your trade, see the result over one year of Trading, two years, three years, and after that you can estimate that the average performance is correct to set yourself more ambitious goals.
The theory of trading and the transition to real trading
A lot of trading training, trading books, and other trading software are popping up on the web. Of course, you can accelerate your learning process through training and other books on Trading, technical analysis etc …, but this will in no way take away the fact that all the theory you have acquired will not alone allow you to make you a professional trader.
Likewise, a demo account with a broker is essential to develop a trading method, to understand the functioning of the markets, but will not allow you to be confronted with the whole psychological dimension when a trade is in progress. Even worse, if you use leverage (and I strongly advise against it), you will see your gains or losses evolve so strongly, that you will no longer know what to do with your trade: cut it, strengthen it etc… it will be pifometric Trading which will quickly bring the Trading account to 0.
Learn as much as you can from people who do Real Trading who accompany you every day and who give you trades to follow , online documentation, training (if you have the means) … but don’t think it will be sufficient. You will need to build your own method over time, your rigor and above all work absolutely every day to truly be efficient over time.
The psychology of the trader
You will also most certainly have to average a losing position, that is to say, to strengthen it while the market is upside down from your trade. As a result, you will no longer have any hindsight on your Trading plan, you will increase your exposure and therefore your leverage and ultimately, you will only be focused on this position by letting all the opportunities that you could have seized either pass through. other markets, or on the same asset.
Keeping your hand and staying objective is essential and the psychological effect will make you do things that you would never have done if you had listened to your trainer or read your book. To correct this, several simple rules:
you think of living from Trading with 5000 euros, so you will inevitably use the leverage effect,
you don’t want to close a losing position, so you will average down and therefore increase your leverage on a losing position against your initial trading plan
you will not place stops because with a strong leverage effect your loss will have a very strong impact on your capital and therefore if things go wrong, instead of moving on, you will do anything with even more leverage strong to try to “remake you”
Again, you certainly have a Livret A that pays you 0.75% per year, or life insurance that pays you between 3 and 6% per year. But do you think you are going to be able to achieve a performance of 20% per month, 100% per month and even more? Honestly, if Trading were that easy then 95% of investors wouldn’t lose in the markets.
A simple rule to avoid losing all your capital:
But if one simply observes the behavior of indices on Wall Street for months and years, after their horizontal consolidations, it has always ended, so far, with a top exit and new all-time highs. . Certainly, we can evoke an overvaluation etc … but those who were until then in the direction of the trend have clearly performed while those who seek the high point, either no longer have an account for Trader because of their leverage, or are in very bad shape.
It’s never the market’s fault, it’s your fault. If you manage to overcome this constant frustration and you know how to question yourself constantly, then you will be able to progress and improve your trading. But to understand this state of mind, there is no miracle method, you have to live it and analyze it over the time you spend in the markets. And to avoid suffering from it before mastering this notion, the best way is always the same: not to use the leverage effect.