Why Do You Trade?
I believe that a prime ingredient for success in any endeavor is the right motivation. One question I like to ask new students early on in class is why they want to trade. This question is very important because so many people fail in this business partly because they lack the drive to persist through the inevitable tough times that are derived from trading.
The obvious answer to this question of why someone would want to trade is to make a lot of money. My experience with traders that focus all their attention on money, however, is that their drive to make money causes them to be lax in their risk management principles. They cling to their losers in an effort to avoid them because profits will only come by holding on long enough for the trade to work; or so they think. This attitude will no doubt have devastating consequences to their trading accounts over time, and many will wash out before they learn that focusing too much on money is not the answer.
My view is that rather than paying attention to the money aspect of trading (which is good, please don’t misunderstand), we should center on what the monetary rewards of successful trading can bring us. These are different for everyone. For some, it may mean not being beholden to any one person or corporation for their livelihood, and that translates into freedom. This may mean time with family, friends, or simply doing things that we enjoy. For others, it may be sending their kids to a good school, or perhaps, traveling the world. Philanthropy, giving something back, is always a fine motive.
A misguided notion about why people pursue a trading career is the belief that because there is no boss to report to, a trader can do as he or she pleases without being accountable. This cannot be further from the truth as successful trading can only be attained by hard work, diligently following rules, and often times, stepping outside of our comfort boundaries. When this reality finally sets in for traders, many will fall by the way side as the short-cuts and easy money schemes are quickly dispelled.
Profitable traders are very competitive individuals who also enjoy being challenged. And believe me when I tell you, being consistently profitable in trading will probably be one of the most challenging undertakings you will ever pursue. This has always been one of the allures of trading for me. Also, the fact that there are no limits in trading — in terms of the monetary gains possible — has a great appeal. Most jobs or careers have some type of limitations, but not so in the trading arena.
Another aspect that can motivate someone to start trading is the gambling component of speculating in the financial markets. This provides excitement to those that need the “action.” The thrill of a “big score” keeps these individuals funding their depleted futures accounts time and again until the trading capital simply runs out.
Here at Online Trading Academy, our motto is that we trade for a better life, not to make trading our life. This statement pretty much encapsulates all the good things trading can provide and what should be avoided.
So, what excites you? What gets you out of bed every morning? What activities do find joy in? What makes you happy? This is where true motivation comes from. Trading should be a means to an end. That end has to be individual, but it must be rooted in something pleasurable or else it won’t work.
Putting money at risk is not easy, but focusing on the reward can change the reasons you trade. So find your positive motivation, set some goals, build a road map to get you there, and go after it.
The Professional Suite is both an intra-day and swing trading technical research service designed to give you an edge and help you make quick and intelligent trading decisions daily.
Written by Gabe Velazquez , Online Trading Academy E-mini Futures, Technical Analysis Strategies and Personal Trading Plan Instructor .
Gabe got his start in the markets as a broker trainee for Paine Webber, a mere 3 months before the market crash of 1987. He witnessed the gut wrenching fear of investors during that time period and the wild speculative euphoria of the late 90′s. That experience brought to light the importance risk management plays in trading and investing. In fact, it’s greatly influenced the way he trades today.
He spent 15 years as a stock and commodities broker, conducting technical analysis seminars through-out Southern California. After many years of managing other people’s money, Gabe now concentrates full time on trading his own portfolio and teaching. Students will benefit from his first hand experience of daily involvement in the market. He brings with him an acute awareness and understanding of how the markets really work. Articulating this knowledge clearly, succinctly, and with enthusiasm is something students can appreciate. This gift for communicating was honed through many years of public speaking.