Does this sound like you?
You put your heart and soul into trading but your losses keep piling up.
Youâ€™ve been trading for a few years now without any results to show for.
Youâ€™ve realized the money you lost could be put to better use elsewhere.
So now the question is:
Should you quit trading, or not?
Read on to find out moreâ€¦
If youâ€™re struggling financially, you should stop trading immediately. Hereâ€™s whyâ€¦
Hereâ€™s the thing:
Many traders get involved in trading because they want another source of income so they can pay the bills, put food on the table, and have a better life.
And if youâ€™re struggling financially, it might seem that trading is your ticket to a better future.
But, this couldnâ€™t be further from the truth.
Trading is not a get-rich-quick scheme.
Trading isnâ€™t something where you can put in $100 and get back $200 the next day.
Trading isnâ€™t something that will pay you consistently week after week or month after month.
ÍţżÍµçľşľş˛Â thereâ€™s risk involved â€” so thereâ€™s no guarantee in trading.
So, if youâ€™re struggling financially, that money should be put to better use like paying the bills, providing for your family, putting food on the table, etc.
You donâ€™t want to risk your hard-earned money on something that may or may not work because thatâ€™s not fair to your loved ones.
And this brings me to my next pointâ€¦
Borrowing money to trade is financial suicide. Quit now while you still canâ€¦
Trading is a mental game.
If you want to excel in this endeavour, your mindset must be at peak performance.
But if you borrow money to trade, you erode whatever edge that you might have.
Trading with borrowed money = Trading with money you canâ€™t afford to lose.
And when you trade with money you canâ€™t afford to lose, you make poor trading decisions because you have the â€śI canâ€™t afford to loseâ€ť mentality.
So, what do you do?
- You shift your stop loss because you donâ€™t want to take a loss
- You take tiny profits because youâ€™re afraid of watching them turn to losers
- You average into your losers hoping to catch the bounce and recover your losses
Eventually, your poor decisions catch up with you and you lose everything (including the money you borrowed).
Now youâ€™re worst off than before because not only are you broke â€” youâ€™re also in debt.
Do you want this to happen to you?
Then, donâ€™t borrow money to trade.
Repeat after meâ€¦
Iâ€™ll never borrow money to trade!
Your mental capital is toasted
Mental capital is the finite amount of â€śenergyâ€ť to do something (whether itâ€™s trading, exercising, studying, etc.).
And for you, your mental capital is at its peak when you just start trading. Thatâ€™s because you experience hope, aspirations, and possibilities.
But as the years go by, your mental capital gets depleted.
You have thoughts like:
â€śThis game is rigged and itâ€™s not possible to make money from trading.â€ť
â€śIâ€™ve been doing it for years but still, no results to show for. Iâ€™m a loser.â€ť
â€śIâ€™ve blown up multiple trading accounts costing me thousands of dollars. This money could be better used elsewhere. Maybe I should stop tradingâ€¦â€ť
But if you havenâ€™t reached this stage yet, then hereâ€™s what you can doâ€¦
#1: Manage your expectations
Trading is not a get-rich-quick scheme. Itâ€™s impossible to master it over a weekend and expect to be consistently profitable in a few months.
So give yourself time to build a strong foundation.
Youâ€™ll likely take 3 years (or more) to know what youâ€™re doing and how this game is played. Plus, thereâ€™s no guarantee youâ€™ll even make a single cent.
So, manage your expectations!
#2: Start small
When you start trading, your performance will be at its worst as you have no clue what youâ€™re doing.
To compensate for your lack of experience, you want to start small â€” so you can reduce your â€śtuition feesâ€ť paid to the market.
This means you want to fund your account with as little money as possible, just to get your feet wet.
And even if you blow up your account, itâ€™s not the end as itâ€™s only a small amount of money which you can afford to lose â€” and that preserves your mental capital.
#3: Focus on the process, not the results
Youâ€™re probably wondering:
â€śWhatâ€™s the difference between process and result?â€ť
Well, the result is the outcome you want and itâ€™s not within your control (like to make $10,000 a month from trading).
The process is the steps youâ€™ll take to reach your goal and they are things which you can control.
- Iâ€™ll develop a trading strategy that has been backtested over the last 10 years
- Iâ€™ll execute 1,000 trades according to my trading plan without deviation
- Iâ€™ll risk not more than 1% of my account on every trade
Does it make sense?
So focus on the process and the results will follow (itâ€™s clichĂ© but true).
The pain of losing money hurts you too much
This might not win me friends but it must be saidâ€¦
Not everyone is meant to be a trader. Yup, you read me right. Not everyone is meant for trading.
ÍţżÍµçľşľş˛Â trading involves risk and not everyone can embrace risk in the same manner.
Hereâ€™s a true storyâ€¦
When I was studying in polytechnic at 18 years old, I owed John (not his real name) 10 cents for a reason I canâ€™t recall.
To most of you, itâ€™s only 10 cents and you probably would forget about it â€” heck some of you might even tell me to keep the change.
But no, not for John.
He pursued me high and low for the 10 cents, pulled the collar of my tee-shirt, and strongly demandedâ€¦
â€¦for his 10 cents (or there will be blood, ok Iâ€™m kidding the blood part).
But you get my point.
And yes, I should have quickly returned the 10 cents as itâ€™s morally right to do so.
Clearly, John isnâ€™t someone meant for trading because the pain of losing money hurts him too much.
Now youâ€™re probably wondering:
â€śHow do I know if trading is for me?â€ť
For starters, you must be comfortable with risk-taking.
If a small loss bothers till you canâ€™t sleep at night, or you keep thinking about it the whole day, then trading is probably not for you.
And thereâ€™s no shame in that because not everyone is meant to be a trader. Just like how not everyone is meant to be an entrepreneur, an employee, or an Olympian.
Now, hereâ€™s the good newsâ€¦
Just because you quit trading doesnâ€™t mean itâ€™s for good. You can always come back when youâ€™re ready as the market is always around.
So here are a few things to help you get back on trackâ€¦
#1: Pay off your debts
You want to start at ground zero and not put yourself at a (psychological and financial) disadvantage.
So, pay off your credit card debts, the money you owe others, etc.
Once youâ€™re at a clean slate, thatâ€™s where you can work your way up.
#2: Get a job
The last thing you want is to rely on trading to pay your bills â€” thatâ€™s a recipe for disaster.
So get a job and have a regular source of income. When you can put food on the table without worries, youâ€™re in a better mental position to trade because youâ€™re trading with money you can afford to lose.
#3: Trade the higher timeframe
Trading the higher timeframe offers numerous benefitsâ€¦
- Itâ€™s less stressful as the market moves â€śslowerâ€ť and you have more time to make decisions
- You can have a full-time job which reduces your opportunity cost
- It requires less screen time which allows you to do the things you love
#4: Take time away from trading
When you feel that you canâ€™t trade anymore or you donâ€™t know what youâ€™re doing, take a break from trading. Walk away.
When youâ€™ve got nothing on the line, you can re-evaluate what went wrong and how to improve on things.
So take time away to â€śresetâ€ť your mind, then come back stronger to fight again.
Hereâ€™s a recap of what weâ€™ve covered in this post:
- Trading will not get you out of poverty. If youâ€™re struggling financially, get a job
- Trading is not the answer to your debt problems. If you are in debt, pay it off first before anything else
- If trading is exhausting you, then take a break from trading. You can always come back later
- Not everyone is meant to be a trader. If the pain of losing money is too much to bear, then trading is probably not for you
Now hereâ€™s what Iâ€™d like to knowâ€¦
Have you ever planned to quit trading?
Leave a comment below and share your thoughts with me.