How to get ‘back to trading’ after a bitter losing experience

This guest blog post was provided by Topstep Trader. Topstep Trader are a media partner of The Trading Show Chicago, and were at the event this past June!

In this article, I would like to talk about: How to continue learning to trade without damaging emotional and financial capital.

The Trading world is highly competitive, severely punishing, ruthlessly unforgiving and yet can be very rewarding. While travelling the roller coaster journey of trading, the trader will likely experience a lot of frustration, anger, fear, greed, euphoria, heartbreak, and financial and emotional meltdowns. There are traps and mine fields all around and the unsuspecting trader is unaware of all these even after getting hurt repeatedly.

The only way to become a successful trader is through a lot of experience, many screen hours, and patience. It takes a while to figure out the markets and then some more to apply the learning to actually profit from trading. The trader finally and reluctantly realizes the need to become a serious student of the ‘Game of Trading’. By this time however, most traders are emotionally frustrated and financially stressed and the road to success may begin to look very dark. So what is the solution? How does a trader know if he has the skills before putting capital at risk again?

Before talking about the solution, let us see what the trader needs in order to be successful and profitable. The main steps for success in trading can be briefly summarized as:

1. Finding the Edge

2. Developing a proper risk and money management strategy

3. Implementing a firm, yet practical and adaptable, disciplined trading routine.

To put all this together and to put it in practice, the trader needs to have a self-developed Trading Plan detailing the edge, risk and money management strategy, and a list of do’s and don’ts to complete the discipline routine. Successful traders will have to learn to predefine the risk of every trade, cut losing trades quickly, and systematically take profits or trail profits when the trade goes in his/her favor. The trader will need to develop abilities to trade without fear, while at the same time exercise restraint so that he/she does not become reckless. With sufficient experience, the trader will learn to feel the markets, adapt his action to the continuously changing market behavior, and learn to preserve capital. That experience is an indispensable part of what allows one to stay in the game longer and become a consistent, profitable trader.

While the above solution is straight forward, the question remains, how does the trader get the necessary experience? How does the trader get back in shape? Remember, the trader is most likely emotionally and financially wounded. The answer is, ‘simulated trading under supervision’. The key is ‘under supervision’. The only way to learn and master trading is by experience. Trading needs to be treated as a continuous exercise in learning, and while simulated trading is certainly no substitute for live trading, gathering experience without using real capital can and will save you lots of money that you may have otherwise lost while just trying to get experience. I am convinced that a trader will have a much better chance at succeeding if he can start making money and keep it while sim trading under proper supervision. If sim trading is done under the supervision and monitoring of a responsible agency and if there is a reward attached to the performance, I believe it will closely approximate the challenge and stress of live trading. This is especially true if such sim trading also costs some real or earned money.

It takes a long time to find your edge. It is akin to the skills of an athlete or a professional sports man. Experts and market wizards will confirm that there are a million ways to make money in the market but for the individual trader it might take years to find ‘the one edge’ from which the trader can personally start profiting. Even after finding the edge, it takes a while to be able to execute the trades flawlessly with discipline and to begin profiting from it.

The trader can use the sim to learn how to manage risk by following required criteria set up for performance evaluation and learn to overcome personal limitations and weaknesses before he/she starts to trade again with real money. It truly will help to test your discipline. The trader learns to protect capital, which he/she will learn to appreciate as the learning progresses.

I am currently benefitting from simulated trading under supervision. My firm of choice is TopstepTrader. It is the only firm I know that has taken the bold step to promote simulated trading and not to exploit traders’ vulnerability. Additionally, it makes available excellent guidance and resources in the form of expert market commentary, trader chat rooms, psychological development, and continuing education. Not only do they encourage traders to use sim trading as a valuable tool to expedite the learning curve but they also are willing to back any promising trader who achieves a set of performance requirements and profit objective. Of course, the evaluation, called the ‘Combine’, comes with a small cost. The cost is a blessing relative to what one would spend trying to trade their hard earned money without properly understanding what they are doing. The cost also ensures that the trader is emotionally invested in the efforts and performance. Moreover, the trader is conscious at all times that his performance is recorded, observed and evaluated for a potential live trading account. This is a win win for current traders and aspiring traders alike. Not only is the trader learning without the associated costs and possible losses, he/she is ACTUALLY vying for a job as Live Trader.

I firmly believe, simulated trading under supervision, can be a solution and possible cure for the wounded trader. The trader can and will get the required experience without putting much money at stake and will be able to experiment and find out for themself if he/she can become a profitable trader and if they can consistently make money in the market. In fact, I believe it can help all traders to learn and improve if done under the supervision and monitoring of an independent agency.

Good Luck to all Traders.

For more information on all things trading, check out The Trading Show Chicago.