India Markets

What is the Real Problem?

Brandon Wendell
Instructor, CMT

Last week I was on a plane when one of the passengers started to feel very ill. It was not a normal air sickness and eventually the flight attendants asked if there was a doctor or nurse on the flight. A doctor was able to stabilize the woman until paramedics met the airplane at our destination.

While the doctor helped the passenger I started thinking about the process that a doctor goes through when evaluating a patient.  The patient will either tell the doctor or physically present symptoms.  The doctor must then diagnose the cause of the patient’s problems.  If they simply treated the symptoms themselves, they may never be able to cure the patient and the symptoms would likely return.

A lot of struggling traders will do the same thing.  Instead of identifying their real problem in trading, they try to switch from trading stocks to trading another asset class.  They do this because they feel that if they cannot successfully trade stocks, they may have better luck with trading forex, options, or futures.  Unfortunately, they find that they can lose just as much money or even more by trading those assets instead of stocks.

I do want to mention that successful traders, and indeed the most successful students of Online Trading Academy, do trade multiple assets.  But the choice to trade those other assets came from a position of strength and not one of desperation.  Trading multiple assets is a great way to properly take advantage of market moves and even help predict those moves.

Pain is a huge motivator.  In fact, pain of losing money in the markets often motivates people to enroll in our Professional Trader Course.   When a pained trader tries to switch asset classes without identifying the source of the problem, they are doomed to repeat the same mistakes.

Once a trader can identify the source of their pain, (i.e, not being able to identify supply or demand zones properly), then they can figure out how to remove it.  We need to improve ourselves as traders before we can switch assets.  I’m not saying that trading multiple assets is a bad thing.  In fact it is just the opposite.  Having the trading knowledge of asset classes like futures and options will improve your stock trading without a doubt.  But trying to switch assets to fix poor trading results is like an alcoholic switching from whiskey to beer because the alcohol content is lower.  The core problem is still there and you are not going to improve until you address and fix it.

So how does one go about identifying the source of their trading pain?  The first thing is to review your trading plan with your education counselor or instructor.  If you do not have a plan, then that is where your problem starts.  In order to trade properly you must have a plan of how you will trade.  This builds consistency and gives us a map to success.

In our Professional Trader Course, we teach how to organize and trade the plan.  If you do have a plan, then you need to dive into your trades and see if you are actually following that plan when you are trading.  Be honest with yourself.  Many of us claim to have and follow a plan, but when we review what we have done for the day, we see that emotions may have taken over and we have strayed from that plan.

If you are following your plan and your trading is not as successful as you would like it to be, you have the easiest fix.  Figure out what is not working in your plan based on the analysis of your trading and change your plan as needed.  If you are not sure what to fix then speak to your educational counselor or repeat the class.  An additional resource that can help you is to enroll in the Extended Learning Track.  In that program, you get two way communications with an experienced trader/instructor on an ongoing basis.  This can hold you accountable for your trading and help to maintain discipline.

So if you are struggling with your trading or even want to improve what you are doing, don’t try to switch assets thinking you will find a miracle fix.  Find the cause of the problem, and solve it.  We wouldn’t place a band aid over a large wound.  You would seek the proper medical attention to fix that wound and to avoid it occurring again in the future.  In the same way, don’t put a band aid over your trading, fix the source of the problem and you will see your results improve dramatically!

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.