7 tips that will help you survive your first year as a trader - Part 1

No wonder that the analysis of brokerage data confirmed that 40% of traders quit after 1 month and only 7% are still active after 5 years. The reason why so many traders give up too early and don’t see the results they are looking for, can be boiled down to 9 principles. The following points will help you understand what it takes to survive your first year(s) as a trader and also how to pave the way for a great trading future.

1. Avoid unrealistic expectations

The first question traders always ask is “how long does it take to become profitable?” and this is a very wrong question to ask – when starting out. Yes, it is possible to become a profitable trader within a few years but it is much more likely that you will lose (several) trading accounts before that.

Although it does not sound good and it might be a downer for some of you, it is important to realize that you won’t make a lot any money in your first year(s) as a trader. If you can trade around break-even and not lose any money, you are already better than 99% of all traders and are off to a great start.

When starting out, you have to focus on not losing all your money so that you can keep trading and learning. Starting with wrong expectations quickly leads to frustrations, bad trading, over leveraging and finally quitting. Make sure to avoid that at all costs.

2. Focus on the right things

So if you are not going to make any money, what are you going to do that first year?! The first steps of a trader consist of getting familiar with the market and the market dynamics, you should look for a decent mentor (more on that later) and start studying as much as you can.

You should pick ONE method or approach and start putting all your focus on that one approach. Over the course of your trading career you will most likely go through several systems and try out different things, which is normal, but you should stay away from frequent “system hopping” and changing your approach every month.

It’s important to develop the right mindset and stay away from gambling and the get-rich-quick promises. Don’t focus on making money, focus on establishing a good routine and learn as much as you can about one method.

3. Should you demo trade?

Demo trading has its place and is certainly recommended for traders. Spending your first few months on demo is necessary to familiarize yourself with the way the trading mechanics and market dynamics work.

Staying too long on demo, though, can have a negative effect. Demo trading eliminates the emotional aspect of trading and it does not teach you how to handle the real money pressure. Setting up a small live trading account and getting your feet wet is a great way to practice.

4. Build a playbook

You should at least give your trading method 6 – 9 months before you start changing it completely. Also, really try to understand the tools and concepts you are using. Most traders use indicators or trading methods and don’t fully understand what they are doing. If you want to become a professional, profitable, full-time trader, you have to really learn your craft and dig deep.

Get a playbook and take screenshots of similar setups, take notes and study the same setups relentlessly. Over time, you’ll pick up similarities and patterns and so build your knowledge. Trading, especially when using technical analysis, is a game of pattern recognition.

Most traders look for consistent results first. This is not how it works. First, you need to have a consistent approach, then you can have consistent results. Don’t change your trading method all the time!

Source: Bloomberg Pro Terminal

Jr Trader Z Karadzhova