How Do You Know When Success in Trading is Getting Closer?

When I began trading live I could not get it to work for me if I stood on my head.  I began to really wonder whether anyone could really succeed despite all of the reports I heard of people making money.

What really inspired me was that I had read the testimony of a woman who successfully traded options that enabled her to build an addition to her house.  Could this eventually be me?  All I wanted was to generate sufficient consistent returns so as to leave my 9-5 job.  Why was it so hard?

Words of Wisdom

I remember a friend of mine and me talking about this precise subject.  While she was successful I was not.  She gave me some words of wisdom which comes in three parts.   I now equate these words of wisdom to learning how to play golf.

Golf has so many moving parts that any one component that is not correct (e.g., your posture, the hand grip, the positioning of the ball, etc.) will not result in a good shot.  So when you hit 10 consecutive shots you feel really fortunate to get one or two good shots and you almost forget about the eight that did not go your way.  You know that with a few minor corrections you can do well enough to play and have fun.

It is the same with trading.  The first few trades I made were losers.  If I expected the stock to go up it went down and vice versa.  I almost wanted to do the opposite of what I was intending to do.  However, when it worked – it really worked well and that is what kept me going.  I realized that with a few minor adjustments (e.g., knowing not to hold an option through a stocks’ earnings announcement, etc.) I could succeed.

So the first part of the Words of Wisdom is to know that when you begin you will see more losers than winners.  However I was not going to give up.  Enter part two of those Words of Wisdom.

Not giving up pays off as I now began having as many good golf shots as not good shots.  It is the same with trading.  I began seeing just as many successful trades as unsuccessful trades.  This second part is what I call the breakeven part.  While getting closer to the success I wanted I felt as though all of my efforts to succeed continued to get sabotaged since one good trade would be offset by one losing trade.  Again I did not give up – and it paid off.

Enter part three.  Here is the validation I was seeking in trading as in golf.  I now got to the part where if I had a total of 10 golf shots, I would see 8-9 good shots and maybe 1-2 bad shots.  In trading I began to see out of 10 trades maybe 8-9 successful trades and 1-2 losing trades.  The best part was that the losing trades were really small losses that could easily be absorbed by the winning ones.

The moral of the story – success is closer than you think.