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"Money without Brains is always Dangerous" 

-Napolean Hill, Author of “Think and Grow Rich”

So, you have funded a trading account, or you are considering it. That’s great, but I have a few questions for you.

  • Do you have a strict trading plan?
  • Have you practiced that plan in market replay?
  • For how many hours have you practiced your plan? For how many days, weeks, or months?
  • Have you developed CONSISTENT results from your practice?
  • Do you have a set of rules for managing your trades?
  • Can you execute your plan and these rules without fail? Are you “unconsciously competent” when trading?
  • Do you spend more time practicing than actually trading?

 If you answered no to any of these questions….. WHAT ARE YOU THINKING?!

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I cannot tell you how many stories I hear about traders blowing out their trading accounts. I am consistently bombarded with emails from brand new traders who want to invest in our products and then expect to start trading their newly funded trading account. Or my favorite, “How much money can I make per day?” Are you kidding me? You haven’t even proven that trading is potentially profitable yet you want to throw some hard-earned money into the markets? Heck, you’re better off going to a casino and putting it all on “00 Green” and crossing your fingers.

So, referring to Napolean Hill’s quote, you have the money but you don’t have the brains. I like that quote, but I’m going to modify it a bit. “Money without EXPERIENCE is always dangerous”. I don’t think you’re brainless for trying to jump in and trade your money away. It’s exciting! No doubt there. And if you are trading strictly for the excitement then go ahead! Just don’t expect to get that money back. But if you want to be profitable, if you want to start paying some bills with trading income, then you need to build the skills first. And you can only build skills with experience.

Sorry to pop your trading bubble, but, building the skills is boring. Most traders have a multitude of faulty assumptions about trading. You can read more about those here. Most traders are in search of that holy grail, that one tip that will make them a successful trader….. and here it is.

Experience + Time + Practice + Proper habits = Skill

Not what you were hoping for was it? I wish I could tell you we had an indicator or trading system that will make you $1000 a day, but that is not true. NO SINGLE INDICATOR OR TRADING SYSTEM CAN MAKE YOU MONEY. Indicators read information about the markets. It’s up to you to decide what to do with that information and how to trade it. There are many trading systems out there that are trying to sell to the emotional side of you. They are trying to get you hyped up about trading by making promises about how easy it is to get rich quickly. Below is an ACTUAL ad that I found online. 

If you have any knowledge about sales you know this to be true, if you can get the consumer thinking about money or sex it is much easier to sell to them. Just watch any beer or fragrance commercial. We are suckers for this tactic. The brain gets excited and impulsive when our minds are fixated on how we’re going to feel while using the product. The emotions go into hyper drive and overload the logical reasoning portion of the brain. So if you are buying indicators or systems because they state that they can make you a lot of money quickly and easily, you are being suckered. The system cannot make you money, the indicators cannot make you money, ONLY YOU CAN MAKE MONEY TRADING. And doing that requires that skill that I was referring to above.

For example, The Intentional Trader has an excellent trading system. We call it BUNT trading. The indicators are the best of the best at providing information and displaying clearly and concisely as a particular market condition exists. Occasionally, I will get an email or complaint stating that our indicators are generating false signals. THERE IS NO SUCH THING AS FALSE SIGNALS. Indicators don’t tell you to buy or sell. They tell you of a condition that exists in the markets, and it’s up to you to understand what usually happens in those conditions and what would be appropriate for you to do based on your trade plan and rules. For example, we have discovered that when there is a confluence of a certain type of information provided by our indicators, there is often a pullback or retracement from the trend. That is our edge we have chosen to use. This we consider our “20%” of trading. The mechanics of identifying, entering, managing, and exiting a trade. Knowing how to practice, how to establish positive habits, how to gain the experience and skills of a successful trader is the “Other 80%” of trading. Unfortunately, most believe that 20% is all they really need to know. These people don’t last too long and end up giving their hard-earned money to those that do know the Other 80%.

So, If you’re a 20%’r, keep your money safe and just have fun with trading in simulation mode. Adjust your expectations and understand that you’re approaching trading more as a hobby than as a professional that generates a regular income from trading. Otherwise, you will just be giving your money away to those that choose to give 100% effort.