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Trading Tips

Are you really cut out for trading?

Should you really be trading? It isn’t for everyone. Here are a few potential indications that trading might not be for you.

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I don’t know if this is really a recent post or not as every post on her sight seems to have the same date on them at the moment, but at some point Jessica at Rouge Traderette shared some thoughts on how to figure out if trading maybe isn’t for you. She presents a trio of signals that maybe it isn’t. I’ll address each in turn.

1) You can’t sleep
I actually think this might have more to do with either excitement or excessive risk taking. We’ve all been in situations where we’re just too excited to sleep at night. I know in my own trading there have been times I’ve awaken in the middle of the night and checked my positions to see how they were doing from a positive perspective. Do you maybe want to reign that in a bit? Probably.

From a negative perspective, if you can’t sleep because you’re worried about the market going against you then you’re probably trading too big. You’ll sometimes hear the advice that you should set your position size to the point where you can sleep at night. If insomnia has you up can checking your positions in fear of taking a loss, then it’s probably time to cut your size.

That said, if you are really hesitant to even pull the trigger on a trade regardless of size for fear of losing money or simply being wrong then maybe trading isn’t for you. I once had a student in a class who wouldn’t even do a trade in a demo account out of fear. Not a good sign for a would-be trader.

2) You are overly concerned with your losses
Jessica actually presented this in terms of denial, which is definitely something to be worried about. If you can’t face up to your losing positions, that’s not a good thing! You’re going to have a lot of losers over a trading career. You need to learn to be able to handle them. Going down the denial route will almost invariably lead to disaster.

Think of it in these terms. Traders who don’t abide by their stops are the ones who tend to take the biggest trade losses because their positions just keep running against them. What do you think is going to happen if you are in so much denial about a losing position that you won’t even look at it?

3) You can’t separate trading from real life
As with anything else, you don’t want trading to become your whole life. That’s not a healthy situation. On the relatively mild side of things it can lead to early burnout. At the more extreme end of the spectrum is things like lost relationships and disastrous trading because you’re taking things personally.

I admit, trading can be very stimulating for any number of reasons. For that reason, though, caution is required. There’s nothing wrong with trading as a form of entertainment, so long as you understand that’s what it is and set your financial expectations and commitments according.

I would add one BIG thing to this list:

You think that you will change your life overnight.

Trading is work and like anything takes time. If you’re looking for a quick fix, walk away.

By John

Author of The Essentials of Trading

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