Why You Need Humble Pie as a Trader

10 févr. 2023

Here's why you need to be a humble trader.

REASON #1:
Humility is required for losing

I’ve mentioned this for the last 20 years. And nothing has changed.

We are NOT in the trading game to be right.

We are in this process, to follow a proven and winning strategy in order to grow our trading accounts over time.

Not in a week, not in a month and not even in a quarter.

It is our job to take the trades, bank the medium sized gains and take the small losses along the way.

There should be no ego with expecting a trade or a sequence of trades to be right.

If you want to be right, go become a lawyer, accountant, swimmer or find another hobby.

REASON #2:
Humility betters your trading strategy process

It can also be tempting to try to change the system. This is where you act on impulse, bank a premature winner or cut a loss quickly.

This does nothing to your strategy except turn it into a discretionary, non-tested and a temporary winner in the short term.

But in the long run, when the markets rectify and become more favourable your winning, your strategy will stop working.

Instead, rather focus on your system, improve on your entries, look for conducive markets and master execution.

Your portfolio’s results will then take care of itself.

REASON #3:
Humility is not trying to avoid drawdowns

You need to be humble enough to believe your carefully proven strategy ‘knows’ better than your short-term ‘wise-guy’ ideas.

It’s not your job to avoid drawdowns (sequence of losses).

It is your job to manage your drawdowns with structured and consistent methods.

I have three strategies with drawdowns:

1. Trade your Equity Curve (portfolio) to know when to pause trading

2. Drop the level of risk per trade

3. Look for only high probability trades on other markets

REASON 4#:
Humility highlights your weaknesses

You have to be honest as a trader.

You can’t keep thinking you’re best at every aspect of trading.

Break down the processes including (Markets allocation, Methods and systems, Money and risk management and Mind and psychology).
Then ask yourself…

Where am I weak with trading and why?

Dig into your personality, traits and preferences.

Become vulnerable so you can see the truth where you may be lacking in your success.

Here are some thoughts:

• Do you convince yourself your trades are going to be winners?
  Do you look for confirmation signals that you don’t need to worry, when your trades move against you?
  Are you scared your ego will be hurt from taking losses?
  Are you only looking at a few markets because you’re scared to branch into international markets?
  Are you feeling old to the point you don’t have time to make slow money as a trader?
  

Find your vulnerabilities, then look for solutions or research on how to improve them.

Treat the market with respect and you’ll find the answers you need to win.

Final words:

Trading is not a race – work on your own time line.

Trading might sound like an easy hobby, and it is.

But you first need to overcome your demons in order to streamline the process.

I tell you this because…

You need to be humble as a trader, or the markets will humble you!