You’re reading this right now because you want to know how long it takes to become a consistently profitable trader.
You’ve heard others say it takes at least 2 years.
Some would tell you it takes 5 years.
And there are a few who still suck at it after 10 years.
So, what’s the answer?
Well, here’s the truth:
All traders go through 4 stages in their trading career. And how fast (or slow) you get to the profitable trading stage depends entirely on you.
Let me explain…
Stage #1: The hyper newbie
This is the first stage of your trading career and you’re filled with hopes and possibilities.
You have hopes for:
- A better future
- Getting out of poverty
- Getting out of the rat race
- Trading full-time and saying FU to your boss
- Becoming the next champion trader (Paul Tudor Jones? Pfff, get in line…)
So, you study everything that you can get your hands on like RSI, MACD, Fibonacci, Price Action, Chart Patterns, Candlesticks, ADX, Trendlines, etc.
At this point, your confidence level is high as nothing can stop you. You put on a few trades and even have a few winners in a row.
You think to yourself…
“Trading isn’t as difficult as it seems.”
“That 95% of losing traders are pathetic.”
“Let me show them how it’s done.”
This goes on until you hit a loss. But that loss is no ordinary loss because it wiped out your entire trading account.
Now, that’s when you realized trading isn’t all about trading strategies, indicators, patterns, etc. because there’s something called risk management.
That’s when you move onto stage 2…
Stage #2: The risk guru
This is the second stage of your trading career where you’ll have probably blown up a few trading accounts.
At this stage, you understand the importance of risk management and how it plays a huge part in your trading.
So you study things like how to calculate your position size, how to risk 1% of your capital on each trade, risk-reward ratio, etc.
Slowly, your huge losses disappear into oblivion (except for the time when you break your rules) and you’ve noticed a leap forward in your trading results. Yay!
So, you continue to practice risk management for every trade like having a stop loss, risking not more than 1% on each trade, having a minimum of 1 to 1 risk-reward ratio, don’t average into losers, etc.
But somehow, you’re not quite there yet.
Yes, your losses have been contained but, it seems your winners are still not compensating enough for your losses — and this still puts you in the red.
And if this goes on forever, you’ll eventually suffer death by a thousand cuts — not good.
This is when you get your next “aha” moment and realized risk management isn’t enough for you to be a consistently profitable trader.
So, you move onto stage 3…
Stage #3: The lone ranger
At this stage, you know a lot about trading like the different types of trading strategies, indicators, patterns, how to apply proper risk management, etc.
But still… you’re not getting the results you want.
That’s when you figured risk management, discipline, psychology isn’t enough if you want to be a consistently profitable trader.
Because your trading strategy must have an edge in the markets, without it, even the best risk management or trading psychology won’t save you.
So, what exactly is an edge?
This is something you do repeatedly over time that yields a positive result.
Here’s an example:
Imagine you have a special coin that rewards you $2 every time it comes up Head. If it comes up Tail, you lose $1.
Do you think you’ll make money in the long run?
Because you have an edge in the coin toss as your winners are greater than losers.
And it’s the same for trading!
So once you have an edge in the markets, combined with proper risk management, that’s when you move onto the next stage…
Don’t worry if you don’t know how to find an edge in the markets because, in the later section, you’ll discover tips & tricks to help you quickly level-up through the different stages. More on that later…
Stage #4: The business owner
The final stage is where you become a business owner.
At this point, you’ve realized a few things…
You need money to make money in this business
Trading isn’t a get-rich-quick scheme. Instead, it’s a get-rich-slow scheme.
It takes time and money to grow your business. Here’s an example…
$5,000 account that earns 20% a year = $6,000
$5,000 account that earns 20% a year for the next 20 years = $191,688
$10,000 account that earns 20% a year for the next 30 years = $2,373,763
Once you’ve understood the math, you’ll go all out to add funds to your trading account and look to compound your returns for the rest of your life — that’s where the magic happens!
You reduce your risk when you trade multiple trading strategies
If your business only has one source of revenue, then you’re at risk of going out of business. Why?
Because if that revenue source “dries up”, then you’ve got no money to cover your expenses — and it’s game over.
That’s why the best companies in the world have multiple sources of revenue. For example…
Amazon has income from its e-commerce platform, a yearly membership subscription (Amazon prime), offers cloud computing (Amazon Web Services), etc.
And this is the same for your trading business!
You want to adopt multiple trading strategies so you can reduce your risk and have “multiple sources of income”.
You must level-up your trading psychology
Now, the mental fortitude required to trade a $10,000 account is vastly different from a $1m account.
If you risk 1% on each trade, that’s about $100 (on a $10k account).
What about a $1m account?
That’s a $10,000 risk per trade.
As you can see:
Even though you’re at the last stage of your trading career, your learning is not over.
You’re still developing new trading strategies, adding funds to your trading account, and training your mental fortitude to handle larger sums of money.
Cheat code: How to quickly level-up your trading without going round in circles
At this point, you’re probably stuck in 1 of the 4 stages.
So now the question is, how do you quickly move onto the next stage?
Well, that’s what you’ll discover right now…
How to get out of stage 1 (hyper newbie)
The reason why most traders fail at this stage is due to unrealistic expectations.
So here’s the truth, simply put:
Trading is a get-rich-slow scheme. It takes years of effort, money, compounding, and discipline to grow your trading account into something significant.
So don’t expect to trade full-time after taking a weekend course, or with a $1,000 trading account — the odds are immensely against you.
Some of the best traders and fund managers make an average of 20-30% a year.
If you’re shooting for anything higher, you’re either the next Market Wizard or downright delusional.
How to get out of stage 2 (risk guru)
Getting out of stage 2 is all about understanding math.
No worries, it’s so easy that even a 10-year old can do it.
Here’s what you need:
- The distance of your stop loss (in pips)
- Account balance
- The % risk on the trade
Then just plug those numbers into a position sizing calculator like this, and you’re good to go!
If you want to learn more, then check out The Complete Guide to Forex Risk Management and Position Sizing
How to get out of stage 3 (lone ranger)
This is a lonely stage because it seems like nobody understands what you’re doing.
Your family thinks you’re wasting your life away, your friends don’t get what the heck you’re doing, and doubt starts to creep in to whether you can pull it off successfully.
So here’s the deal, in this stage, only you can help yourself.
More trading strategies, techniques, patterns, or whatsoever won’t help you anymore. It’s time to discard 90% of the stuff you’ve learned and focus on the 10% that matters.
But how do you know what works and what doesn’t?
That’s where backtesting comes into play.
This is where you validate your trading strategy (using historical data) and find out whether it works, or not.
If you want to learn how to do it systematically, then check out The Essential Guide to Systems Trading.
Alternatively, if you’re a discretionary trader and want to do it manually, then check this guide out.
How to survive stage 4 (business owner)
In this stage of your career, you’ve beaten 95% of all traders out there.
Now, it’s time to scale up and diversify your risk.
#1: Add funds to your trading account
As you know, you need money to make money in trading. So, to scale things up you need to add new funds into your trading account.
This could be money from your job, businesses, etc.
#2: Split your money across different brokers
Here’s the deal, no broker is 100% safe.
That’s why as a business owner, you must split your funds across different brokers.
Also, different brokers specialize in different niches like stock trading, FX trading, Futures trading, etc. So go with a broker that suits the markets or strategies you’re trading.
#3: Always be a student of the markets
Remember this, you’re forever a student of the markets even if you’re already profitable.
That’s because you can always improve your trading results.
- Adopt an uncorrelated strategy to your portfolio so you can smooth out your returns over time.
- Discover a new trading strategy that lets you profit in both bull and bear market conditions.
- Tweak your existing strategies to make it even better
If you need ideas for new trading strategies and techniques, then check out the list of my recommended trading books.
#4: Create multiple sources of income
You can be an affiliate for products or services.
An affiliate is someone who earns a fee (or commission) when someone signs up for a product they recommend.
Need some ideas?
Then here are some products (or services) that offer affiliate partnerships…
(Note: I’m not endorsing any of them. These are just examples for educational purposes.)
Brokers – ICMarkets, Blueberry markets, etc.
Platforms – TradingView, CQG, Trading Technologies, etc.
Tools – TraderVue, Forex Tester, etc.
The possibilities are endless.
All you need to do is reach out to the service provider and ask them if they offer any affiliate partnerships, and that’s it!
A word of warning…
Never promote products you don’t believe in just for the sake of affiliate fees — it’s not worth burning bridges for short-term gains.
At this point…
You’re probably thinking…
“Okay Rayner, so how long would it take for me to become a profitable trader?”
Here’s the deal:
I can’t tell you how long it’ll take to become a profitable trader because it depends on many factors like which stage you’re currently at, your attitude towards trading, etc.
Marty Schwartz, a market wizard, relied on fundamental analysis and lost money for 9 years. Then, he shifted to Technical Analysis and made millions ever since.
Now, you might think Technical Analysis is the answer, but it’s not. Marty Schwartz found success in the markets because of his winning attitude. Technical Analysis is a medium to his success, not the driver of it.
“I always laugh at people who say “I’ve never met a rich technician” I love that! Its such an arrogant, nonsensical response. I used fundamentals for 9 years and got rich as a technician.” — Marty Schwartz
Now here’s what I’d like to know…
What stage in your trading career are you at right now?
Leave a comment below and share your thoughts with me.