Last Updated on August 3, 2020 by Rayner
Does this sound like you?
You put your heart and soul into trading but your losses keep piling up.
You’ve been trading for a few years now without any results to show for.
You’ve realized the money you lost could be put to better use elsewhere.
So now the question is:
Should you quit trading, or not?
Read on to find out more…
If you’re struggling financially, you should stop trading immediately. Here’s why…
Here’s the thing:
Many traders get involved in trading because they want another source of income so they can pay the bills, put food on the table, and have a better life.
And if you’re struggling financially, it might seem that trading is your ticket to a better future.
But, this couldn’t be further from the truth.
Trading is not a get-rich-quick scheme.
Trading isn’t something where you can put in $100 and get back $200 the next day.
Trading isn’t something that will pay you consistently week after week or month after month.
Because there’s risk involved — so there’s no guarantee in trading.
So, if you’re struggling financially, that money should be put to better use like paying the bills, providing for your family, putting food on the table, etc.
You don’t want to risk your hard-earned money on something that may or may not work because that’s not fair to your loved ones.
And this brings me to my next point…
Borrowing money to trade is financial suicide. Quit now while you still can…
Trading is a mental game.
If you want to excel in this endeavour, your mindset must be at peak performance.
But if you borrow money to trade, you erode whatever edge that you might have.
Trading with borrowed money = Trading with money you can’t afford to lose.
And when you trade with money you can’t afford to lose, you make poor trading decisions because you have the “I can’t afford to lose” mentality.
So, what do you do?
- You shift your stop loss because you don’t want to take a loss
- You take tiny profits because you’re afraid of watching them turn to losers
- You average into your losers hoping to catch the bounce and recover your losses
Eventually, your poor decisions catch up with you and you lose everything (including the money you borrowed).
Now you’re worst off than before because not only are you broke — you’re also in debt.
Do you want this to happen to you?
Then, don’t borrow money to trade.
Repeat after me…
I’ll never borrow money to trade!
Your mental capital is toasted
Mental capital is the finite amount of “energy” to do something (whether it’s trading, exercising, studying, etc.).
And for you, your mental capital is at its peak when you just start trading. That’s because you experience hope, aspirations, and possibilities.
But as the years go by, your mental capital gets depleted.
You have thoughts like:
“This game is rigged and it’s not possible to make money from trading.”
“I’ve been doing it for years but still, no results to show for. I’m a loser.”
“I’ve blown up multiple trading accounts costing me thousands of dollars. This money could be better used elsewhere. Maybe I should stop trading…”
But if you haven’t reached this stage yet, then here’s what you can do…
#1: Manage your expectations
Trading is not a get-rich-quick scheme. It’s impossible to master it over a weekend and expect to be consistently profitable in a few months.
So give yourself time to build a strong foundation.
You’ll likely take 3 years (or more) to know what you’re doing and how this game is played. Plus, there’s no guarantee you’ll even make a single cent.
So, manage your expectations!
#2: Start small
When you start trading, your performance will be at its worst as you have no clue what you’re doing.
To compensate for your lack of experience, you want to start small — so you can reduce your “tuition fees” paid to the market.
This means you want to fund your account with as little money as possible, just to get your feet wet.
And even if you blow up your account, it’s not the end as it’s only a small amount of money which you can afford to lose — and that preserves your mental capital.
#3: Focus on the process, not the results
You’re probably wondering:
“What’s the difference between process and result?”
Well, the result is the outcome you want and it’s not within your control (like to make $10,000 a month from trading).
The process is the steps you’ll take to reach your goal and they are things which you can control.
- I’ll develop a trading strategy that has been backtested over the last 10 years
- I’ll execute 1,000 trades according to my trading plan without deviation
- I’ll risk not more than 1% of my account on every trade
Does it make sense?
So focus on the process and the results will follow (it’s cliché but true).
The pain of losing money hurts you too much
This might not win me friends but it must be said…
Not everyone is meant to be a trader. Yup, you read me right. Not everyone is meant for trading.
Because trading involves risk and not everyone can embrace risk in the same manner.
Here’s a true story…
When I was studying in polytechnic at 18 years old, I owed John (not his real name) 10 cents for a reason I can’t recall.
To most of you, it’s only 10 cents and you probably would forget about it — heck some of you might even tell me to keep the change.
But no, not for John.
He pursued me high and low for the 10 cents, pulled the collar of my tee-shirt, and strongly demanded…
…for his 10 cents (or there will be blood, ok I’m kidding the blood part).
But you get my point.
And yes, I should have quickly returned the 10 cents as it’s morally right to do so.
Clearly, John isn’t someone meant for trading because the pain of losing money hurts him too much.
Now you’re probably wondering:
“How do I know if trading is for me?”
For starters, you must be comfortable with risk-taking.
If a small loss bothers till you can’t sleep at night, or you keep thinking about it the whole day, then trading is probably not for you.
And there’s no shame in that because not everyone is meant to be a trader. Just like how not everyone is meant to be an entrepreneur, an employee, or an Olympian.
Now, here’s the good news…
Just because you quit trading doesn’t mean it’s for good. You can always come back when you’re ready as the market is always around.
So here are a few things to help you get back on track…
#1: Pay off your debts
You want to start at ground zero and not put yourself at a (psychological and financial) disadvantage.
So, pay off your credit card debts, the money you owe others, etc.
Once you’re at a clean slate, that’s where you can work your way up.
#2: Get a job
The last thing you want is to rely on trading to pay your bills — that’s a recipe for disaster.
So get a job and have a regular source of income. When you can put food on the table without worries, you’re in a better mental position to trade because you’re trading with money you can afford to lose.
#3: Trade the higher timeframe
Trading the higher timeframe offers numerous benefits…
- It’s less stressful as the market moves “slower” and you have more time to make decisions
- You can have a full-time job which reduces your opportunity cost
- It requires less screen time which allows you to do the things you love
#4: Take time away from trading
When you feel that you can’t trade anymore or you don’t know what you’re doing, take a break from trading. Walk away.
When you’ve got nothing on the line, you can re-evaluate what went wrong and how to improve on things.
So take time away to “reset” your mind, then come back stronger to fight again.
Here’s a recap of what we’ve covered in this post:
- Trading will not get you out of poverty. If you’re struggling financially, get a job
- Trading is not the answer to your debt problems. If you are in debt, pay it off first before anything else
- If trading is exhausting you, then take a break from trading. You can always come back later
- Not everyone is meant to be a trader. If the pain of losing money is too much to bear, then trading is probably not for you
Now here’s what I’d like to know…
Have you ever planned to quit trading?
Leave a comment below and share your thoughts with me.