Trading / Investing

Pick Your Battles with Your Trading

5 Min Read

Traders contact me all the time to ask questions and address issues they’ve been having with their trading. In order to help these people, the first thing I need to do is figure out the root cause of the problems.

If you only focus on the surface-level issues, the real underlying problem will only end up presenting itself in a different way in the future. Instead, you need to dig deep and try to find what’s at the heart of it.

When you do this, you start to realise that most problems traders experience tend to fall into a very small number of categories. One of the biggest categories is that traders have a misalignment between their short-term and long-term goals, wants and needs.

There are many ways to address this issue, but for this article, I want to focus on one key area that I see coming up time and again. It’s all about choosing your ‘battles’ wisely. Too many traders (particularly new or young traders) are being driven by their ego and lose sight of what they’re trying to achieve overall.

Let me ask you a question. If I gave you the following two options, which one would you choose?

A) Win a huge trade tomorrow, mainly thanks to being lucky.

B) Be a consistently profitable trader 5 years from now, not relying on luck.

I think it’s a bit of a no-brainer, isn’t it? Most people would choose B.

But, many traders, on a daily basis, are choosing option A at the expense of option B.

You see, if you want to succeed in trading over the long-term, you need to shift your focus away from your short-term results and towards your progress as a trader.

I think of becoming a profitable trader like becoming a world champion boxer. You start off by learning your craft in the gym; the skills, the terminology, the strategies and what you need to do to succeed. This process can take months or years.

After a while, you move onto sparring; perhaps after a number of months. You then may be ready to start competing; starting with easier opponents that you’re expected to beat. Your opponents at this stage may even be ones that you can get an early knock-out against.

If you’re a good prospect, these early knock-outs may come more frequently against the lower-level opponents. They look impressive on your record, but after a certain point, they aren’t providing you with enough of a learning experience. You aren’t getting to work on important areas of your game that will help you in the future when you compete against more challenging opponents.

A lot of promising boxers go through this. They get to a level where they face their first challenge and they look lost. They spent too much of their career trying to blast out lower-level opposition, rather than trying to progress and improve as a boxer. By that point, it’s too late.

The result? They don’t fulfil their potential and end up losing the important fights.

Now think about your trading. A lot of new traders are so focused on earning a profit in every trade right at the beginning, that they lose focus on what they should be doing to become a better trader.

I like to explain to people that you can be making losses on your record and still be winning overall.

For example, if you’re trading on a demo account you should be prioritising improving as a trader — your priority should not be your P&L. You may decide one week that you don’t care if you lose overall because you’ve chosen ONE aspect of your trading that you’re going to work on for the whole week until you start to see progress in it. The next week you might choose something else. The profit or loss doesn’t matter, your progress is the focus.

I don’t know if it’s part of the social media culture and the type of ‘traders’ people are exposed to on Instagram and YouTube, but everyone seems to want things to happen immediately. However, let me be very clear with you... If you are trying to rush your progress, you are more likely to lose in the long term.

I always see people saying, “I want to be a profitable trader by the end of this year”, or “I want to go full-time next year”. But why? What’s the rush? You’ll be ready once you’re really ready, not just because you’ve set yourself a deadline. First, make sure you have solid foundations in place with your trading.

When you shift your thinking from your P&L to your own skill as a trader, you realise that your entire focus changes. Each week you only care about improving, not about winning trades here and there. Your focus is on building skills and experience that will allow you to be more consistent, not just looking for opportunities here and there that end up being hit-and-miss.

So let me reiterate. It might sound counter-intuitive, but you can be making losses and still be winning. The true winners in life will leave their bravado behind and focus on whatever it is they need to do to win in the long-term. Don’t try and win every single thing, instead focus on what’s most important overall. Be willing to lose the battles, in order to win the war.