Driving involves a number of different skills and requires engaging them all at the appropriate time in the right way.
So does Trading!
Since you can drive, I am confident you have the skills you need to become a profitable trader.
Driving:
- requires the ability to make risk based decisions every time you decide to use your car to get where you want to go
- requires understanding the rules of the road, defining a destination and planning out a route that has the best chance of getting you there
- requires the basic knowledge of the mechanics of a car to get the car in motion and maneuver it through the curves, turns and obstacles along the way
- requires the awareness of the other drivers around you, the weather and road conditions, and adapting accordingly to ensure the risk you are taking stays within manageable levels
So how does that apply to Trading?
Making Risk Decisions
Since you already drive a car, you know how to make risk based decisions. Every time you are in a car, there is the risk that you could get into an accident …with the most serious outcome being loss of life. So you take the appropriate precautions … buckling up your seat belt, driving according to road and weather conditions and staying alert to the flow of the traffic around you so you can adapt in real time.
Trading requires risk based decisions … and you’ve demonstrated you know how to make them. Every time you get into a trade there is a risk that it will go against you … with the most serious outcome being loss of money. So you take appropriate precautions … you set a stop to ensure your capital is protected, you choose trade strategies according to the market conditions and you stay alert to the flow of the market so you can adapt in real time.
Making a Plan
When you jump in your car, you always have a destination in mind that you are trying to get to, sometimes it’s just a quick trip to the corner store while other times it’s a trip across country … either way, there is a destination to get to. And no matter the destination, you also have an idea of the route you are going to take to get there. Where the corners are that you’ll be turning at and what direction you’ll be turning when you get there.
Trading requires a plan … and you’ve demonstrated you know how to make a plan to get to a destination. When you get into trading, you have an idea in mind for what it is you want trading to do for you. That is the big destination, kind of like the end of the road trip across the country. And every day you also need a daily plan for how you will navigate through the day, like the trips to the corner store. So before jumping into a trade, make a plan for where you will be looking for trades and what direction you’ll be trading in once it gets there.
Knowing the Mechanics
When you started driving, I’m willing to bet you didn’t spend a whole lot of time learning every bitty detail about how the car worked, how every piece fit together, what every nut and bolt did … I bet you focused on learning the basics of what you had to do to get it running, put it into gear and get it to move. How far to turn the wheel to get it to go in the direction you wanted, how hard to press the brake to stop on the spot you wanted and how to put pressure on the gas to speed up while not giving yourself whiplash. Once you mastered the basics, got your license and were effectively using the car to get you to where you wanted to go …then it was time to decide if you wanted to study more and become a mechanic who knows all the itty bitty details of how the car works, or spend time training to become a race car driver who can manoeuver the car around a race track at breakneck speeds. But you didn’t need to do things first in order to use driving to meet your goals.
Trading is the same … and you’ve demonstrated that you do not need to know every detail in order to use a tool to get to your goals. Many people are convinced that unless they know every little detail about the markets, the economy, the announcements, the indicators, the trading platform, etc …that they cannot start trading. But the reality is all you really need are some basic fundamentals to get started and become successful. Once you have mastered the basics and are consistently profitable, attaining your goals, then you can decide if you want to study more to learn all the details about the markets, the economy, how indicators are calculated and trading platforms are programmed.
Adapting in Real Time
When you are driving, you instinctively pay attention and adapt to the conditions around you, the flow of the traffic, the weather and road conditions. If traffic on the freeway is crawling along, it’s really difficult to be the one trying to speed through the traffic. If traffic is flowing at the speed limit or even faster, then being the one crawling along at a slow pace will get you lots of horn honking and fist waving. If it’s storming outside, you drive more cautiously and if you come up on road conditions, you take a detour. So you naturally adapt in real time to the conditions around you, making adjustments to avoid an accident or follow a detour to take different route to your destination.
Trading requires you adapt in real time … and you’ve demonstrated that you have the skill to be aware of the conditions around you and adapt as necessary. The movement and flow of the price action of a market is much the same as the movement and flow of traffic when you’re driving down a freeway. If the market is trading slowly, it’s best to match your expectations to the pace of the market, giving the trade time to play out. If it’s moving faster, then you need to match the pace and be ready to make adjustments to your trade more quickly. If there’s a news announcement or the price starts moving in an erratic way you didn’t expect, you adapt your plan to either protect yourself or take a different route to your exit. Staying aware of the pace of the movement, matching your expectations to it and being ready to react when it does something out of character is a key skill for getting what you want from trading.