You may have heard about the ‘Black Holes’ in trading. We’ve been asked many times, what are these – and why should those of us trading the markets be concerned?
Black Holes in trading are the sticking points or blockers that all traders – experienced and new – come up against. In this article we look at the most common obstacles: Time, Money, Strategy, Discipline and Risk Management.
Black Hole #1: Time
Taking ‘Time’ as the first example, this is the hidden obstacle to success that we’ve all faced. We’re all busy people these days, long hours at work, stress, and then the dull and boring chores await you at home. Many of us are commuting longer. As a footballer, I used to drive over an hour each way to Stoke City ground from Sheffield. All I had was my tunes! I certainly don’t miss that journey (although it was the best job in the world). And who enjoys waiting for trains? It’s just dead time. So whether you’re working full-time, juggling multiple jobs, or looking after your family, there will always be pressure on your time.
We’re adults, so we all have responsibilities in our lives. But what about fulfilling your potential? What happened to living your dreams?
Might it be time to carve our space in the diary to focus on some long-term self development? Have you got the balance right?
Many students come to us looking for courses in trading, asking how much time they’d need to commit each day to trade successfully. There is no correct answer to this. Some students have ambitions to trade full time. They’re ‘both feet in’, full speed ahead and learning at a pace. They may prefer day trading. For others, they wish to retain their full-time job, and learn to trade as a second income. These people learn to fit their analysis and trading activity around their other commitments. These people may prefer swing trading.
Either way, it’s the software that makes the difference. It makes life simple. At Trading College we take advantage of our scanning software package called The Pro Trading System. It’s searching and identifying trades every minute of the day. Whether you are at your trading screens all day, or trading around other commitments, there is an option for you. (see articles on day trading versus swing trading).
If you’re working the standard 9-5pm, then you could be running your swing trading scanners between 8am and 10am. This is when the US markets are closing, so if you’re based in the UK or Europe, I’d say it’s the perfect time to find the new trades for the next day. The Pro Trading System saves me time, as I have no need to look through lots of markets one by one. The scanning software finds the trades that are setting up.
Whilst on the go, you could be managing your trades from your mobile phone. The majority of brokers have trading apps. The evenings and weekends are a good time to manage swing trades, using our Trend Predictor Weekly Scanner to tell you what trades are setting for the week ahead.
Black Hole #2: Money
They say “Money makes Money” and of course you’ll be needing some funds to open a trading account with a broker. But many students start out trading a demo account, requiring no funds at all. Brokers will offer a demo account as a safe place to practice and learn. You won’t be trading real money, so that’s a great place to start. When you are ready to open a live trading account, you can start small. For those who’ve just completed a course in trading the markets – you might like to ask your broker for a ‘mini locked trading account’, where if you’re spread betting, you can spread bet as low as 50p per point and even down to 10p per point on some brokerages. Some brokers will allow you to open a live account with as little as £250. Many students, keen to get started, decide to start small and then build the account up when they’re confident that they know what they’re doing. Adding to the account later is easy.
I’d advise against watching random videos on YouTube. You may think that you’ll learn online and save money on a course, but much of what we see on YouTube is absolute rubbish in my opinion. I’ve taken on students and we’ve had to undo all the bad practices they’d learnt. You are welcome to watch my free videos – and these are available on the website or Trading College’s social media channels. There is no replacement for decent trader education.
Black Hole #3: Strategy
To any trader, strategy is very important. No way around it, you have to have a solid trading strategy if you wish to gain consistent profits. We take our trading strategies from the charts. We program the strategies into our scanners and the scanners find us the trades setting up so we have a perfect scenario. The strategy is crucial, you want to trade in a strategy that is over or around 80% winning trades. We have some fantastic trading strategies that we use here combined with the trading software. But it is crucial that you have a high probability trading strategy to make consistent profits.
I start teaching our strategies at our ‘Learn to Trade Live’ courses for beginners.
Black Hole #4: Discipline
It’s clear to see that any trader who succeeds in mastering the markets to achieve long term success as a trader has also mastered the necessary discipline. Learning to trade the markets is not unlike entering into any other new business venture, or new career choice. You’ll need to learn the rules, stick to the rules and understand the parameters within which you can work. Trading is a world of data – and we often suggest that students start with looking at three markets. The undisciplined trader will wander through endless markets and end up with ‘analysis paralysis’, unable to make any decisions from data overload. I’ve described trading as a “never-ending buffet” – and this can be a good thing, as opportunities are always present. But without a focused mind you can spend all day hunting for perfect trades, and never actually placing a decent trade!
A water-tight trading plan helps you to determine priorities and boundaries. To identity your strengths and weaknesses – and to truthfully analyse your performance and to consider what’s going well and what isn’t. A disciplined trader manages this process effectively, enabling them to evaluate their performance objectively.
The best way to get into the habit of operating with ‘discipline’ is to start with three markets only. You can analyse what is happening in those markets so you don’t get overwhelmed. Start small, that will build confidence and discipline will start to come.
Black Hole #5: Risk Management
This is very important, we need to manage risk on every single trade so we don’t lose our trading account. Every trader wants their trading account to grow. Unfortunately, some believe that they need to risk more to make it big. I teach my students that we want to be risking only 1% to 3% per trade. This means that you won’t lose your trading account in one or two trades. Trading is a game of probabilities. We all know this, so you’re going to have winning trades, and you’re going to have losing trades. The best traders know how to keep their losing trades nice and small. When you have a winning trade, you want that to be nice and big. Just look at our videos about the Pro-Trading System, and check out our recent results of trading crude oil – hundreds and hundreds of pip profit and the risk was small. That is what we’re trying to achieve here as traders!
Black Hole #6: Negative Self Talk
I am talking about personal self doubt. I am fascinated by trader psychology. The belief that ‘I can’t do it’. Where does this utterly damaging internal dialogue come from? Anybody can trade the markets. I am certain of it. Take my own background…. I came from professional sports, and I started trading some 18 years ago when I was about 34. I scraped through maths at school. Football couldn’t be further from trading, and yet I was determined. Our students come from all sorts of backgrounds. I’ve taught teachers, oil engineers, shop workers, florists, bankers, surveyors, gardeners, landlords, small business owners, data scientists, pensioners… I honestly cannot see what they have in common. We do personality profiling with many, and they’re all so different.
I believe that anybody can trade the markets. Anybody can learn how to trade properly. You could be trading from anywhere around the world as long as you’ve got an internet connection, a decent pc or laptop, a strategy, a trading plan and the discipline to learn and to follow rules.
So these are my top 6 black holes in trading.
Take a look at this recent chart.
It will have taken you about half a second for the scanner to have found this trade and it would have taken probably no more than five minutes to place the trade. And look at the amount of profits it would have made you. There’s no excuse about time! This was done in minutes, not hours.
Wishing you every success in your trading, guys!
Lee is qualified at The Society of Technical Analysts, having passed his MSTA and CFTe with flying colours. To see Lee and our coaches use technical analysis, you can access our Live Trading Room 5 days a week. If you’re looking to step into the world of online trading, we’d like to help. We offer both courses and mentoring opportunities to help you trade with skill and confidence. Come along to our free Learn to Trade Live one-day course to really get your foot in the door! See here for more details and to find a date near you.
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