There is a plague that permeates around a big group of traders. It mostly shows up with newer traders and traders who seem not to be able to turn the corner despite multiple efforts or attempts at it. The plague is known as THE TRADER DRIFT.
It is a state or feeling of “not fully knowing”. It often shows up in a trader as overwhelm, confusion, and frustration. Most traders don’t know they are ‘drifting’, but they are drifting nonetheless.
In this blog I am going to discuss the causes of Trader Drift and the consequences associated with it, as well as, the solution.
Trader deception comes from within each trader. At the beginning of each trading journey, a trader believes they will make money and improve their financial picture. If this were not the case, no one would embark on this journey.
The challenge comes when the results one starts to achieve does not match their initial belief or expectation, they start to doubt if that result is truly possible. They get discouraged, and often some get desperate. If this way of thinking is not caught and remedied early enough, it most often leads to a disastrous end.
There are serious consequences associated with trader drift.
Let's break down the dire consequences of these 4 causes. It is important for a trader to not only know the causes but also to know the consequences of each.
Let’s break down each consequence in order.
Most traders embark on their trading journey without a concrete plan. Most wing it and hope that trading the markets will better their financial well-being. Unfortunately, this path will never lead to long-term consistent profits.
A trader will sometimes get lucky and have a big winning trade, just like a gambler in a casino may get lucky from time to time. The disconnect is any luck or random short-term success only adds to a traders confusion, especially when those gains are quickly evaporated and given back to the market.
Trading the markets requires a concrete plan with a specific set of rules that are easy for a trader to follow. The market has too many unknowns for any trader to master fully. The more a trader spends time attempting to master the impossible, the more confused they get and the more their trading suffers. A concrete trading plan is the solution to break free of confusion. It requires some upfront work for sure, but it will save a trader years of confusion and poor results.
When a trader has a detailed trading plan, they have an EDGE that 90% of traders don’t have. To get the results you desire, you must join the 10% and run away as fast as you can from the other 90%. I will address how to construct a plan in my next blog on this topic.
Trading can come with an enormous expense and not just the financial expense. Of course, there is a financial expense, even for the most successful traders. These are all the typical financial expenses that traders face.
Many traders try to cut their expenses by not getting educated upfront or by not investing in a trader coach, only to find out that their attempt to cut costs actually cost them more in overall losses. Unfortunately, there are no shortcuts in trading. My trader coach informed me of this fact early on. He said you either invest (pay) in your trading education or you pay the market, but make no mistake you PAY one or the other. Thankfully I chose to pay for the former which prevented me from continuously paying for the latter.
In addition to the obvious financial expense of trader drift, there are other expenses that may not see more obvious or real, but they are real nonetheless.
When a trader struggles to make progress with their trading, often measured by monetary results, it can cause emotional distress. Nobody wants to spend a lot of time to not see any measurable progress. If someone wants to get in shape, they can simply just start to walk each day and then jog, and eventually, they get faster and more fit.
In trading, you can spend countless hours and sometimes years trying to get profitable, only to never get there. This can cause someone massive emotional pain.
When a trader drifts along without a clear goal and without a clear plan to move them towards their goal, it will cause psychological damage. A trader’s poor approach to trading the market will wear them down and eventually make them believe that making consistent money is not possible. This is second biggest reasons most traders quit this business. The first of course is they simply run out of money.
When someone chooses to engage in trading the markets, whether full time or part time, they willingly choose to give up something else in their life. The truth is that everyone only has 24 hours in a day. There is no more time available to anyone. If you choose to spend 3 nights a week to learn the how to trade, that time is taken away from doing something else. Now of course to learn anything new, a commitment must be made.
The disconnect is that some people get some consumed with trading that it causes them to let other areas of their life (and almost always more IMPORTANT) areas suffer. Most traders spend all their time attempting to make their trading work but do so without a plan that gets them from their starting point to reaching their goal. They start to deceive themselves into believing that they have “time on their side” to get it right.
The truth is you need a clear plan to get there or else most find themselves not making progress and just repeating the same unsuccessful steps over and over again. If you feel like this sounds like you, then the BEST way to interrupt this pattern is to make a decision to RESET their trading and start fresh.
Some pain is unavoidable-this is life, but most traders bring unnecessary pain to their trading life. Like most areas in life, no plan equals poor results. It is simply IMPOSSIBLE to make consistent money trading the market by trading randomly or by luck.
The probably saddest part of trading is finding yourself down the road in your journey, having experienced all the pain, the lost opportunities to do it right, and the expense it cost you, plus all the confusion, frustration, overwhelm and regret, only to realize that all of this, you ended up with a worse financial picture that you dreamed. More losses than gain and time spent that you can NEVER get back. How PATHETIC?
Your mind starts to search for answers to all the what if questions you are asking and the if I only did this or that.
Sadly these 3 empowering What if questions at this point may be too late. Before you get to this point, you need to look seriously at your trading and see which of those 3 do you need or do you need all of them?
Make no mistake that making consistent money trading is possible. The challenge is in the willingness of a trader to be different from the majority who attempt to do it but never get there.
Now, let's talk about the SOLUTION and simple steps you can do right away to break free from the masses and join the elite 20% of profitable traders.
I believe there are 3 simple steps a trader can implement to break free from the masses of those who don’t make it. When followed, these steps allow a trader to move massively towards their outcome – which is to dramatically change their financial picture for the better and to make MONEY.
The truth is, the stock market cannot be beaten. No one has ever done it, and I am here to inform each and every one of you that you will not be the first no matter how much you attempt to do it.
If the market cannot be beaten, then how does anyone ever achieve consistent profits as a trader? The secret to the success of the 20% of consistently elite profitable traders lies in how they think and approach their trading and the market.
They have developed a mindset and an empowering belief system that allows them to trade from a place of confidence, probability, and without fear or becoming reckless. The process to get to this point requires some advanced thinking and understanding.
The uniqueness of each trade is profound. There simply is no way to know if a trade is going to work or not. This is true even if a trader did all their required analysis and/or has a specific strategy they trade consistently AND this particular trade has all the same elements and pattern as the previous ones.
There are too many unknown variables constantly at work that prevents two trades from ever being the same. Once a trader understands this AND fully adopts it, then he or she can act in a way that protects him or her from the unknown.
The 20% of elite traders place no expectation on whether a particular trade will work or not. In fact, they make a reasonable assumption that it will not, so once they enter a trade they first and foremost consciously protect themselves by knowing this trade may not work. They accomplish this by immediately becoming a risk manager once they enter a trade.
There is no novice thinking of… “this trade is going to make me money” or “I am so right on my trade analysis that this one must work” or “I hope this trade will work” or any other similar thought. Once a trader starts to believe they are right OR this trade is going to work, then at that moment they start to become reckless in their thinking.
If each trade is unique and there is simply no way to know if any trade will work or not, then how can a trader have any confidence in trading to make consistent profits?
It requires an understanding of probability and a trader’s edge over a series of trades. It is the same way all casino owners think and run their casinos, which allows them to consistently profit in such a random environment as the gambling industry. In trading, if a trader can fully adopt this same mindset, then a trader will become consistently profitable.
The majority of folks, however, trade randomly. This offers them no EDGE. They have no consistent way to determine what their trading EDGE is. If someone cannot easily identify their edge then how can they ever trade in a manner that allows the proven power of probability to work? This is the major disconnect for struggling traders. They trade randomly with no EDGE and do so simultaneously in an environment where each trade is unique and independent from every other trade. It is a recipe for a negative equity curve in their trading account.
Once a trader breaks free from this flawed thinking and starts to think like a winning trader, then they can finally devise a trading plan that offers an EDGE and allows them to fully experience the power of probability and starts to move them rapidly towards that rising equity curve.
Before moving on to the second step, be sure Step 1 is first mastered. Otherwise, you will not follow your well-constructed and crafted trading plan.
This is IMPORTANT to recognize. You cannot just jump to step 2 without first committing to master Step 1. I know this is not what most traders want to hear because step 1 does not involve charts or actual trading or the excitement that most traders want to feel or experience. I can appreciate that. However, the small groups of elite traders who make consistent money, have mastered Step 1 while the rest have not. It is that simple.
You have to decide what side of the pendulum you want to live in. I chose the smaller elite group.
If you chose the elite group, then once you master Step 1 you can move onto Step 2.
The term trading plan brings many different things to mind. Most assume it is the entry and stop and target for a particular trade they want to take after they have done their analysis. While this is surely part of a trading plan, it is just a small part. Also, a trader who first randomly analyzes a stock to come up with an entry and stop and target almost always performs that task in a way, which removes the power or probability (more on this later).
The first thing a trader must do with regards to their trading plan is first to envision what their future looks like as a trader. Without an empowering vision that includes your goals and why you want to achieve them, it rarely leads a trader to greatness. Most want to just get busy trading without a powerful vision of what that looks like for him or her.
As I said earlier, each person’s trading plan is specific to him or her. You cannot just cut and paste someone else’s and make it yours. It won’t have the power and pull than if you spend the time thinking and writing one yourself. I do realize though as both a professional trader and coach, some students get stuck on where to begin, so I thought I would provide a few pieces of my plan as a guide to hopefully inspire and guide you in a powerful and awesome direction.
"I am a consistently profitable day and swing trader. I am free to enjoy my life and days because I am clear about my trading goals and why I trade. I consistently earn between 20-25K per month trading less than 3 hours a day. I achieve this success because I trained myself to think and act like a profitable trader and because I self-discipline myself to do all the boring tasks that I don’t necessarily want to do but MUST do achieve the results I want. I enjoy the freedom I have, and I remind myself of this daily to keep my mind focused on the right disciplines. I am always grateful for what I have in my life right now."
No one achieves an awesome future unless you know what it looks like, but also why you want it. Without reasons and a purpose, most will drift along without taking the necessary action steps to make it a reality. Some questions you may want to answer before you write out your purpose are…
"My purpose is to earn my desired monthly goal so I can massively contribute to the financial well-being of my family. To be able to send my kids to private schools, to experience adventure filled vacations with them. To be able to be home every day when they come home from school. To be in a position to bless others who are less fortunate."
Without compelling reasons that answer your why you almost always fall off into a drift at some point and never reach your goal.
To make sure you are always moving towards your envisioned future rather than away from it, there are specific commitments you must make to keep you on track. Some questions you want to answer before you write out your commitments are:
Despite the power of a clear vision and purpose and even specific commitments, there are obstacles that show up. Mostly these obstacles show up in our old way of thinking. (before mastering step 1) They show up mostly through fear or temptation. It is vital you know what these are for you so you, don’t drift into the abyss and start to deceive yourself into thinking in your old novice ways.
Now comes the actual mechanics of your trading plan and the action steps required to move towards your goal. I thought I would share a few pieces of one of my 2 trading tactics of my core strategy. This is by no means my full plan but a snapshot to move you in the right direction.
Strategy: I am a Location Trader. I trade stocks at real price support and demand or real price resistance or supply. I buy where big money already bought before and likely will buy again. I strive always to be on the side of big money and run away from how the retail trader thinks and trades. I am an income trader and therefore I trade, to get paid. This applies to both my day and swing trading. What good is it to be right and not get paid?
Tactics: I have two trading tactics for my location trading strategy. I specialize on Significant (Professional or Amateur gaps) or stocks in confirmed up or down trends
Indicators used: My only indicators are simple and straightforward. I utilize red/green candles, volume (w/average), 3 simple moving averages on daily/weekly chart (20,40,200), 1 simple moving average on hourly chart (20), and on smaller timeframe intraday charts (just VWAP). These indicators apply to both my day and swing trading.
Stock MUST have following for Day and Swing Trading
Stock CANNOT (in general) have for Day or Swing Trading
If both targets achieved, I would profit $415 net which is 41% of my over daily income goal.
The above strategy/tactic plan is a partial piece of my own trading plan. This particular trade setup (break of pre-market high) is not my first choice for entry from my location strategy.
One of the most impactful things I did early in my trading career was to hire a coach. I wanted to find a coach who was also a successful trader. I wanted to find someone who was getting the results I wanted to get. I wanted to learn how to think like a profitable trader, but I also wanted someone who already mastered that part of trading and was successfully applying it to their own trading.
I knew that hiring a great trader coach would cost me money, but I looked at it as an investment to step up and get my trading to the elite status I wanted to achieve. I wanted someone who would assist me in thinking big and not just to trade so I could pay off some bill or something. Also, I was already not making money after 1 year of trading; in fact, I was losing money so any decision other than to hire a coach seemed like a dumb one.
If I did not change the way I was trading, my results were not going to change. I did not want to trade for years and not make money. The pain of that pathetic existence was awful, so I decided to make an investment in my trading. I chose to accelerate my trading education and to invest in a trader coach. This was the most obvious way to accomplish my envisioned future.
One of the main objectives of a coach is to dramatically assist their client or students fulfill their potential. Often the client is so involved in whatever task he or she is trying to achieve they cannot see that certain actions or thoughts that are impeding them or slowing down their progress.
Coaches often call these areas blind spots. A great coach can assist the person in not only identifying blind spots but also have a simple set of steps and tools to breakthrough them. Another area a coach helps a person is to move them to get from where they currently are to where they ultimately want to be (their envisioned future).
As I discussed earlier in this blog, most traders start out without any real vision for their trading. The mistake activity for achievement rather than chancing their actions into what is most important.
Over the last 3 years, I expanded my career to not just my personal trading but also in helping others change their trading with coaching. Each month and each student I find my coaching continues to get better, and I see my students achieving better results faster than ever before.
If you want to seriously change your trading and get to the level of elite status, then you MUST hire a trader coach. Find one who you know, who is both a great trader and a great teacher, and walks his talk every day.
As I always say, someone can always make more money, but no one can recapture time. When I teach or coach or blog, I always strive to make certain the time someone took out of their day to listen to me or read something I wrote, was worth their TIME. I don’t waste a day or an hour on anything that does not bring massive value to my life, and so I hope that this blog exceeded any expectations you had.