Most people don’t realize the huge mistake they make when starting out in their trading career. There are several elements to the mental trap that people get caught in when they begin trading that sets them on the wrong course, but one particular error is the one that virtually guarantees failure, or at least a rather long and loss-filled road in becoming a successful trader.
Luckily, although this situation is one that is difficult to foresee and very understandable that it is made, there is a straightforward and rather simple solution to the issue.
The core of trading is definitely within the ability of most to grasp, however trading as an occupation does have a significant body of knowledge to absorb and certain skills that are required to trade profitably and consistently. Coupled with the fact that most traders are of smarter than average,this makes for a situation where the success rate should be much higher than it is.
Like with most professions with a substantial body of knowledge, there is a progression to trading.
Here is an analogy to illustrate the problem. Let’s take mathematics.
Mathematics begins with the concept of numbers in general, quantifying items. Next come addition, subtraction, multiplication and division. After that, one moves on to algebra, geometry, and trigonometry. Once that base is developed, then one can comfortably move on to calculus, La Place Transforms, differential equations and other higher math.
When it happens that a person does not fully establish the prerequisites for calculus, such as algebra or trigonometry, the ideas in calculus may be understandable, but working the problems will be a tremendous challenge, if not near impossible to solve. If one were to attempt to go directly from basic mathematics to differential equations, it would be a very long struggle indeed to become proficient at the higher level.
It has been documented in studies on the obstacles to learning that have found that there are specific physiological reactions when a person encounters this particular situation - that of starting too high up in a learning gradient or skipping foundational knowledge while trying to grasp concepts at a given level.
This is the fundamental mistake that many traders make, and they are generally not consciously aware of this particular situation and its ramifications. Many people begin active trading without the foundational knowledge to trade at the level where they become active. When this happens, it creates a considerable obstacle to adequate learning within an efficient time frame. Subsequently, the trader often winds up suffering severe losses, sometimes losing all their capital before they have established a sufficient skill and knowledge base to trade proficiently.
The individuals are not to blame. This is a systemic problem which unfortunately most have to endure. There is no required training or certification before a person is allowed to put themselves and their capital at real risk, so the high percentage that fail is largely the result of a lack of warning and preparation for what the business of trading entails.
Those that are fortunate enough to seek out the proper teachings and help are the ones that can minimize the effects of this situation that is so commonplace in the trading world. If a person can find a mentor that recognizes this particular obstacle and the others that are present in the development of a trader, then odds are greatly improved for a good trading experience. Most however choose to do it themselves or simply make it on sheer determination alone, while learning the lessons of trading the hard way - through personal experience and numerous losses.
Instead of falling prey to this mistake as many do, you have the option to save yourself considerable time, losses and personal grief. The first step is backing up so to speak and making sure that you’ve got the basics fully covered, and then moving forward with a focus on mastery and development.
This one factor can set your destiny as a trader, so it is well worth acting on.
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