Most of us have ideas about the amount of time it takes to make a certain amount of money. These ideas do not apply to trading the markets.  A trader can literally make thousands of dollars in a matter of minutes or even seconds with very little effort expended at all. This is very different than what most people are brought up to believe is possible about making money.

Most people are raised to believe that to make money (especially large sums of money), it takes much time and effort. When I first started trading, my family and friends couldn’t understand how, in just a matter of minutes, I could have the possibility of being up or down many thousands of dollars.  People don’t make thousands of dollars in minutes.  It takes weeks. At least it does in most businesses.

To many people, the possibility to make or lose money that quickly is something they’ll never experience. But to a trader, this is something we experience on a daily basis.  To be a successful trader, you’ll definitely need to get used to it.

The problem is many people have a mental conflict with that kind of situation.  Because of our upbringing, we have certain beliefs about whether we deserve to make money that quickly. In many cases, we are so taken back that we made that much money so fast, that it doesn’t seem to be right that we could have that much that quickly. This leads to two serious problems.

The first problem is the big one.  If you subconsciously don’t feel you deserve to make money so quickly, then when we do get that quick windfall, our subconscious will say, “Hey you can’t make money that fast!  We’d better find a way to give that money back!”

And believe it or not, you will most likely end up doing just that. That is how powerful your subconscious is. If you have a certain belief about yourself, your subconscious will strive to make that belief true. For instance, if you do make a large profit very quickly, you will find a way to give that money back because inside you it doesn’t feel right.  It might feel great and exciting to have made so much so quickly, but deep inside, in your subconscious, it is not right at all.  And your super-powerful subconscious will override your conscious thoughts and find a way to give back that money you didn’t feel you deserved in the first place.

In Section 3, we will talk about an ex ercise to become comfortable with large windfalls. You’ll learn how to be deserving of those windfalls so your subconscious does not try and force you to give the money back. The second problem with this mental conflict is it causes people to stay in trades way too
long.  Here’s what happens:

A person gets into a trade and for whatever reason it goes their way right away.  They make those thousands of dollars we just talked about in only a few minutes. This is great, but the problem comes up when they feel the trade must be worth much, much more.  They feel this way because it moved their way so quickly that the market just has to keep moving in this direction.

Well, we all know the market doesn’t have to do anything.  It only does what the buy and sell orders cause it to do.  I see this situation all the time.  One of the most important things you must realize about trading is that the market can take away profits just as easily as it can give them and just as quickly.  Because of this fact, you must protect your trading.  Of course, that means you should be trailing your stop orders to lock in profits.  But it also means you need to protect yourself mentally.

But a lot of people get caught up in thinking that it does.  That is a big mistake.  For instance, let’s say you get short the S&P 500 Futures.  Right after you get short, a huge sell order comes in to sell 2000 contracts at the market.  This particular order drops the market like a rock. After that order is filled, you are sitting on a $2,500 profit in a matter of less than a minute.  You are sure that after falling that much that quickly the market must be completely ready to fall apart.  But this is not necessarily true.  In fact, just the opposite happens, without more selling, the market starts to rally back up taking much of your profits with it.

The only way to deal with these situations is to be mentally prepared for them to happen, because they will happen.  Instead of being so sure that the market must do what you think it should do (continuing in your direction), you must be prepared that it can do anything (like taking away your quick windfall just as fast you got it in the first place). By being mentally prepared for this type of situation, you act in your own best interest by not letting the lion’s share of your profits get away from you.  Sure, in the above situation, the market hopefully will keep going in your direction, but the most important thing you need to be concerned with is what to do if the market doesn’t keep moving in your direction (e.g. trailing your stop order, covering half your position if you’re trading multiple contracts, etc.).

Remember, acting in your own best interest to protect yourself is much more important than finding winning trades.  Don’t get caught up in thinking the market must keep going if it moved this far, this fast.  It doesn’t have to do anything, no matter what it just did.  Keep yourself prepared for whatever it does and you’ll have a much better chance of holding onto your profits.

Years ago, I got some advice from a fellow trader in the S&P pit.  He told me to never get married to a trade.  Michael Douglas told Charlie Sheen to never get emotional about a stock (in the movie Wall Street).  Those statements are much more than just pieces of advice picked up along the way.  If you don’t remain flexible and stay detached from your trades, you will not become successful in this business.

Basically, what this means is very simple.  No matter how strongly you feel about a trade, you need to be willing to give up on it in a moment’s notice.  A very common occurrence for a trader is to get caught up in the particular trade they are in and put much more weight in that trade than it deserves.

For instance, I’ve talked to a lot of traders who’ve experienced a common feeling when in a trade.  I’ve even experienced it myself, occasionally.  You feel as though you have to be right on this particular trade.  This causes you to be inflexible about getting out of the trade.  Even if the market is showing you signs that it isn’t going to continue in your direction, many traders get so attached to their trades that they cannot be flexible enough to act in their own best interest. (Which is the only way to be successful.)

Many times when this happens, the trader feels as though this is the last trade they’ll ever be in. Inflexibility will kill your trading in a hurry.  You see, to be a successful trader you need to be willing to change your mind quickly and easily.  You certainly can’t be fighting with yourself back and forth when you’ve got an open position in the market.  It will be a disaster. In the real world, having a large ego can sometimes be helpful.  Many people who’ve got large egos and think they are usually right also have the ability to also convince others that they are right.  This works for many people.  Those people with large egos don’t need to be as flexible in the real world.  At least they do not have to be flexible to the people they can convince they are right.

But in the trading environment, being inflexible and unwilling to admit you’re wrong will do nothing but drain your trading account dry.  Of course, nobody wants to admit that they are wrong.  Who wants to be wrong???

I try and think about it a different way.  I don’t think about it as being wrong in a losing trade.  I decided to shift my thinking and instead of thinking of myself as wrong in a losing trade, I think about it this way:  If I don’t get out of this bad trade (that has very little potential), it will eat away at my past and future winning trades.  And obviously, I don’t want anything to eat away at my winning trades.

This helps me be more flexible and not afraid to cover my losing trades or trades where the profit is deteriorating.  I’ve learned to be flexible in these situations because of how much I want to keep my winning trades intact.  The less flexible I am about my bad trades, the more they’ll eat away at my good trades.  I’m always trying to protect those winning trades because those trades are the one’s that pay my bills each month.

Always remember the more flexible you can be, the more successful your trading will be. In fact, the amount of money you make trading will be in direct proportion to how flexible you can be.  If that is not a reason to learn to be more flexible, I don’t know what one would be.