When Should You Quit Trading?
When Should You Quit Trading?
July 16, 2020
Should You Quit Trading? A Comprehensive Guide
If you've been immersed in the world of trading and find yourself facing continuous losses, or if you've been at it for years without tangible results, you might be pondering a crucial question – should you quit trading altogether? This article will help you navigate this challenging decision.
Financial Struggles and Trading
If you're currently grappling with financial difficulties, the prudent move would be to halt your trading activities. Here's why:
Many individuals turn to trading as an additional source of income to cover bills, put food on the table, and enhance their overall quality of life. When facing financial challenges, trading might appear as a potential solution to improve your circumstances.
However, this perception is often far from reality.
Trading Is Not a Quick Fix
Trading is not a get-rich-quick scheme. It does not guarantee immediate, substantial profits. It carries inherent risks, which means there are no assurances in trading. As such, if you're wrestling with financial hardship, your hard-earned money should be allocated to more immediate and pressing needs, such as bills, family support, and daily sustenance.
Borrowing Money for Trading: A Perilous Path
Trading is, to a large extent, a mental game. Successful trading hinges on maintaining peak mental performance, especially during decision-making processes. Borrowing money for trading is a precarious endeavor and should be avoided for several reasons:
Trading with borrowed funds means you're trading with money you cannot afford to lose. This mindset leads to poor trading decisions, such as shifting stop losses to avoid losses, taking small profits out of fear, or averaging into losing trades to recover losses.
These poor decisions, driven by the "can't afford to lose" mentality, eventually catch up with you, potentially resulting in significant losses, including the borrowed capital.
As a result, not only do you end up with a depleted trading account, but you also accumulate debt. This situation is financially disastrous.
Managing Your Mental Capital
Over time, trading can deplete your mental capital, leading to negative thought patterns and self-doubt. Here are some signs that you may be experiencing a depletion of mental capital:
Thoughts such as "I've been trading for years with no results; I'm a loser" or "I've lost thousands of rupees in trading; this money could have been better used elsewhere."
If you find yourself in this mental state, it's essential to recognize the signs and take appropriate action.
Strategies for Trading Success
If you're relatively new to trading and haven't yet reached a state of mental capital depletion, there are proactive steps you can take:
Manage Your Expectations: Understand that trading is a long-term endeavor that requires time to develop proficiency. It may take three or more years to become skilled, and there are no guarantees of profit. Manage your expectations accordingly.
Start Small: Begin your trading journey with a small account. Starting with a minimal amount reduces the financial pressure and acts as a form of "tuition fee" to the market. Even if you lose this initial investment, it's a manageable loss that preserves your mental capital.
Focus on the Process: Emphasize the process of trading rather than obsessing over the outcome. Develop a robust trading strategy, execute your trades according to a well-defined plan, and employ strict risk management principles. The results will follow when you focus on a solid process.
Is Trading Meant for You?
Trading is not suitable for everyone. It requires a willingness to embrace risk and handle losses without undue distress. To determine if trading aligns with your disposition, consider the following:
If small losses keep you awake at night or occupy your thoughts throughout the day, trading may not be a suitable pursuit for you. Some individuals cannot comfortably manage the emotional aspects of risk.
This is not a cause for concern; trading is not a universal vocation. Not everyone is destined to be a trader, just as not everyone is meant to be an entrepreneur, an employee, or an Olympian.
A Break from Trading: A Fresh Start
If you decide to quit trading, remember that it doesn't have to be permanent. The market will always be there. Here are some steps to facilitate your potential return:
Settle Debts: Begin with a clean slate by paying off your debts. This ensures you are in a favorable financial and psychological position to resume trading when the time is right.
Secure a Job: Having a regular source of income through a job is crucial. Relying on trading to cover your bills is risky and often counterproductive. A steady job provides financial stability and reduces the pressure on your trading endeavors.
Trade on Higher Timeframes: Consider trading on higher timeframes, as it reduces stress, requires less screen time, and allows for a full-time job if necessary.
Take a Break: When you feel overwhelmed or lost in your trading journey, stepping away from trading for a while can be rejuvenating. Use this time to assess your past actions and create a plan for your return to trading.
Seek Mentorship for Guidance
Mentorship can be invaluable in your trading journey. Learning from an experienced mentor can provide you with the knowledge and skills needed to excel in the markets. A mentor can offer guidance, strategies, and a supportive community to enhance your trading capabilities.
In conclusion, if you are struggling financially, it is advisable to reconsider your trading activities. Focus on immediate financial needs and responsibilities, and return to trading when you are in a better position to do so. Trading may not be suitable for everyone, and that is entirely acceptable. Above all, remember that there is no shame in seeking mentorship and learning from those who have successfully navigated the challenges of trading.
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Till then be safe...
~MS
Founder MARS EQUITY