The Dumbest Misconception in Trading

06/20/2012 9:45 am EST


While clever marketing is designed to convince them otherwise, new traders who come in search of leisurely profits and reliable “online” income are as good as broke before they start, writes Coach Shane of

I enjoy talking to would-be traders. There is much enjoyment from talking to like-minded people who just want to gain a better life for themselves, and most times, that involves making money online.

Trading has quickly become accessible to almost anybody with a computer, an Internet connection, and $50. Many of them have read—by way of some smart marketing material—how to make a fortune and work anywhere in the world. It can be a way to spend more time with family and do the things you have always wanted...a way to complete your bucket list.

The issue comes when people think trading is actually the same as “making money online.” Many times, when discussing trading, people have said they were looking for ways to do just that. Some have a background in Internet marketing; others are contractors who are customer service reps for various companies. But regardless of what they have done online to try to earn money, thinking trading is anything like “making money online” is a huge mistake.

Let’s look at Internet marketing as an example. People generally do SEO while building sites to sell products. They then build links to their various Web properties and hope for a rise in search rankings for their particular search term that they have researched. They have to contend with like-minded individuals who may target the same term(s) and also the myriad of Google algorithm changes. Many times, those with the deepest pockets win, however, it is very possible that someone can build something to rank in the top three and produce some income.

In trading, though, you are not competing with others, nor fighting an algorithm that can decimate your rankings. You are up against other people who have traded longer and have a ton more experience than you do. Yet, that is not the biggest issue. The biggest issue is you!

Working on you is akin to climbing Mt. Everest when you compare it to building a Web site. There is no greater psychological push/pull when dealing with money. Sitting looking at your charts and every up or down tick is either adding to your profits or taking them away.

Losing trades mean a smaller account, which drives many to take silly trades that are not in their trade plan (if they even have one). Winning trades where price is streaking in your favor can cause people to pull their profit targets and try for the “home run.” People actually think they are on a winning streak when the truth is that your distribution of wins and losses know nothing about a streak.

Some of the best traders can look at price or market mechanics or volume and know exactly when the amateurs are trading and then zoom in and take their money. They understand herd mentality, order structures, and the psychology behind the price movement. They know when to push the buttons and put their capital in the market. The majority of traders are gunslingers in the wild west and have no idea who the real shooter is.

You can’t approach trading as “making money online.” The fact is you are not. You are (hopefully) making money trading a market instrument that just happens to be available via your computer.

The hype on the Internet is great. It truly is. I still see it, and to this day, I have little moments of enjoying the good life: beachside with the ocean crashing in the background, warm breeze blowing over me as I lay under a palm tree sipping a Mai Tai and trading the markets. Hey, perhaps one day that will happen. For now, though, that is not the reality, and I have been trading for quite a while.

The whole point of this post is that you should understand that trading is nothing like you have ever done before. Most will fail, and there is no shame in that, because trading is tough. It is actually so simple that it is super tough to do! That is a wicked paradox.

If you truly think it is “making money online,” save yourself the trouble and walk away. If you know deep inside that it is something you have to do, move forward with common sense. Get out of the mindset that it is no different than other “online” ventures. Educate yourself, and talk with other traders at a Traders Expo.

Most of all, accept responsibility for your failures as well as your success. Never be afraid to point the finger at yourself.

By Coach Shane, contributor,

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