Profitable Trading: How Long will it Take me?

Posted by:DKovach in Stocks

Introduction

Most traders have heard many war stories from experienced traders of bad trades, a streak of bad trades, or even months or years of bad trading.  The novice trader may ask ‘How long will it take me to be profitable?’

Unfortunately, if you’re asking this question, you already have the wrong mindset.  Anyone who hasn’t warned you that trading is difficult is not being forthcoming.  While it is certainly reasonable to ask how long it will take you to become profitable, a better way of thinking about it is to ask how long it will take you think in terms of risk management.

The Right Mindset

Trading is essentially a game of probabilities.  No matter how sure you are of a trading setup, there will always be risk.  Any particular trade is subject to different forms of risk.  For example, this risk could be as simple as the volatility of the product you’re trading.  In particular, bonds tend swing less dramatically (comparatively) than, gold or oil.  So an acceptable stop loss in bonds will get you stopped out very quickly in those latter two products, even if you were right in the first place.

There is also the question of psychology.  Trading can break down even the most steadfast.  It can take a while to develop to the mental fortitude to endure hectic markets, resist FOMO, interpret and make decisions about new developments effectively, handle losses, and more.  Many never develop this skill.

Finally, it takes a while to get familiar with the markets from a fundamental and technical perspective.  Even if you have mastered the above skills, a lack of technical or fundamental knowledge can present a major hole in your game.  It is very difficult to find resources that are encompassing enough to fully cover this trading dichotomy.  Many technical traders can remember the day that a great technical setup was smashed by a data release.  Conversely, fundamental traders may lament when a technical observation like a nearby vacuum zone or contrarian indicator could have saved them from holding a trade underwater.

Conclusion

If you’re asking how long it will take you to be profitable in trading, we first must address your thought process.  Trading is not a skill that can easily yield a particular dollar amount per day, week, month, or year, even for the most skilled of us.  The correct mode of thought is to commit to understanding and implementing risk management and getting the hang of trading psychology.  Learning and understanding the markets is critical as well.  The typical time frame for truly getting the knack of trading is 2-10 years.  In fact, in your first year, you’re doing stellar if you break even.