If you’re like most traders, you have worked your way into this profession on a part-time basis. Every year, thousands of new traders enter the markets.
Professional traders can spot a new trader a mile away. They can’t wait to play the other side of the new trader’s position and bank another trip to Fiji.
Just like any other niche, it may take a while for you to get your legs underneath you. If you enter trading with immediate expectations that your trading will provide all you need to live on the rest of your life, you may be setting yourself up for a rude awakening. I’m not certain why we innately think we can enter the market from day one and achieve extraordinary results. It would be like facing a professional baseball pitcher hurling 100 mph fastballs and thinking you are going to knock it out of the park on your first trip to the plate. I don’t think so.
The facts are that no professional makes their living from their performance while they are developing their expert skills.
Doctors spend years in training before they get in front of a patient. Athletes go to years of practice sessions before they make a payday worth their efforts. All professionals, athletes, actors, lawyers, musicians etc., develop their skills gradually over time until they are capable of living off their expert skills. Trading is no different. If you can accept this, it will alleviate excessive expectations and relieve possible discouragement.
Simply to master the core competencies in trading takes time and understanding. Trading as a professional is no different than any other occupation in developing expertise. You simply must learn the ropes. The natural process is to gradually take up trading on a part-time basis. As you develop your skills and, perhaps, are trading well enough, you will know when it’s time to move to trading for a living, if so desired.
Inevitably, there will be some losses as you learn. That’s why its important when you start trading, even part-time, and do so within a business entity. Any significant losses taken while you are being educated on the markets, commonly called tuition to those of us already in trading, can be used to offset ordinary income.
At this time, investors losing money in tuition are limited to only $3,000 of capital losses per year to offset ordinary income. But if you simply start a home-based small business, you can really insure your downside if things go south.
Enuf said.