Are you reading this article because you want to know how long it will take to become a consistently profitable trader? You may have heard others say that it will take at least 2 years. Some will say that it will take 5 years. And there are some who still haven't been able to succeed even after 10 years.
All traders go through 4 stages in their trading career. And how quickly or slowly you get to the profitable stage of trading is entirely up to you.
Complete newbie
This is the first stage of your trading career and you are full of hope and opportunity. You want:
- Achieve success in trading.
- Get out of poverty.
- Quit boring work.
- Earn decent amounts of money.
You study all the trading information you can find. You will learn everything about indicators, for example, RSI , MACD , ADX . Read about Fibonacci , price action , candle patterns , candles , trend lines , etc. Explore the Forex portal .
At the moment, your level of confidence in success is very high. You are full of enthusiasm and nothing can stop you. You make multiple trades and even make some profit. You think:
Trading is not as difficult as it seems. Those 95% of losing traders are losers. Everything works out for me.
This continues until you get your first loss. But this loss is no ordinary loss because it wiped out almost your entire trading account. At this moment, you understand that trading is not only trading strategies, indicators, patterns, etc. Because there is something called risk management or risk management . That's when you move to the second stage.
risk management guru
This is the second stage of your trading career where you may have already lost several trading accounts. At this stage, you understand the importance of risk management and how much of a role risk control plays in your trading.
You learn things like calculating your position size , how to risk 1% of your capital on every trade, risk to reward ratio , etc.
Gradually, your huge losses disappear into oblivion, and you notice some jump in your trading results. Hooray!
You continue to practice risk management for each trade, such as always using a stop loss , risking no more than 1% on each trade, having a risk/reward ratio of at least 1:1, and never averaging your positions.
But for some reason you are not quite profitable yet. Yes, your losses were limited, but it looks like your successful trades still don't make up for your losses enough, and you're still going into the red. And if you continue like this for even longer, you will end up losing everything again from many small losing trades.
At this point, you have another epiphany and you realize that risk management is not enough to become a consistently profitable trader. At this point, you move on to step 3.
The lone ranger
At this stage, you already know a lot about trading, such as different types of trading strategies, indicators, patterns, how to apply proper risk management, etc. But still you are not getting the desired results.
You come to the conclusion that risk management, discipline and trading psychology are not enough if you want to be a consistently profitable trader.
Because your trading strategy must have a statistical edge in the markets, without that, even the best risk management or trading psychology won't save you.
Imagine that you have a special coin that gets you $2 every time it comes up tails. If it comes up heads, you will lose $1. Do you think you will make money in the long run? Certainly! Because you have a coin toss advantage, because your successful tosses are worth more to you than your unsuccessful ones. It's the same with trading.
So, if you have a statistical advantage and combined with proper risk management, you move on to the next step.
Businessman
By now, you have already understood a few things.
You need money to make money trading
Trading is not a get-rich-quick scheme. This is a gradual enrichment tool.
It takes time and money to grow your business. Here is an example:
- $5,000 account earning 20% per year = $6,000.
- A $5,000 account that earns 20% per annum over the next 20 years = $191,688.
- A $10,000 account that earns 20% per annum over the next 30 years = $2,373,763.
Once you understand the math, you will go out of your way to add funds to your trading account and aim to increase profits for the rest of your life - that's where the magic happens.
You reduce your risk by trading multiple trading strategies
If your business has only one source of income, you risk going out of business. Why?
Because if that source of income dries up, you won't have any money to cover your expenses and it's game over. This is why the best companies in the world have multiple sources of income. For example, Amazon generates revenue from its e-commerce platform, annual membership subscription (Amazon Prime), offers cloud computing (Amazon Web Services), etc. The same should be true for your merchant business.
You must use multiple trading strategies to reduce your risk and have multiple sources of income.
You must work on your trading psychology
The mental strength required to trade a $10,000 account is very different from a $1 million account. If you risk 1% on every trade, that's about $100 (in a $10k account). What about a $1 million bill? That's $10,000 risk per trade.
Even though you are at the last stage of your trading career, your education is not over yet. You are still developing new trading strategies, adding funds to your trading account and training your fortitude to handle large amounts of money.
How to quickly level up your trading?
If you get stuck on one of the four stages. What will help you move to the next step?
How to get out of the beginner stage?
The reason most traders fail at this stage is due to unrealistic expectations.
You must understand that trading is not a get-rich-quick scheme. It takes years of effort, money, compounding and discipline to turn your trading account into something worthwhile.
So don't expect to be able to earn a significant amount of money with a $100 trading account.
Some of the best traders and fund managers earn an average of 20-30% per year. If you're aiming for something higher, you're either the next market guru or you're setting too unrealistic expectations for yourself.
How to get out of the risk guru stage?
To get out of stage 2, you need to understand the math. Don't worry, it's easy, even a 10 year old can handle it.
Here's what you'll need:
- Distance to your stop loss (in pips).
- Balance on the trading account.
- Percentage risk per trade.
Then just use those numbers in your position sizing .
How to get out of the lone ranger stage?
This is a lonely stage, because it seems to you that no one understands or supports you. Your family thinks you're wasting your life, your friends don't understand what the hell you're doing, and doubts begin to creep in whether you can handle it and succeed.
The fact is that at this stage only you can help yourself. More trading strategies, techniques, patterns or anything else will not help you. It's time to discard 90% of what you've learned and focus on the 10% that really matters. But how do you know what works and what doesn't?
This is where trading strategy testing or backtesting comes into play . You test your trading strategy using historical data and find out if it works or not.
How to succeed at the last stage?
At this point in your career, you have already outperformed 95% of all traders. It's time to move on and diversify your risks.
Fund your trading account
As you know, money is needed to earn on trading. So, in order to scale up, you need to add new funds to your trading account. It could be money from your job, business, etc.
Divide money between different brokers
The fact is that no broker is 100% safe. This is why, as a business owner, you must split your funds between different brokers. In addition, different brokers specialize in different niches such as stock trading, currency trading, futures trading, etc. So choose a broker that suits the markets or strategies you are trading.
Always study the markets
You should always study the markets, even if you are already in profit. You can always strive to improve your trading results.
- Apply an uncorrelated strategy to your portfolio to flatten the profit curve over time.
- Discover a new trading strategy that allows you to profit in both bull and bear market conditions.
- Customize existing trading strategies to make them even better.
Create multiple sources of income
You can be a partner for products or services. An affiliate is someone who receives a reward (or commission) when someone signs up for a product they recommend. Never promote products you don't believe in just for the sake of affiliate fees - don't burn bridges for short term gains.
So how long will it take me to become a profitable trader?
I cannot tell you how long it will take to become a profitable trader because it depends on many factors.
Marty Schwartz, market wizard, relied on fundamental analysis and lost money for 9 years. He then switched to technical analysis and has since made millions.
Now you might think that technical analysis is the answer, but it's not. Marty Schwartz has been successful in the markets with his winning trading strategy. Technical analysis is the means to its success, not its driving force.