Picture shows many fingers pointing at guilty trader

You Should Feel Guilty Making Money as a Trader

“You should feel guilty making money as a trader.” Many traders who come to me as clients or students have a voice inside their head that says something similar to this sentence. It can come from their families, spouses, or larger communities. It can even come from beyond the grave with voices that sound like parents and grandparents.

In fact, it just doesn’t seem right. It doesn’t seem right that a trader should be able to sit down for two or three hours a day and make many more times than his parents did working many hours every day and sometimes more than one job.

I win, you lose. In the futures market, looking just at the futures trades themselves, it is a zero-sum game. For everyone that makes money, somebody else loses money. This of course excludes the value the participants receive outside of the futures market because of their futures positions, but in fact many of my clients see trading activity as a zero-sum game. If I win, you lose.

Get a real job. Son, you know I love you, but trading is just gambling. It doesn’t do anything for anybody. Why don’t you get a real job with some security?”

Trading is cheating. Brother, you know that good money can only be made through hard work. If you’re not working hard for money, it is cheating.”

Trading is out of rapport with our values. With these and other messages, the traders that come to me are out of rapport between their values, their desire to add value, and their trading career. As a result, when they get to a certain level of income or wealth they manage to make all the trading mistakes of a novice and give either much of it or even all of it back. In fact, some of my clients have blown out more than two or three accounts in this process.

What is trader’s guilt? Are you adding value to the world as a trader working only three hours a day? Is it okay to be successful while your friends are spending 12 hours a day as an accountant or attorney or doctor? Is it okay to be successful when your waitress has to work two jobs to make ends meet?

Do independent traders really add value anywhere?

Liquidity is the answer we most often hear. Yes indeed, independent traders and traders of all types add liquidity to the marketplace. If all traders quit tomorrow, the cost of buying selling almost everything in the world would explode. It would take longer to make a purchase and sale of almost everything.

Price discovery is another common answer. People would be paying one price on one side of the country and paying a very different price on the other side of the globe. This would lead to increased inefficiencies and higher cost for everyone.

Traders do provide liquidity and price discovery. Are these two factors alone enough to explain the longevity of intermediaries, middlemen, traders and market makers?

What are we paid for as independent traders?

Where is the value? As traders, the contribution you add to the market place and hence to the larger economy, is constantly moving price to value. I know that adding liquidity to the markets is of value, but I believe that the minute by minute information you add to the market is of greater value.

As an independent trader, you are in the information business.

Chart showing how trading profits add value

If you go long, and the market goes up…you have done the market a service. You have moved the price, even just a teeny bit towards value. The market says to me…”OH…Rich, you just moved the market closer to value in that moment giving everyone better information. Here, let me reward you with some profits!”

If on the other hand, you go long, and the market goes down, you have moved the market price AWAY from value. The market says to me… “Hey Rich, you just moved the market away from value…that’s OK…but you have to pay a price for giving me bad information. I will just take some money from your account and give it to others who gave me better information.”

What you are doing as a trader is continually giving the market information. Successful traders give the market excellent information and are rewarded handsomely. They can use that capital they earn to add even more great information to the market. Unsuccessful traders give the market bad information, and they have to pay a penalty for that. The penalty can even be so great as to drum them out of business.

You are really in the information business.

Trading is a sustainable career for the long term because you are giving the market good information about value. There is a reason why the market pays you money year after year. Moving price to value creates information that is critical for economic growth. Hence, building a trading career is far more than just buying and selling, winning and losing. Moving price to value is a foundation for a sustainable career and is worth your investment in your time, education, skill building, mental mind set, energy and capital.

How can you provide the market with better information?

Here is an exercise.

After a profitable trade, say out loud: “I provided the market with good information.”

After an unprofitable trade, say out loud: “I provided the market with bad information.”

Either way, there is a balance. This reduces the tendency to blame the markets and ourselves for not having a winning trade. We simply provided the market good or bad information. For some traders, this avoids a number of unhelpful emotional triggers.

As a result, you can now appreciate the market’s fairness. Your attitude can shift from “they are out to get me, run my stops, create fake breakouts etc.” to taking responsibility to provide great information to the market.

Does this model expand your permission for success? Some of my clients struggled with acceptance of a profitable career that didn’t require the “hard work.” However, they have made a big shifts when they think of themselves, not as traders, but information providers. And each day they strive to provide better and better information to the marketplace.

Does this speak to your situation? Do you have other issues that are more critical? Let me know what you think in the comments at the bottom.

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  • Richard Wills says:

    Dear Rich,

    My understanding of the futures market is that it is comprised of larger commercials, whose primary purpose is to lay off their potential risk of loss regarding future purchases or sales through hedge transactions (consumer & producer hedges, respectively), and smaller speculators, whose primary purpose is to make a profit by undertaking that risk. Furthermore, the commercials, through their hedging, are not so much profit oriented, only risk of loss avoidant. Futures trading allows the commercials to transfer their risk onto speculators, who accept it for potential profit.

    If this is true, then I see myself as a futures trader not so much as providing market liquidity or price information, but as assisting the commercials to do their job, by accepting their risk, and with the more risk that I am willing to accept, the greater potential for profit that I have. [My task therefore being to satisfactorily manage whatever risk I have accepted.]

    Lastly, although I have resisted in the past seeing futures trading as gambling, I have come to embrace trading as prototypical gambling behavior. In the past, I have served as an academic research scientist, but it appears to me that academic science research is also gambling; one gambles (ie, risks) one’s time and research grants effectively speculating that one’s research will “pay off” with new discoveries and knowledge. More recently, I have practiced as a lawyer. Perhaps much “office lawyering” is not gambling, but I very quickly came to see “court lawyering” as gambling, gambling my time and my client’s funds that the particular Judge assigned to my case will recognize, interpret, and apply the law favorably to my client. Lawsuits are not “slam dunks,” and their outcome depends highly on the Judge(s) who determines it.

    In summary, I have come to embrace my futures trading, without any guilt whatsoever, as gambling and to recognize its purpose as allowing commercial traders to lay off their risk of future loss, a purpose having value indistinguishable from that of making a future profit. To the contrary, I see my trading as adding value to the world’s economy, as, in the past, I added value as a research scientist and as a lawyer.

    Richard Wills

  • Richard, most excellent! You have found a path to embrace your trading success. Ultimately, we know that the markets have survived over centuries because they provide a service and provide value. We really don’t need any justification. However, I have found the model of being an information provider helps some of my traders sidestep the trigger of discomfort with trading success.

    Delighted you are so clearly aware of your own process and have found a way to sustain a belief that supports your success. I hope other readers will find your thoughts helpful.

  • Mike Ross says:

    Been enjoying your “ministry” to traders and our mindsets/barriers to success. Trading is one of those entrepreneurial endeavors where the ‘success drive’ will sabotage your success in uncanny ways until we learn to understand our unique environment. A complex realm of personal, emotional and technical factors make it perhaps the most confusing of professional prospects/projects to undertake for almost anyone. We won’t accept that challenge longterm without inwardly giving it credibility as a professional endeavor of high value.

    Yet, even the acceptance of the above is only the entrance key to the realm, and the learning curve is long and involved on multiple levels and layers that must eventually be coordinated. Seems like immersion is valuable for a few years, but continues beyond that only at risk of burnout/addiction to learning more and more, when it’s actually time to apply and step back and begin the reaping process. That’s my present space. Focus. Simplify. Management of Information that is essential to profit.

    In the end, as Mr. Wills states so well, the explanation of what we do is only odd till we analyze the risks surrounding so many choices in life. I see it as profit and loss, skill and practice, personal and professional management expertise which produces rewards based on things that are valued economically. Markets are the world’s exchange. We are operators in that world. And what a world it is!!

  • Rich Friesen says:

    Mike, what stands out is a process of learning the simple, adding more information and complexity, gaining skills and knowledge, then coming back to simple and focus. Yes, we are operators on the world’s exchange. What an incredible gift to join the heartbeat of world commerce.

  • Jerome Gmünder says:

    Dear Rich,

    I really have a big problem with my mindset when it comes to trading. I am trading the futures market but I didn’t startet yet with real money because I’m not yet 18 (I’m 17 but I’m already Paper-Trading).

    My problem is: “I really feel bad when I make money because the money I’ve won somebody lost it.” What funny is is when I lose money I don’t feel bad because I know it was my fault and not the person who won it.

    That’s the only thing which is holding me back in order to persue my trading career.

    I would be very thankful if you could help me with this issue.

    Jerome Gmünder

  • Rich Friesen says:

    Jerome, I am so glad that you are able to capture your belief about your wins mean somebody’s losses. For many traders, this is a subconscious drag on their trading.

    The futures market by itself is indeed a zero-sum game but is part of a larger context, the economic engine of the world.Price discovery plays a major role in productivity and value.

    When the market, even for a moment is oversold, and you buy, you are moving the price to value. If the market is overbought, and you sell, you are moving the price to value. The market appreciates this information and pays you for it. If on the other hand, you sell an oversold market, you are giving the market bad information by pushing (even minutely) the market price AWAY from value. The market then say, sorry, you gave the market bad information and you will pay a penalty.

    When you make money, it isn’t some magical thing. It is because you have added value to the market’s information system. The more money you make, the more value you add.

    On a deeper level, your concern about unknown people reflects beliefs and even an identity that may be sabotaging your desired outcomes. These issues require more focused attention and discovery.

    Great awareness! Keep up the good work!

  • Jerome Gmünder says:

    Hi Rich, Thank you so much for this valuable information. It will help me a lot in my trading.

    Wish you all the best!

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