“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.
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.