You might be shocked to hear this, but there aren’t many differences between you and a professional hedge fund manager. The only real differences are the balance of your trading account and your ability to control yourself.
The world’s top money managers all started on a path similar to yours; they had to learn how to trade just like you, they had to master their craft, fine-tune their strategy and learn to master their emotions and control their behavior in the market. Mastering one’s emotions and controlling behavior is probably the biggest thing that separates the pros from the amateurs.
With enough screen time and experience, if you stick around long enough, just about anyone can begin to call a market quite confidently. But as many of you will all know by now, that alone isn’t enough.
As I mentioned, what really separates the ‘men from the boys’, is the ability of the pros to treat each trade as just another execution of their edge, without little to no emotional connection to it. Trading multi-million or billion-dollar hedge funds is certainly no easy feat and definitely not for the weak-minded.
The only way anyone could successfully trade these huge sizes and successfully trade for high net-worth clients, is by having complete and utter control of their minds and actions in the market.
Remember, it’s just zeros.
The ability to change how you think about the money in your trading account is what you really need to succeed at this game.
What professional hedge fund traders know and do, is think about the accounts they trade as score boards, keeping score in a giant world-wide game. The score is the trading account balance and to them, it’s nothing more than digits on a screen, the more zeros they rack up after the first couple digits the better they are doing.
Imagine managing a billion dollar position the same as you would manage a $1,000 position? The only way to accomplish this is by remembering it’s all just zeros; it’s just digits on a screen. If you start allowing yourself to truly “feel” the power of the money, you have already lost.
The ONLY true weapon you have as a small retail trader, is not allowing yourself to be affected by the money you have at risk in your account. This can be accomplished a number of different ways:
- Don’t trade with money you really can’t afford to lose.
- Know your overall net-worth, liquid money left over after debt.
- Risk a very small amount of your liquid money per trade.
- I like to do the “sleep test”; if you are able to sleep with your position on, then you’re good.
If you are doing all of the above, then the final step to trading your account like a hedge fund manager lies in how you think about the money you’re trading.
I can tell you from personal experience, that the only thing more potentially nerve-racking than trading your own real money, is trading someone else’s money. Thus, a hedge fund manager needs to have ‘ice in their veins’ (discipline, self-control), otherwise they are not going to get above average returns for their clients.
How do they do this?
By thinking of the money in your trading account as “just numbers”, a trader with a really big “baller” sized account, can remove the emotion from their trading decisions. They are simply thinking about their money differently than you are, and as a result, they are able to function in the market essentially as if they’re trading a demo account.
Have you ever traded a demo account successfully and then when you transitioned over to a real account you blew it out in a month? Why did this happen? Well, it’s simple; you were letting the money control you on the real account rather than you controlling how you thought about it (like you did on demo). Don’t let it affect you. You do this by following the 4 bullet points above and then remembering it’s just numbers, nothing more, just zeros on a computer screen.
You have to take the power back from the money, don’t let the money control you, you control you and as a result, you control the money in your account.
This might sound like some type of gigantic cliché motivational speaker type stuff to you, especially if you’ve just come off a bad streak of trading losses. But, I am telling you, from personal experience, that it’s a FACT that how you think about the money in your trading account directly influences whether or not you succeed or fail at trading.