Today, I’m proposing the idea that we have two switches in our mind, like light switches. We have the money switch and the percentage switch.
I’ve developed a theory called, the money switch theory, which is not talked about often enough.
The money switch theory will result in really smart trading decisions, so let’s dive into it.
Money Switch VS Percentage Switch
As mentioned, we have 2 switches in our mind. One switch is the money switch and the other switch is the percentage switch.
Usually the money switch is turned on and the percentage switch is turned off. That is what we are conditioned to live with and how to operate. We are in a consumer driven society, which means money drives everything we do.
The people with the money switch on are only going to talk in terms of dollars, or whatever the currency is where you live.
For example, “I want to make $100, $1000, $5000.”
Occasionally, year returns are sometimes talked about in dollars but most of the time, in the professional world, money is discussed in percentages.
If you reach out and talk to a professional trader they will never ever talk in dollars. Don’t just take my word for it, you can reach out to Wall Street traders on LinkedIn and talk to them directly.
Turning Off The Money Switch
What I am proposing in this blog is, to be a successful trader, turn off the money switch and turn on the percentage switch.
When that switch is made in your mind, that’s when you will start to see strides and growth in your trading as well as an increase in your P/L. (P/L = Value today – Value from Prior Day.)
The people who trade with their money switch on and their percentage switch off, will inevitably chase trades, over leverage, and use an unregulated broker to try and take advantage of the system.
They do these things because they are looking for the quick buck. They think it’s a ‘get rich quick scheme,’ and these people do not last in the trading world.
Most people who trade with their money switch on will drop out and quit before they get to a full-time trading level.
What Are The 3 P’s?
As a professional (or aspiring) trader, you need to focus on the three P’s:
- Percent returns
These are what good trading is built on – not chasing a $ amount. I believe in this so strongly that I don’t think you should have dollar goals in your trading plan..
I don’t think having a dollar amount in your trading plan is realistic because it limits your beliefs. It limits your frame of thought as to how much money you could possibly make. If you are a goal orientated person and like implementing them into your trading plan, then I highly suggest having percentage goals instead of specific dollar goals.
Remind yourself that there’s unlimited potential out there because of how big the market is.
Focus on turning off the money switch and turning on the percentage switch.
That’s all you need to do and you will see a lot of strides in your trading growth.
Now, there’s one more tip that I would like to give: if you are using an unregulated broker, you’re going to have a harder time turning off the money switch than if you switched to a regulated broker.
This is plain and simple because these unregulated brokers are going to give you high leverage and you are a human being, so you are going to be tempted and select the high leverage option. This means that, without a doubt, you’re going to over leverage and lose a big chunk of your account if not all of your account.
On the other hand, if you use a regulated broker sometimes they won’t even let you put 10% of your account on a trade which, in my opinion, is still too much of your account at risk on one trade. However, the lower leverage will make it easier to focus on turning the percentage switch on and the money switch off since you’re no longer tempted by high leverage.
When you can’t go crazy with your lot (position size) in a trade, it’s going to shift your mindset to a whole different level. You will begin to look at your trading like a business and not as a get rich quick scheme.
If you are looking for a get rich quick scheme, take your money to the casino, and I guarantee you’ll have better luck. This market will chew you up if you’re looking to gamble.
If you are trading and have the dollar switch on for too long, you will give up and burn out, which is the opposite of what we are striving for at ASFX. We want to help create and sustain professional traders who are in it for the long haul.
So, let’s say it out loud, I promise to switch off the money switch in my mind and switch on the percentage switch while I’m trading.
Put it in your trading plan, put it on a sticky on your wall, put it in your journal and just try it.
I guarantee you will start to see your trading evolve into an ever growing and profitable business.