Why do the vast majority of traders lose and what you can do to separate yourself from that group?
So why do most traders end up losing? There are, of course, a large number of answers to that question and I certainly cannot cover them all. However, in this and a number of following articles, I will endeavour to cover the major factors and what you can do to avoid these pitfalls.
Before we go further, I think it would be useful to hear the opinion of someone who has interviewed many of the greatest traders in the world; Jack Schwager.
In preparing for his book Market Wizards and more recently New Market Wizards Jack interviewed a number of the world’s top traders and provides some very valuable insights in these books. At the end of his second book he made the following observation; “Time and Time again, those whom I interviewed for this book and its predecessor stressed the absolutely critical role of psychological elements in trading success!” He also stated that those successful traders never talked about indicators or techniques, but rather about such things as discipline, emotional control, patience and mental attitude toward losing.”
So let this message be very clear: the ultimate key to your success as a trader is internal, NOT external.”
Here are some further proof: another great trader was once asked a college course on trading.
The course lasted 10 weeks. In the first week he covered the basic information about markets and trading. The next week was spent on his moving average crossover system. And the remaining eight weeks of the course were devoted to the psychology of trading, convincing the students of the necessity of following the plan absolutely, and developing the mindset to accept losses as an inevitable part of even the very best trading strategies.
So if this evidence from the world’s best traders who have collectively earned billions through their trading is not convinced you of the necessity of managing your own mind set when trading I suggest you find another avenue to make your fortune.
Of course, all the great psychology in the world will not make you a successful trader you do not have a system with an edge. Pinpoint and trade runner provide you with an edge with the probability of around 70%. However, only you can ensure your success of following rules 100% of the time.
To be continued…