It has often been said that successful trading is almost entirely about mastering emotions, which is why so many people struggle to make it in this industry. While I generally agree with this statement, what most fail to understand is why they do what they do, and why they believe what they believe. You see, it’s nearly impossible to become a consistently successful trader without first understanding your belief system and how it was formed. The problem is that most traders are quick to believe some marketing ploy or listen to someone who ‘sounds’ professional and polished, and yet they don’t really know who is teaching them, and if that person should be teaching them!!
Another issue that plagues traders is not fully appreciating their own thought processes and beliefs. You see, its practically impossible to trade profitably without understanding why you do what you do. Why do you sell too soon? Why do you not take stop losses? Why do you cost average down on losers? Why do you over trade on losing days, but quit after 1-2 winners on the good days? Why do you knowingly risk more than you should? Why, Why, Why?
You see technically proficient traders are a dime a dozen, but genuinely profitable traders (who show it) are truly few and far between. Why is this? Because it’s always easier to give advice than it is to follow your own! Anyone who has ever traded knows this business preys on your emotions and mental fortitude more than just about anything else you’ve ever tried in your life. You’re relegated from being the smartest person in the room to just some lost, frustrated head case. This is the game that the markets play with us on a daily basis. Thus, everyone wants to know how to overcome this feeling of ineptitude and frustration. The answer is simple, EGO, but the process of changing is much more challenging.
Most people never stop to think about why they believe what they believe. Where were these beliefs created and fostered? Why do some people believe one thing, and another believes something totally different? First of all, this is what makes the markets work. People have differing belief systems. SO, the key attaining trading mastery, is to not only understand what you believe, but also what others believe.
Let’s use a simple example of belief systems. Why do you believe a Rolls Royce is a good car? Have you ever driver one? Have you ever had an opportunity to really ‘look’ at one in great detail? Most people haven’t. Yet if you ask ‘most’ people they will tell you that a Rolls Royce is a good car. Why do most people believe this? Because that’s what they’ve been told over the years. Perhaps they see wealthy people driving them, or perhaps they’ve seen them on “Lifestyles of the rich and famous” with Robin Leach. What does this really tell us about Rolls Royce’s? Not much other than they are expensive.
How does this relate to trading? We believe too much of what we HEAR, and not enough of what we actually EXPERIENCE. You see, the only way to truly find out who you are as a trader, is to actually trade! Only then can you find out what beliefs and emotions are afflicting your trading. How we approach trading, our initial belief about the business, has a significant impact on whether or not we will be successful. Your initial perception of the trading business will have the largest impact on your timeline for success as well as your opinion of what success in trading is.
There are various ways we develop our beliefs. Some are from personal experience, some are stories we’ve heard, some are based on ‘authority’ (someone you trust tells you something), some are based on premonition, and idea or dream you’ve had. The question is, how many are based on reality and experience? Usually not many. This is why traders struggle so much, because there is such a huge gap between what people are pitching/selling and what ‘real’ markets are actually about. So your belief coming into the business is one of excitement and to get rich quick. In reality nothing could be farther from the truth.
As you can see your belief coming into the business impacts your likely success or failure. Now, there are two important points to remember here: 1st we only have ourselves to blame if we believe everything we hear without experiencing it first, and 2nd it is entirely up to us to take the necessary actions to be successful. We cannot blame others for our lack of preparation because we drank too much hopium, and didn’t do proper due diligence. The victim mentality never works in trading, or in anything in life for that matter.
So, in closing, when entering the trading business, make sure you are doing your due diligence, and not getting overly excited or ahead of yourself. This is a challenging business that requires lots of hard work, dedication, education and most importantly market experience. If someone is telling you otherwise, then don’t just walk away, RUN away. What we believe and how those beliefs were formed will ultimately determine our success or failure in this business.
