“Our mind is
our enemy.” – Tom Hougaard
Our mind is really our foe, especially when we find it extremely
difficult to do what are in our best interest. Doing the right things tends to make
us uncomfortable initially, unless we train our mind to adapt to doing the
right things until they become our second nature. In the part one of this series, I mentioned
how drivers and motorcyclists need to be forced to do what are in their best
interest and the best interest of their loved ones (including members of the
public).
It’s well known that smokers are
liable to die young. A few years ago, I visited an elderly man who’s a dad to
one of my friends. He was glad to see me. After some time, he reached for his
drawer and took out a cigarette. He lit it and started smoking. The elderly man
noticed that, by my countenance, I wasn’t happy that he was smoking. I was
concerned about his health, for he looked a bit emaciated. Before I could
speak, he said:
“Young man, I know you aren’t happy that I’m smoking, but that’s not your
business. I’d been smoking before you and your friend – who’s my son – were
born. I know cigar is dangerous to my health, but mind you, if my health
deteriorates and I die, it’s nobody’s business. Nicotine is thought to be
poisonous; yet I buy it with my money and take it into my body. It’s my body
and my life, not your body or you dad’s body. If I do what can affect my life,
it’s nobody’s business. It’s my life and it’s not your concern if I lose it.
I’ll smoke till I die. Whether I smoke or not, it’s something that’ll cause my
death. Your friend, who’s my son, has accepted this fact and has stopped
remonstrating with me. I’ve told my children that if I die today, I should be
buried quickly so that I don’t cause a stench in the neighborhood.”
What does this have to do with trading? Many traders who know what can’t
pay them in the markets still find those things irresistible. This is the most
important reason why most traders won’t make it. Below, you can read 4 things
that will guarantee your failure in the markets. If you avoid those things, you success is then guaranteed.
4 Things that
will guarantee your failure in the markets
1. Thinking that
risk control isn’t very crucial: Risk control is one of the major factors that
contribute to your everlasting success in the market. If you don’t know what it
is, you’d better learn it and start applying it. If you know it already, you’d
better start applying it with strict religiosity.
2. Thinking that
you know everything: It’s unfortunate that many traders feel that they know
what the price would do next. We tend to feel we’re hot, but the markets
sometimes remind us that we’re cold. The expert traders’ saving grace is that
they never forget they’re students of the markets. It’s thus helpful to trade
what you see and properly manage your trades. It’s by far more helpful to use
speculation methods that have stood the test of the time historically: plus
methods that make money regardless the direction of the markets.
3. Thinking that
overtrading can bring more profits: Overtrading doesn’t improve any statistics,
especially when the extant market situation isn’t favorable to your trading methodology.
Rather than doing that, you may think of temporarily suspending a certain
trading approach until the market conditions become favorable to it. The time
of favorable conditions is recognized based on expertise and experience.
Another key is to make sure that there’s no reason not to trade a particular
setup. This ensures that we enter a position based on our logical entry rules
only, not based on irrational emotions.
4. Thinking that
your education and knowledge in other field can help you in trading: I know
speculators who were very good at other things but who’re now grappling
desperately with the markets. Bill Gates, who’s very successful in the computer
world, was recently beaten at a chess game by a chess champion. John McAfee was
successful as a software engineer and programmer, but failed as an investor.
Your expertise in one field doesn’t automatically translate into success in
another field. Someone who’s successful as a TV superstar may fail as a
politician. No matter your level of education or degree of expertise in another
field, you’ll need to learn the art of successful trading.
Weigh the consequences
There are consequences for suicidal and safe trading principles, and
therefore, you’d do well to weigh the consequences before you allow your mind
to mislead or lead you. Testing a method in real market conditions is more
preferable and more agreeable. When a good method doesn’t work, we patiently
control our risk and wait for the time when the conditions in the market would
be favorable to it again. The easiest trading methodologies are also the most
profitable.
This article is ended with the quote below:
“When I gave
up trading due to frustration and losses. I realized the markets didn’t beat
me, I beat myself. The classic Jesse Livermore line. I firmly believe that
most, if not all of trading over a longer time frame is psychological.” – Larry
Tentarelli
Source: www.tallinex.com
Learn from the Generals of the Markets: Market Generals
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