I believe there are four aspects to successful trading.
1. The technical aspects; your equipment, software, connection, broker, etc.
2. The method of choosing and timing your trades; your trading system.
3. The ability and skill to execute your decisions in a timely manner.
4. The emotions of trading, the ability and discipline to follow through on your own plans objectively, without hesitation.
One of the most frustrating problems I come across, the saddest and most difficult to solve, is when people learn 1-3 with flawless perfection, and still lose money. They know what is right; they know when they should react, and how; they know the consequences of not reacting; but still their fears and hopes twist their reasoning, and consciously or unconsciously prevent them from acting on that knowledge. The last aspect of trading to overcome, and by far the most difficult, is your emotions.
This is particularly tragic because it is most often in a later stage of a person’s trading career, after a lot of time and money has been invested, that the real emotional blocks to
trading raise their heads, and the trader finds out that they simply can not conquer their emotions. In earlier stages, a lot of mistakes can be passed off as “tuition”. It takes time and money to learn a system. It takes time for a trader to refine their system, find their niche, and work through the first few trials and errors. It then takes time to discover that the reason for a losing pattern, is not that the system is not working, but that the trader is in fact not following their own system. Many never do arrive at, or accept, this realization.
It is in these later stages that we really begin to see how much trading is an avenue to self-discovery. I have learned more about “me” sitting here staring at blinking numbers, putting my convictions on the line, than in any other endeavor in my life (except maybe parenthood :-). As I place myself in direct confrontation with my own fears and hopes, I discover places within myself I had no idea existed. This is one of the things I love the most about trading, and I hope this learning process never ends.
Working with other traders, I have also learned more than I imagined about people, and their strengths and weaknesses. I have learned a lot about what makes a good trader, and what common pitfalls arise. I see patterns to stages that traders go through. I see people struggling with the same issues, over and over. Some manage to overcome these hurdles, and some never do. I try my best to note the common denominators, and learn from them.
I believe there are deeper issues in our character that create our weaknesses and fears. I also believe that the purpose of life is to learn, and that we draw to ourselves the lessons we need. So as we are confronted with these deeper issues in our trading, it becomes an opportunity to explore and grow as people. Taking advantage of this opportunity will in the long run be the most gratifying and lasting solution. I am however not a therapist, so in dealing with trading, I feel I am not qualified to help solve the deeper reasons for common trading mistakes, but rather treat the symptoms.
My ideas about overcoming this last stage of learning to trade are based then on what I have learned from myself, and from others, those who have both succeeded and failed. My views about controlling the emotional blocks that arise in trading are based on what works for me, and what I see working for others. They are a product of both observations and experiences.
In later posts I would like to delve into the common pitfalls of traders, as well as some of my ideas about overcoming them. Please feel free to ask any questions you have and offer your own insights.
- Shawn |
