What is the difference between a winning trader and a losing trader? It all comes down to attitude. Plus the winning trader makes it their career while the losing trader packs up their bag and disappears broken.
How do you get the right attitude? Where do you gain the skills necessary? Can previous winning experiences in a different field translate into additional self-confidence in the trading game? How long is this gestation period going to take? What details and secrets does it take to be a consistently successful trader? Is there a point in time that you will know all there is to know? How much is technical knowledge compared to self-mastery knowledge?
Attitude comes from within. Whether you think you can or cannot do anything, you are right. Every decision you make is one from free will. No one is forcing you to do anything at gunpoint. Your upbringing and outlook on life in general affect what kind of trader you are. Your point of view on money, value, work, winning, losing, wrong decisions, right decisions, happiness, sorrow, anger, fear, disgust, self pity, self worth, greed and a host of others are all rolled into either an arrow to help you along or a wall to stop you in place.
You can choose to have any reaction to whatever the markets may present to you. Maybe you will react as most people will. Maybe you will react differently. What is wrong or what is right depends on your attitude vis a’vis the markets.
As I see it you can control in general only 2 things while trading:
- The amount of money you lose in unprofitable trades when you set a stop loss.
2. The elements of your plan.
That’s it that’s all. The first one is easy. Enter a trade, set a stop. Barring extraordinary occurrences (as we have seen lately they do happen) you can precisely set the amount to lay on the line to test your trade ideas. The second one is the tricky bit. Your trading plan/system/edge is your foundation. It is comprised of both technical and emotional components. It is within your power to carry it out exactly as planned if you have the will to do so. It is not out of your control unless you choose to let it out. It’s up to you to follow and execute no matter what happens. To the degree you are swayed is the degree for improvement.
What can sidetrack you? Basic human emotions and lack of skills including the overall inability to cope with changing market conditions. Emotions such as fear and greed and all their associated feelings can sabotage your sincerest desires.
Acquiring the necessary skills should be done with no thought as to self imposed deadlines. First of all, beginners at any endeavour have no idea what so ever about what they even need to know. Trading is no exception. Certainly it is easy to have some winning trades right from the start and think you have this thing mastered. Market conditions frequently produce winning trades with hardly any effort at all. But when conditions change from strong to weak to sideways to chop and back again how are you going to cope if you really have no idea what to do. A beginning trader can lose their bank very quickly. Again it all comes back to you to realize what is going on and adapt to the conditions. But if you are beaten down, can you mount a comeback? Deep down inside do you have what it takes?
I can take some examples from sports and draw some parallels.
In tennis you can see the test of skills and wills clearly. One player gets the advantage and wears down the other. Slowly but surely unforced errors occur as the player behind tries to overcome the deficit. Have they lost the skills? No. Now it has become psychological in nature. One is getting beat. They are losing. Self-doubt creeps in. Their attitude has shifted from winning to losing. On the other hand the winning player feeds off the successes. They can see they have the upper hand. They can push it and show no mercy and try and pummel their opponent into the ground. They have the edge. Self confidence. Attitude.
Comeback wins do happen though and it takes supreme will power and control to force yourself to apply the system to best fit the conditions relentlessly.
Learning how to trade and manage yourself takes a lot of time. How long depends on the individual. I watched the markets and paper traded every day all day for two years before I felt I was ready to take on the professionals who have unlimited money and deep skills under all market conditions. Long markets, short markets, sideways markets all require different techniques to make consistent money in. In the very beginning how do you even know how to set your screens up. What information do you display? Then comes watching and being amazed at all the movement and colour. What about an edge, a plan, a system, taking profits, sizing, stops. This all takes many many instances of seeing and experiencing before it starts to sink in and become usable information. Why do you think flight simulators are so valuable in the aviation business? Because you can train for all conditions without crashing and burning. Over and over you can practice without getting killed. Crashing and burning as it relates to trading is to lose all your money and become psychologically damaged in the process. Your attitude will become a losing one.
Learning the technical aspects of trading and the markets takes time and what you think you know after 1,2, 3 years is nothing. Really, nothing. As the years roll by and you accumulate 1000’s of hours of seat time honing your edge and system you get to learn a few things about yourself as well. This is where you become a trader. And if you are humble, the learning never stops. To think otherwise is a recipe for disaster.
I wrote in one of my previous posts that trading is not about charts, chat rooms and technical indicators. It is about information and human emotions, real or not, that drive the prices and how best you can exploit them. The most important skill you can acquire is to master yourself. Trading wise that means to be able to do anything that you want to do at any time. You are in control of your emotions and let them work with your system and goals to become successful. The right action at the right moment based on the prevailing information and your intuition.
Confidence gets build into you when you see that you can do this thing. Winners make more winners. Unprofitable trades are only that. They are not taken as a bad reflection on yourself. Hesitation, self doubt, anger, sorrow, joy, fear, greed can all be mitigated by a winning attitude. The continual application of looking inwards at yourself is what will make an unshakable winning attitude and a complete trader.
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6 comments:
This is one of your finest posts to date...
The first sentence touches on something very important, "...the losing trader packs up their bags and disappears broken." The common human frailty of shrinking in the face of adversity is one of the emotions/behaviors which trading will expose quickly. Quitting when things get tough, when one loses early-on: I think this is why the estimates that 90% of all traders lose money is true. The folks looking for quick, easy money put their tail between their legs and crawl out instead of bearing down and fighting to learn.
Keep yourself in the game by mastering the art and science without money on the line.
Don't be the 90%, commit to being the 10%, even if it takes five years, or five times five years.
Don't stop, don't ever quit.
I have to keep changing my favorite post.
This is incredibly timely - in the midst of what I find myself realizing. So many great lines - I want to frame every paragraph and hang it in my office.
"What can sidetrack you? Basic human emotions and lack of skills including the overall inability to cope with changing market conditions."
That is me - inability to recognize and cope with changing market conditions; and as a result, finding myself back to dealing with the emotional component. It is one thing to read this, quite another to recognize myself in it and let it become my own.
Thanks for sharing man.
DTF- Well this was inspired by the post I left on your blog and the response that came back.I wasn't going to argue there but instead wanted to expand on my beliefs here.
man, great post! myself and dtf are right on the edge of great success. it is so easy if we just open our minds to what is in front of us and have the confidence to put on the trade. today for example, i was talking to dtf about the q's and the doji at 1100, the hammer at 1115, and then the doji at 1230. these are examples of changing market conditions. you have to have the ability to flip your positions on a dime. what i am working on, and i think it is what you are able to do, is look at every new 5 minute candle as distinct and seperate from what has happened before. i.e. i use to trade in an office with my buddy, i remember coming in one day an hour later and i immediately started buying. he was heavily shorted. he got agitated saying, "why are you buying" the market has been going down all morning. but, i came in the office with fresh eyes, fresh mind, i wasn't influenced by what happened since the open. i came in, saw a downtrend, saw a hammer candle, and that was all i needed to know. it is just hard not to be influenced by your positions but you need to free your mind. control your emotions, control your pre-existing beliefs, and just be in the moment. i am getting there and pushing myself everyday to really believe that i have what it takes to be succesful.
another quick thought...i flipped on the golf channel and realized a golfer has to be focused for 15 seconds before his swing, a baseball player mainly when the pitcher is winding up, a jockey when he is runing the race etc...Now, I do believe a lot of preparation and practice goes into doing their job well. But, what other job besides day trading do you have to be consistently focused for extended period of time. the only job i can think of is a race car driver. it is really amazing to me how much dedication and focus one needs to have to do this job well. and focusing or concentration is not something most people practice. when i started trading i thought i would kill it, it looks so easy. but once your start, man, what a mind game. thanks for all the great insight! enjoy the 3 day break.
Scott, I too believe that this post is one of your best. This reminds me of a famous quote about poker: "Poker is not a game of cards played by people. It is a game about people that happens to use cards." As you eloquently state in your latest post, the same can be said about trading. Trading is not a game where people try to beat the market. It is a game about people trying to beat (master) themselves through the market.
Thanks for your generosity.
Eric
www.ericchung.com
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