It’s long been said that knowledge is Power, and history has shown us repeatedly that there is an undeniable Truth to these words.
Through understanding and learning from the mistakes of others, no matter what their profession, YOU can Learn How To Be More Successful At Trading – without repeating their mistakes.
In combination with Your own research efforts and your own personal experiences, this article will Help Forge You Into Being A More Effective And Prosperous Trader.
In this article, You’ll Learn about what we’ve discovered from analysing the histories of successful businesspersons and entrepreneurs, all of which whom have suffered from severe ill fortune, and exactly how this information can be applied when working as an derivatives market trader.
You may perhaps be feeling a little sceptical by this point, but you should remember that there are universal constants no matter what the business in question is – private or retail, these people are all traders who own and run businesses and companies.
Written below is a recurring, five step process that we’ve uncovered during our research – one which has caused many traders and businesspersons world-wide a whole lot of grief and trouble!
The First Step: Overconfidence and Foolishness
The first step is a small yet important one: Overconfidence.
When Success strikes a trader, they may begin to feel invulnerable and immune to any possible misfortune that could happen – obviously, that’s not a good thing when one works in the derivative markets!
A trader having confidence in their abilities and their trading results is a good thing, but allowing it to bloat and fester into overconfidence? It is a terrible and very foolish road to walk down.
We’ve stated this in a few of our correspondence with clients, and we’ll state it again – Trading Success Is Gained From The Consistency And The Solidness Of Your Process. In comparison to this, the actual trading results aren’t as important.
Sadly enough, however, people who know nothing about the trading game will ask about your trading process – just about your results.
With this is mind, you can now probably understand exactly why traders struggle to keep their focuses and attentions on their trading processes, and why many of them stupidly shift their focuses onto the results and only the results.
It slips their mind completely that both their successes and their profitability are influenced, in part, by chance and luck – they could still quite easily have a “slump month”, even when they do religiously follow their systems.
When the foolish trader feels invulnerable, when their focus is shifted onto just the results, they forget what the root cause of their success is.
…And this leads onto step two.
The Second Step: Take a Hike, Discipline!
Discipline is the structural support, the framework, of a trader’s ability to succeed – it may only contribute a small part overall, but without it, you cannot be successful at all. Nada. Zip. It’s like the piston inside of an engine: small, yet critical.
Unfortunately enough for those who are on step one (and because of its nature, most likely without even knowing that they are), it’s a safe bet that they’ll walk blindly right onto step two.
What is step two, you ask? Simple – the overconfidence causes them to slack and become lazy with their trading routines.
At first, it’ll start small – for example, being late to the markets, missing a few ‘unimportant’ trades…and entering trades themselves a little late, because the trader foolishly assumes that they’re going to win on it, regardless of the situation.
Discipline is like a building that needs to be constantly maintained, in order for it to be of use. When a trader slacks or becomes lazy, it causes it to break down and crumble to the point where it would not be nearly as useful to the trader as it once was.
And this leads the foolish trader onto the third step…
The Third Stage: When Risks are Too Risky
Now being fueled by their overconfidence and having crumbling discipline under their belts or skirts, the trader will begin to notice that their trading results are beginning to slip in a very, very bad way.
Since the trade entries aren’t as accurate as they once were, courtesy of the trader’s slacking, they’re now not nearly as profitable as they once were. Unfortunately, the trader will not notice this problem because of their overconfidence – they’ll assume that nothing has changed, and that it’s their own ability, not their entries and weakened process, that isn’t good enough anymore.
Sadly enough, even as their profits and returns drop, they’ll still remain overconfident. They’ll also foolishly undertake more riskier gambles and trades – they’ll assume that it’s the perfect answer to their problem, because they still believe that it’s themselves and not their system that’s the trouble. They’ll believe that increasing their risks will not affect their final results.
Obviously, this is a bad idea – when they’re upping the stakes with such sloppy ethics, it can only lead to financial losses and disasters. In their current mindset, however, they’ll never accept that it’s their own fault.
The Fourth Stage: Holding On By a Thread
As you, the reader, should know by now, risk management is an integral part of the trading game – but you should also always remember that increasing your risks per trade is only acceptable when you have a strictly followed trading routine, and if the rewards are worth the risky effort.
When a trader has reached the point where they try to win upped stakes in order to try and recover their losses and financial worth, they’ve stumbled right onto the fourth step.
Desperation in their increasingly erratic actions and behaviour becomes evident, and their bloated sense of overconfidence finally comes crashing down, much like the Hindenburg. They will now try anything that will return them to the point before all this mess began.
However, they’re now so depressed and full of self-doubt that it significantly affects the way they think. They still can’t understand the problem, but worse still, their sense of pride and their ego stops them from seeking help. Frustration mounts, and it just forces them deeper into the hole.
Even when the solution is just in front of them, they’re still incapable of stopping and actually seeing what’s going on.
This ultimately leads onto the fifth and final step…
The Fifth Stage: the Precipice
In the fifth and final stage, the trader typically goes down one of these three roads:
· They give up and stop trading completely, ending their careers
· They lose all of their money on shaky, high-risk trades, leaving them ultimately flat broke
· They understand that they have a problem, and finally have the sense to look for professional help
If you, the reader, are one of these traders who is having such troubles, I implore you to choose the third option!
A lot of traders and businesspersons have been hit by the five stages, and it has caused them an unmeasurable amount of trouble and suffering.
You should be also be aware that while a trader can go through each step in order, from one–five, it’s also quite easily possible that some steps can be skipped over entirely: it all depends on the trader and the current circumstances involved. There is also no set
‘speed’ for an affected trader to slide from one step to another – a transition could happen at any time, or even not happen at all.
A trader could have gone straight to the fourth step from the second, because they became lax and careless with their risk management.
Another is that an unfortunate trader could have jumped from the third step to the fifth, simply by emptying their trading account after using it for just a few trades.
Another example is that the trader can permanently remain stuck on the second step, because they’re always making as much as they’re losing (essentially, breaking even) – while good at managing risks, the trader isn’t getting any further.
Remember to always be on your guard – as Benjamin Franklin once said, “An ounce of prevention is worth more than a pound of cure.”
It’s my hope that you’ll never have to suffer from the problems – physically, emotionally, mentally, and financially – that this pattern causes.
I wish you the best of luck!