TWO CIRCLES TWO TRADERS

The following graphic describes two types of traders.  The first (the circle on the left) describes what I believe to be the characteristics of all beginning traders, most of which end up quitting.  There is a progression here from bad to worst.  However, if the beginning trader can break through this cycle somewhere around undisciplined fear (#3) and paralysis of analysis (#4), the chances of his success improves exponentially.

THE LOSER’S CYCLE OF DESPERATION

Simply put, a trader enters the stock market with little if any knowledge about what to expect.  How can he?  No experience = no knowledge.  Not only that, but his expectation of untold riches distorts his perception of reality.  Once in the market he seeks the holy grail that will make him rich.  When he doesn’t find it he continues his search as fear begins to shackle his feet.  The fear leads to paralysis of analysis or the thinking that the more indicators and patterns and candlesticks etc. that he uses the more likely he will win.  Wrong! 

IT IS HERE THAT A CHANGE IN DIRECTION MUST TAKE PLACE OR IT COULD BE ALL OVER!  

Unless our trader gets very lucky (unlikely), he will cast caution to the wind and gamble his money away.  This is where the professionals make most of their money.  If our trader can step back and focus on trading as a simple disciplined PROCESS, then he has a great chance at making a career out of trading.

DISCIPLINED SIMPLICITY AND THE PROCESS CIRCLE

It is my contention that the most successful traders are the ones who have the discipline to keep trading simple by focusing on the process and not on the money. 

Here are the characteristics:

1. CONFIDENCE: absolutely essential in an environment that feeds on emotional    instability.

2. TRUST: if you cannot trust yourself who can you trust? Trust your rules, trust your edge, trust that you will do the right thing-no matter what!

3. FOCUS: you will never learn all there is to learn about the market.  Push your ego aside and focus on one market and one edge.

4.  ACCEPTANCE:  you have to accept what the market is willing to give or you will give the market what it wants to take.

5.  RESPONSIBILITY: you and you alone are responsible for the money you lose and the money you make.  Take the credit for both.  Either way you deserve it.

6.  PATIENCE:  The market is not the place to learn patience, it is the place to practice it.

7.  RULES:  the market has no rules and no one else will do it for you. Develop rules for entering AND exiting trades before trades are made.

8.  RESPECT:  you have to respect the market for what it is not for what you want it to be.  The market has a logic all its own.  You may not like it but you have to accept it.

Disciplined simplicity will move you from the circle of fear, pain, desperation, anxiety, loss, depression (you name it) to quiet, confident success.  It could turn your whole life around. 

You have tried everything else so why not give this a chance?  Who knows?  It might just be what you have been looking for!

Post from: The CrossHairs Trader

THE STOCK TRADER’S CIRCLE OF SUCCESS (AND FAILURE)

Related posts:

1. CAN MISSING A STOCK TRADE BUILD CONFIDENCE?
2. THE SECRET TO TIGER WOODS SUCCESS…AND OURS
3. THOMAS BULKOWSKI AND THE FAILURE OF POPULAR STOCK TRADING PATTERNS

Last 5 posts by David Blair

• THE THINKING TRADER 11/20/2009 - November 19th, 2009
• OVERTRADING: YOU MIGHT BE A STOCKAHOLIC IF… - November 17th, 2009
• THE THINKING TRADER 11/13/2009 - November 13th, 2009
• VETERANS DAY 2009 IN THE CROSSHAIRS - November 11th, 2009
• THE ART OF TRADING VERSUS THE ART OF DECEPTION - November 10th, 2009