Master yourself to be a trader

As humans you have a natural tendency to try and influence our surroundings and events we take part in.

This is one reason you, as a species, have succeeded but it is also one of the fundamental flaws you have when trying to achieve success as a traders.

When it comes to trading, most of what you have learnt to date and the beliefs that you have formed about success are inappropriate.

When you are trading you need to be:

· Quick to cut a loss
· Flexible to the ever-changing flow of information
· Take the lead from the market rather than try to control it
· Comfortable with uncertainty and risk

What are you taught about success?

· Not to be a quitter
· To be decisive, not fickle
· To take charge/control
· To dictate
· To stamp out uncertainty

It is not difficult to see that what you believe about success in all other areas of life will work against you as traders. Lets look at some particular behaviors in trading.

Not cutting losses, what is the likely thinking that would result in this behavior?

· Losing is bad (If you lose then you are a loser)
· Being wrong is bad (you all learn this at school!)
· To take charge/control
· You want to be right all the time i.e. perfectionist
· And snatching profits:

Fear of losing what you have (losing is bad again). Need to feel good (You are not good enough).

Ultimately you'll struggle as traders because you want and need to feel good about ourselves and you are looking to the market for this affirmation.

You are reluctant to take a loss because you think a loss is bad and that it underlines our fear that you are bad (a loser). You snatch profits because you are desperate for information that supports the idea that you are good.

If you have an unshakeable belief that you are good, then you would not look to the market for approval; you only look for something you think you don't have.

To resolve this problem you need to simultaneously work on and build the belief that you are already perfect and you need to shift our neediness away from the market and seek affirmation from another source.

As traders......

You have to realize you have no control over the market and if you accept that then you have to accept that you can not influence the direction of the market.

The problem of course is you have a tendency to try and succeed and when inevitable losses come, it is easy to let those losses effect you emotionally.

Becoming euphoric when you hit a winning streak is almost as detrimental as becoming depressed when you have a string of losses.

You as traders have to try and achieve the state of impartiality.

You have to accept that you will have losses as readily as you will have wins.

Reaching the stage where you can comfortably accept loss in the knowledge that your method of trading will produce profits in the longer term is the state you have to aspire to.

CFA's who managed funds, the most consistently profitable were the one with the best risk management systems.

To trade successfully you have to take a long look at yourself.

Ask and answer the following questions:

** How much equity do you need to start?

** How much should you risk on any one trade?

** Are you undercapitalized?

** Do you have a risk management strategy in your

    trading system?