Top Ten Trading Psychology Myths
Here are the top ten trading psychology myths:
1. People are born traders. Although certain personal characteristics can make it easier to trade, no one was ever born a trader. A main theme of Jack Schwager’s Market Wizards books is that virtually none of the market wizards was successful from the outset. They all worked hard at it.
2. You have to have a high IQ to trade. This is just not true. In some ways, an above average IQ may be a hindrance. Trading is a human performance activity where strong intellectual abilities are not necessary.
3. Successful traders are successful because they have the “right trading personality.” There is no such thing as “the right trading personality.” Researches have been unable to find a strong correlation between personality type and trading success. It is important, however, to understand your personal characteristics and how they may help and hinder your trading.
4. Trading is easy. Just follow your indicators, maybe draw a line or two and buy low/sell high. Easy, right? The truth is that trading is a difficult business to master. It involves different skill sets and abilities than what are needed in most other professions. The trader must develop specific skills to deal with the mental and emotional demands of trading. These skills are the most difficult to develop and the most overlooked.
5. You must be tough, hard charging, and fearless to be successful. That’s more media hype … Continue reading here …
I totally agree with #5 and #6 even though they may seem a bit paradoxical.
Having a plan helps tame my emotions especially when the going gets tough in the markets. Although I’ll admit I don’t do it all the time, I try to set a stop loss at the onset of a new trade corresponding to the maximum amount I’m willing to lose. It’s much harder to pull the trigger to exit later on when you’ve been jolted by losses and hope the market will come back to breakeven.
As for #5, being fearless is probably one of the easiest ways to lose big in the markets. There are plenty of situations in life where you’ve got a lot to gain and little to lose and that’s the perfect time to be fearless but trading certainly isn’t not one of them.
This is a great article, and i hope that this article will bring more and more traders to the markets. Anyone can recognise at least one mistake that he does in this sentences. I can’t wait to read the book.
I agree trading is one of the most difficult businesses, however it creates an illusion of no an easy job. People fail in this because they never prepare for this business and give up their hard earned money.
Thanks for your comment, Arun. One of the reasons they fail is because they don’t treat it as something that needs persistent effort and lots of preparation. They think it easy, and, therefore, fail to prepare.