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A surefire recipe for failure is for a trader to have an egotistical belief system, with a myopic outlook on what a successful trader actually is. Successful traders do not strictly measure their success in terms of how much money they made or lost on any particular trade. Successful traders know that they will have many losing streaks lasting days, weeks, and in some cases months. However, in the end they know that they will end up being net winners, because they didn't trade in an egotistical manner. |
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The vast majority of individuals who start trading will lose money, and many of these traders will define themselves in terms of their actual or perceived profitability. In other words, these individuals will validate their beliefs according to how the market treated them. Typically the beliefs of the conscious mind associate losing money with being a lousy trader, and profitability with being a great trader. |
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If you are losing money on a particular trade, your beliefs about trading and life may convince you to average down. In this case, your beliefs are preventing you from clearly defining what a winning or losing market position is. Consequently your ego, which is deathly afraid of being wrong once again, will convince you that averaging is the logical thing to do. You can then rationalize away the fact that the position is a loser, because the average cost has been adjusted downward in your favor. This is an example of a myopic belief about the marketnamely, that each trade must be a winner. Occasionally averaging down will work, thereby allowing you to avoid the truth. All will go well until averaging down blows up in your face, bankrupting your trading account. All successful traders know that to average down a position is to play with the ultimate demise and ruination of their trading capital. |
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Are you curious as to why most successful traders at some point early in their careers lose most if not all of their trading capital? The answer is that their beliefs about the market, and what trading is, set them up to lose on a massive scale. That is why many traders buy high and sell low. That is why many novice traders hold on to a losing position hoping that it comes back. When presented with a winner, these same novice traders will be quick to take a profit so that they don't give back their hard-won gains. The reason that traders hold on to or average down losers and prematurely offset winners lies in their beliefs! In many cases the impulsive nature of the unconscious mind is not being controlled by the conscious mind. Traders lose their detached, unemotional viewpoint because their beliefs are preventing them from using their rational conscious mind to control their irrational unconscious mind. |
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Whenever you find yourself fighting the trend, it is because your mind is insisting that it is right and the market is wrong! Whenever you find |
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