When Jack Schwagger interviewed legendary trend following trader Ed Seykota for his book “Market Wizards” in 1989, it’s clear he was not ready for the answers that Ed Seykota gave.  Not many people are.

But by far the greatest and most provocative answer that Ed gave was that of “Everybody gets what they want out of the market”.  Not only did it incite an almost angry response from Schwagger, it has confused and enlightened an entire generation of traders since.

The Famous Ed Seykota Interview

Jack Schwagger asks his interviewee: “Don’t all traders want to win?”

And Ed replies with: “Win or lose, everybody gets what they want out of the market.

“I know one trader who seems to get in near the start of every substantial bull move and works his $10 thousand up to about a quarter of a million in a couple of months.  Then he changes his personality and loses it all back again.  This process repeats like clockwork.  Once I traded with him, but got out when his personality changed.  I doubled my money, while he got wiped out as usual.  I told him what I was doing, and even paid him a management fee.  He just couldn’t help himself.  I don’t think he can do it any differently.  He wouldn’t want to.

• “He gets a lot of excitement, he gets to be a martyr, he gets sympathy from his friends, and he gets to be the centre of attention.  Also, possibly, he may be more comfortable relating to people if he is on their financial plane. 

“On some level, I think he is really getting what he wants.”

Does This Sound Like Someone You Know?  Maybe Someone You Know… Intimately?

Even back then, Ed Seykota had a fantastic grasp on the dangerous psychology pitfalls that almost every trader has to work through before they become a success in the markets. 

So you need to ask yourself:

Are you uncomfortable with or around rich people?  Do you enjoy a lot of excitement?  Would you prefer to have an interesting story more than a boring but winning trade?  Do you find it hard to go your own way, as opposed to following the herd and the news? 

Most people are surprised to learn that the majority of winning trading systems are quite boring.  Following them is even more boring.  But following a proven set of rules in the market can be the difference between make or break.

The Number One Way To Help Your Psychology When Trading And Investing

We can’t all be blessed with a correct natural gut feeling when it comes to the markets (in fact believe it or not, 99.5% of people’s psychology are inherently set against them when they first start).  So how can we still have success?

By creating a set of mechanical, tested trading rules, that we then follow, we can get around our twisted subconscious and become profitable in the stock market (and don’t worry – we all have parts of our subconscious that needs work).  When we test our mechanical trading rules, we want our win percentage to be more than 50%, and our profit to loss ratio more than 2:1 where possible (giving us a positive “expectancy”).

You can find or make your own rules, learn them from a mentor (we have a great set here at ASX Market Watch), or find some and tweak them to suit your trading style.  Either way, you must have a set of trading rules, test them and follow them to a tee.  If they don’t work, change them and test them again.

The Rest Is Up To You

If you have any psychological flaws at all (and yes, we all have them) the markets will draw them out and exploit them for all their worth.  Then it’s up to you to work on yourself, banish your ego, and get comfortable making a lot of money.  And when you’re making money in the stock market, you’ll definitely feel like you’ve earned it.