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Four Main Reasons Why Traders Fail

  
  Education
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# They do not understand that the markets are a mirror of life on a chart. Markets are a living thing and reflect crowd behaviour, you , the trader are one of the crowd too.

# They fail to understand their own personality and what that means for their trading style. It can make THE difference between success and failure as a trader.

# They fail to notice how they transfer their feelings and emotions to their trading and believe that the emotions they pick up from other traders and the markets are theirs.  Feelings are unpopular with traders, big mistake!

# They have unresolved psychological blockages which they supress with superficial positive thinking and learned discipline. We all have blocks, to think that you are the one who has not is dangerous arrogance. 

# And finally….

..add to this one most important point for the beginning trader: Under capitalisation due to unrealistic expectations and poor trader training. The recipe for trading failure is complete.

Ignoring The Herd

  
  Education
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Sir John Templeton said, “To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage, but provides the greatest profit.”

Then, this is what Warren Buffett says, “The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs.” In other words, Buffett is urging us to do the opposite of what others do: to be contrarians.

“Buy low, sell high” is the time-honoured dictum, but investors who are swept up in market cycles too often do just the opposite. Here is what Howard Marks writes in his book, The Most Important Thing –

“The proper response lies in contrarian behaviour: buy when they hate ’em, and sell when they love ’em. “Once-in-a-lifetime” market extremes seem to occur once every decade or so— not often enough for an investor to build a career around capitalizing on them. But attempting to do so should be an important component of any investor’s approach.”

Now, of course, being a contrarian is not going to be a profitable strategy at all times. After all, much of the time there aren’t great market excesses to bet against. And even when an excess does develop, it’s important to remember that “overpriced” is incredibly different from “going down tomorrow.” (more…)

John C Maxwell, Sometimes You Win—Sometimes You Learn (Book Review )

  
  Education

We’ve all read innumerable times that we learn more from failure than from success. Well, that’s not quite accurate. The sentence should probably read: “Failure provides a better opportunity for learning than does success.” Not all people—in fact, probably few people, take advantage of the opportunity that failure offers.

John C. Maxwell, a prolific author of self-help books, wants to increase the number of learners. Sometimes You Win—Sometimes You Learn: Life’s Greatest Lessons Are Gained from Our Losses (Center Street/Hachette, October 2013) explains how to turn failure into learning. John Wooden wrote the foreword to the book, based on its outline, a few months before he died.

Losses are tough, there’s no getting around this fact. They cause us to become emotionally stuck and mentally defeated, they create a gap between knowing and doing, they never leave us the same. They hurt, but when we don’t learn from them they really hurt.

Maxwell approaches learning from multiple perspectives: the foundation of learning, the focus of learning, the motivation of learning, the pathway of learning, the catalyst of learning, the price of learning, and the value of learning. His final chapter is entitled “Winning Isn’t Everything, But Learning Is.” He incorporates anecdotes, insights from others, and apposite quotations such as Bill Gates’s famous line: “Success is a lousy teacher. It makes smart people think they can’t lose.” (more…)

Trading Psychology -Quotes

  
  Education
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  • To be a successful trader/investor, your intellect and emotion must work as a team, which is easier said than done.”

– James Dalton

  • ” Successful traders accept and expect losses. Losses are endemic to trading; they are the cost of doing business. The consistently successful trader accepts deep in his heart that his winnings will be tempered with inevitable loss. But the trader anticipates his ultimate triumph because he has structured the probabilities in his favor”.

-LBR

  • “To be a successful trader you need to trade without fear. When you use fear as a resource to limit yourself, you will create the very conditions you are trying to avoid. Or to say this another way, you will experience your fears.”

-Mark Douglas

  • “The man who insists upon seeing with perfect clearness before he decides, never decides.”

– Henri-Frederic Amiel

  • “…to be a successful trader, I must love to lose money and hate to make money…The first loss is the best loss; there is no better loss than the first loss…Trading is a discipline.”

– EEK

  • “One of the critical criteria I use in judging my traders is their ability to take a loss. If they can’t take a loss, they can’t trade.”

– John Mack

  • “If you have bad inventory, mark it down and sell it quickly.”

– Alan “Ace” Greenburg

  • “Never meet a margin call. (In other words, if the market is going against you, concede defeat quickly and liquidate before you really lose your shirt.)”

– James Grant

  • “Fail Often but never quit.”
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