Buy at 0 and sell at 100 which bears no loss. Is it realistic?
Without a doubt that there are specific reasons why the best traders consistently out-perform everyone else.
If the reasons are to be distilled all of down to one, the best traders think differently from the rest. That doesn't sound very profound, but it does have profound implications if you consider what it means to think differently.
To one degree or another, all of us think differently from everyone else. We may not always be mindful of this fact; it seems natural to assume that other people share our perceptions and interpretations of events. In fact, this assumption continues to seem valid until we find ourselves in a basic, fundamental disagreement with someone about something we both experienced. Other than our physical features, the way we think is what makes us unique, probably even more unique than our physical features do.
Let's get back to traders. What is different about die way the best traders think as opposed to how those who are still struggling think? While the markets can be described as an arena of endless opportunities, they simultaneously confront the individual with some of the most sustained, adverse psychological conditions you can expose yourself to. At some point, everyone who trades learns something about the markets that will indicate when opportunities exist. But learning how to identify an opportunity to buy or sell does not mean that you have learned to think like a trader.
The defining characteristic that separates the consistent winners from everyone else is this:
The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions. As a result, they are no longer susceptible to the common fears and trading errors that plague everyone else.
Everyone who trades ends up learning something about the markets; very few people who trade ever learn the attitudes that are absolutely essential to becoming a consistent winner. Just as people can learn to perfect the proper technique for
swinging a golf club or tennis racket, their consistency, or lack of it, will without a doubt come from
their attitude Traders who make it beyond "the threshold of consistency" usually experience a great
deal of pain (both emotional and financial) before they acquire the land of attitude that allows them to
function effectively in the market environment. The rare exceptions are usually those who were born
into successful trading families or who started their trading careers under the guidance of someone who
understood the true nature of trading, and, just as important, knew how to teach it.
Why are emotional pain and financial disaster common among traders? The simple answer is that most
of us weren't fortunate enough to start our trading careers with the proper guidance. However, the reasons go much deeper than this. It is, after tremedous research, discovered that trading is chock full of paradoxes and contradictions
in thinking that make it extremely difficult to learn how to be successful. In fact, if one had to choose one
word that encapsulates the nature of trading, it would be "paradox."
(According to the dictionary, a paradox is something that seems to have contradictory qualities or that
is contrary to common belief or what generally makes sense to people.)
Financial and emotional disaster are common among traders because many of the perspectives,
attitudes, and principles that would otherwise make perfect sense and work quite well in our daily lives
have the opposite effect in the trading environment. They just don't work. Not knowing this, most
traders start their careers with a fundamental lack of understanding of what it means to be a trader, the
skills that are involved, and the depth to which those skills need to be developed.
Here is a prime example of what is talked about:
Trading is inherently risky. To our horror, no trade has a guaranteed outcome; therefore, the possibility of being wrong and losing money is always present. So when you put on a trade, can you consider yourself a risk-taker? Even though this may
sound like a tricky question, it is not.
The logical answer to the question is, unequivocally, yes.
If I engage in an activity that is inherently risky, then I must be a risktaker. This is a perfectly reasonable assumption for any trader to make. In fact, not only do virtually all traders make this assumption, but most traders take pride in thinking of
themselves as risk-takers. The problem is that this assumption couldn't be further from the truth. Of
course, any trader is taking a risk when you put on a trade, but that doesn't mean that you are
correspondingly accepting that risk. In other words, all trades are risky because the outcomes are
probable—not guaranteed. But do most traders really believe they are taking a risk when they put on a
trade? Have they really accepted that the trade has a non-guaranteed, probable outcome? Furthermore,
have they fully accepted the possible consequences?
The answer is, unequivocally, no!
Most traders have absolutely no concept of what it means to be a risk-taker in the way a successful trader thinks about risk. The best traders not only take the risk, they have also learned to accept and embrace that risk. There is a huge psychological gap between assuming you are a risk-taker because you put on trades and fully accepting the risks inherent in each trade.
When you fully accept the risks, it will have profound implications on your bottom-line performance.
The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely
and without hesitation or conflict, admit it isn't working. They can get out of the trade—even with a
loss—and doing so doesn't resonate the slightest bit of emotional discomfort. In other words, the risks
inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence.
If you are unable to trade without the slightest bit of emotional discomfort (specifically, fear), then you
have not learned how to accept the risks inherent in trading. This is a big problem, because to whatever
degree you haven't accepted the risk, is the same degree to which you will avoid the risk. Trying to
avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.
Learning to truly accept the risks in any endeavor can be difficult, but it is extremely difficult for
traders, especially considering what's at stake.
What are we generally most afraid of (besides dying or public speaking)?
Certainly, losing money and being wrong both rank close to the top of the list.
Admitting we are wrong and losing money to boot can be extremely painful, and certainly something to
avoid. Yet as traders, we are confronted with these two possibilities virtually every moment we are in a
trade.
Now, you might be saying to yourself, "Apart from the fact that it hurts so much, it's natural to
not want to be wrong and lose something; therefore, it's appropriate for me to do whatever I can to
avoid it." I agree with you. But it is also this natural tendency that makes trading (which looks like it
should be easy) extremely difficult.
Without a doubt that there are specific reasons why the best traders consistently out-perform everyone else.
If the reasons are to be distilled all of down to one, the best traders think differently from the rest. That doesn't sound very profound, but it does have profound implications if you consider what it means to think differently.
To one degree or another, all of us think differently from everyone else. We may not always be mindful of this fact; it seems natural to assume that other people share our perceptions and interpretations of events. In fact, this assumption continues to seem valid until we find ourselves in a basic, fundamental disagreement with someone about something we both experienced. Other than our physical features, the way we think is what makes us unique, probably even more unique than our physical features do.
Let's get back to traders. What is different about die way the best traders think as opposed to how those who are still struggling think? While the markets can be described as an arena of endless opportunities, they simultaneously confront the individual with some of the most sustained, adverse psychological conditions you can expose yourself to. At some point, everyone who trades learns something about the markets that will indicate when opportunities exist. But learning how to identify an opportunity to buy or sell does not mean that you have learned to think like a trader.
The defining characteristic that separates the consistent winners from everyone else is this:
The winners have attained a mind-set—aunique set of attitudes—that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions. As a result, they are no longer susceptible to the common fears and trading errors that plague everyone else.
Everyone who trades ends up learning something about the markets; very few people who trade ever learn the attitudes that are absolutely essential to becoming a consistent winner. Just as people can learn to perfect the proper technique for
swinging a golf club or tennis racket, their consistency, or lack of it, will without a doubt come from
their attitude Traders who make it beyond "the threshold of consistency" usually experience a great
deal of pain (both emotional and financial) before they acquire the land of attitude that allows them to
function effectively in the market environment. The rare exceptions are usually those who were born
into successful trading families or who started their trading careers under the guidance of someone who
understood the true nature of trading, and, just as important, knew how to teach it.
Why are emotional pain and financial disaster common among traders? The simple answer is that most
of us weren't fortunate enough to start our trading careers with the proper guidance. However, the reasons go much deeper than this. It is, after tremedous research, discovered that trading is chock full of paradoxes and contradictions
in thinking that make it extremely difficult to learn how to be successful. In fact, if one had to choose one
word that encapsulates the nature of trading, it would be "paradox."
(According to the dictionary, a paradox is something that seems to have contradictory qualities or that
is contrary to common belief or what generally makes sense to people.)
Financial and emotional disaster are common among traders because many of the perspectives,
attitudes, and principles that would otherwise make perfect sense and work quite well in our daily lives
have the opposite effect in the trading environment. They just don't work. Not knowing this, most
traders start their careers with a fundamental lack of understanding of what it means to be a trader, the
skills that are involved, and the depth to which those skills need to be developed.
Here is a prime example of what is talked about:
Trading is inherently risky. To our horror, no trade has a guaranteed outcome; therefore, the possibility of being wrong and losing money is always present. So when you put on a trade, can you consider yourself a risk-taker? Even though this may
sound like a tricky question, it is not.
The logical answer to the question is, unequivocally, yes.
If I engage in an activity that is inherently risky, then I must be a risktaker. This is a perfectly reasonable assumption for any trader to make. In fact, not only do virtually all traders make this assumption, but most traders take pride in thinking of
themselves as risk-takers. The problem is that this assumption couldn't be further from the truth. Of
course, any trader is taking a risk when you put on a trade, but that doesn't mean that you are
correspondingly accepting that risk. In other words, all trades are risky because the outcomes are
probable—not guaranteed. But do most traders really believe they are taking a risk when they put on a
trade? Have they really accepted that the trade has a non-guaranteed, probable outcome? Furthermore,
have they fully accepted the possible consequences?
The answer is, unequivocally, no!
Most traders have absolutely no concept of what it means to be a risk-taker in the way a successful trader thinks about risk. The best traders not only take the risk, they have also learned to accept and embrace that risk. There is a huge psychological gap between assuming you are a risk-taker because you put on trades and fully accepting the risks inherent in each trade.
When you fully accept the risks, it will have profound implications on your bottom-line performance.
The best traders can put on a trade without the slightest bit of hesitation or conflict, and just as freely
and without hesitation or conflict, admit it isn't working. They can get out of the trade—even with a
loss—and doing so doesn't resonate the slightest bit of emotional discomfort. In other words, the risks
inherent in trading do not cause the best traders to lose their discipline, focus, or sense of confidence.
If you are unable to trade without the slightest bit of emotional discomfort (specifically, fear), then you
have not learned how to accept the risks inherent in trading. This is a big problem, because to whatever
degree you haven't accepted the risk, is the same degree to which you will avoid the risk. Trying to
avoid something that is unavoidable will have disastrous effects on your ability to trade successfully.
Learning to truly accept the risks in any endeavor can be difficult, but it is extremely difficult for
traders, especially considering what's at stake.
What are we generally most afraid of (besides dying or public speaking)?
Certainly, losing money and being wrong both rank close to the top of the list.
Admitting we are wrong and losing money to boot can be extremely painful, and certainly something to
avoid. Yet as traders, we are confronted with these two possibilities virtually every moment we are in a
trade.
Now, you might be saying to yourself, "Apart from the fact that it hurts so much, it's natural to
not want to be wrong and lose something; therefore, it's appropriate for me to do whatever I can to
avoid it." I agree with you. But it is also this natural tendency that makes trading (which looks like it
should be easy) extremely difficult.
Last edited:
