In this post I’m quoting from The New Market Wizards: Conversations with America’s Top Traders, a book written by Jack D. Schwager on the reason why most traders fail – discipline. Sounds interesting? Please read on.
The Book:
The New Market Wizards: Conversations with America’s Top Traders is a collection of interviews with extremely successful traders. It aims to reveal the common traits, strategies, and psychological disciplines that contribute to their extraordinary performance. This book is the second installment in the “Market Wizards” series and was released in 1992.
What I like about this book (and the others in the series) is this: the traders in the book come from all walks of life, trade different instruments / assets, and use different strategies. Yet, they all are successful. Why? What do they have in common? The common theme is their practice of good risk management and their understanding of the psychological aspects of trading; things all of us can aspire to implement.
The Quote and an Explanation:
Below, I quote a trader from the book named Victor Sperandeo. At one point in his career he mentored a group of traders, most of whom failed. He was asked why and he answers as follows:
They lacked what I call emotional discipline-the ability to keep their emotions removed from trading decisions. Dieting provides and apt analogy for trading. Most people have the necessary knowledge to lose weight-that is, they know that in order to lose weight you have to exercise and cut your intake of fats. However, despite this widespread knowledge, the vast majority of people who attempt to lose weight are unsuccessful. Why? Because the lack emotional discipline.
The above come down to the following:
Most traders know what to do in order to become successful, especially if they’ve been trading for a while.
Here it is in a nutshell:
- Find a trading strategy that makes sense to you and fits your lifestyle.
- Your strategy should have clear rules – why and how to enter, profit target and how to manage the trade.
- Back test this strategy to ensure it has an edge.
- Practice good risk management.
- Do your utmost best to stick to your strategy.
- Track all you trades. This will identify your strengths and weaknesses. Don’t deviate from your strategy because its not producing results – work on yourself (your weaknesses).
- Treat trading as a business.
- Expect that success might not come over night. Have patience.
This all comes down to having discipline. Sure you are going to have to deal with trading psychology issues, but its discipline that’s going to help you identify them and make you work on them.
Finally:
If you struggle with discipline, the good news is that it is a skill and skills can be cultivated. Consider working on your discipline, not only in your trading, but also in other areas of your life. This will make things much more easier.
Thanks so much for reading. All the best with your trading.
Thanks and Regards,
Trading SOS SOS
