Before launching into the actual argue traders lose money, let's pace dorsum in addition to review an of import principle: Most accepted wisdom inward the trading globe consists of kernels of wisdom that conduct maintain been blown upward into Grand Ideas that are utterly invalid.
The poster tyke for this phenomenon is the thought of discipline. Successful trading requires having rules that guide decisions in addition to actions. Success requires the consist next of those rules. Given a gear upward of valid rules, the amend performer volition hold out the disciplined mortal who trades alongside fidelity to those rules. Makes sense.
But in 1 lawsuit nosotros blow dependent area into a Grand Idea in addition to insist that Discipline is the origin of all trading success, nosotros thence conduct maintain mentors in addition to coaches who harangue traders alongside journals in addition to checklists to monitor every infinitesimal activity. This ultimately serves 2 purposes: it makes traders thence self witting that they are no longer attuned to marketplace patterns, in addition to it thence routinizes trading that traders buy the farm unable to conform to changing marketplace conditions. As a full general principle, dependent area makes sense. As a supposed formula for trading success, Discipline ensures consistency inward losing.
The same is truthful for ideas of emotional awareness in addition to mindfulness inward trading. Great ideas inward context that, in 1 lawsuit blown into Great Principles, divert traders from the existent operate for identifying objective patterns playing out inward the marketplace. If a trader trades randomness alongside self awareness, they volition hold out a great observer of their ain demise.
Which brings us to the theme at hand: the existent argue traders lose money.
One of those nuggets of wisdom that gets blown out of proportion is the thought that success comes from trading inward a agency that fits your personality. There is for sure truth to that. If you're an extroverted person, your thought generation is probable to do goodness from talking alongside knowledgeable marketplace participants. If you're introverted, you lot are to a greater extent than probable to do goodness from reflection in addition to analysis. Taken to the grade of Grand Principle, however, the thought that success volition follow from expressing your personality inward markets becomes a sort of anything goes, do whatever you lot experience similar justification for piteous conclusion making.
Because *that* is the existent argue traders lose money: They ARE trading their personalities. Show me a losing trader in addition to I'll exhibit you lot someone acting out their personality inward risk-taking. Consider examples drawn from the "big five" personality traits:
* The trader who lacks conscientiousness inward his/her personal life fails to accomplish consistency inward trading. The trader who is overly conscientious fails to nowadays when marketplace weather condition change.
* The trader who lacks emotional stability inward his/her life trades impulsively in addition to emotionally. The trader who is highly emotionally stable has difficulty taking proper adventure out of fearfulness of upsetting the emotional apple tree cart.
* The trader who is highly introverted or extroverted allows internal or external stimuli to interfere alongside conclusion making.
* The trader who is highly opened upward to experience becomes thence enamored of novel ideas that his/her trading becomes skewed yesteryear the latest shiny toy. The trader lacking openness to experience finds 1 agency to brand coin in addition to can't do anything else fifty-fifty later on that 1 agency loses its edge.
* The trader who is real likeable has difficulty tuning out people in addition to becomes easily distracted yesteryear noise. The trader who lacks likeability alienates the real colleagues that could aid inform his or her trading.
In other words, traders lose coin BECAUSE they are trading their personalities. Every personality trait brings potential assets in addition to liabilities to trading. Sometimes, our personalities pose severe challenges to trading success. Every personality asset, when overutilized, brings its ain gear upward of problems.
There is alone 1 origin of making coin inward markets, in addition to that is identifying recurring patterns inward marketplace behaviour in addition to exploiting those inward a trend that provides venture vantage relative to risk. We marshal in addition to attenuate diverse personality traits to position in addition to exploit those patterns. Success comes, non from indulging our personalities, but from knowing which traits to describe upon in addition to which to operate around. That is called wisdom.
In my adjacent post, I'll furnish a personal event of trading success that came, non from next my personality, but from properly channeling it.
Further Reading: Trading Psychology for the Experienced Trader
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