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Your Personality and Successful Trading

Your Personality and Successful Trading

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Published by Ian Moncrieffe

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Published by: Ian Moncrieffe on Jan 25, 2009
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12/12/2010

 
Your Personality & Successful Trading
Windsor Advisory Services
 
DESTRUCTIVEEMOTIONS & THEMARKETS
“Money alone sets all the world inmotion.” 
Pubilius Syrus Maxims1st century BCMost people dream of being totallyindependent and self-sufcient nancially.These people spend millions of pounds onlottery tickets, hoping to be the lucky oneto scoop the jackpot. There is another wayto make a million, the highly leveragedfutures markets. Everyone has heardstories of investors turning small stakesinto vast fortunes, and it is this chance thatattracts traders to open futures accountsand dream, just like the lottery ticketbuyers, of receiving the big payout. Thereality of futures trading is different; theprots always seem to be elusive so eachtime the trader trades he suffers consistentlosses rather than consistent prots.Trading looks deceptively simple, yet fewsucceed. If you read interviews withthe great traders, you will perhaps bequite surprised to learn that very few areintellectuals, many have never been tocollege, and a considerable number evendropped out of school. Additionally, mostwill claim they have simple trading systemsthat almost anyone can understand.So what separates winners from losers?The answer is not just knowledge of the trading environment, but also anunderstanding of our personality make-upand how it needs to interact with themarket in order for the trader to emergewith consistent prots. In the followingpages you will learn why an understandingof our own personality is the key tosuccessful trading, and how the emotionsof greed, fear, pride and hope are fatal totrading success.
“A cloud does not know why it moves insuch a direction at such speed, it just feelsa compulsion that this is the place to gonow. By the sky knows the reasons and  patterns behind the movements, and you’ll know too if you lift yourself high enoughto see beyond the horizon.” 
Richard Bach - IllusionsTake any price of any commodity andyou will notice trends over a sustainedperiod of time, where the price moves in aspecic direction for a sustained period of time. Many analysts believe that prices arerandom and that trying to predict futureprice movement is futile and doomed tofailure. However, behind the seeminglychaotic price movements there is order.In the following pages I will give you aninsight into how and why price movementsoccur and how, over a period of time, youcan capitalise on these moves and howyou can trade with the odds of successbeing rmly in your favour.
SELF CONTROL & DISCIPLINE
“To the destructive element submit yourself.” 
J. ConradSuccessful trading is 80% psychologicaland 20% methodical. As I have alreadysaid, self-knowledge is the key to marketsuccess. A trading method by itself, nomatter how well thought out, cannot besuccessful if it is not applied in the correctmanner. It is in the application of atrading method that many traders end uplosing. Consider the analogy of a highperformance-racing car. No matter howaerodynamic or technically advanced, itneeds to be driven. An advanced pieceof engineering such as racing car needsto be driven by a person who can drive itwith care. Just as a disciplined driver isneeded to race a car, a disciplined traderis needed to apply a trading method. Alltraders have heard the word “discipline”,but few really understand what it is andwhy it is so important to develop it.
 
EMOTIONS AT WORK
 “When dealing with people, let usremember that we are not dealing withcreatures of logic. We are dealing withcreatures of emotion, creatures burstingwith prejudices and motivated by priceand vanity.” Dale CarnegieIntelligence, knowledge and talent have tobe applied. Any person who is successfulknows that application requires discipline,self-control and condence in one’sabilities. Bjorn Borg was a great tennisplayer, he had talent. However, whatalways gave him the edge when playingwas his mental control, which earned himthe nickname “Iceman”. He combinedtalent and discipline to achieve his successand you must do the same.We are all put in situations where, afterthey have occurred, we look back andfeel that if only our emotional controlhad been better. You are going for a job interview and role-play Th a friendbeforehand. You come over as assertiveand condent. In the interview itself,however, the condence goes. You practisea best man’s speech, it ows well andsounds great; however, on the day, deliverysuffers as you feel nervous and shy.All the above we can associate with.The fact of the matter is, when thepressure is on, our actions are inuencedby our emotions. The more important thescenarios, the greater the inuence willbe.Trading is no different. As soon as moneyis committed, logic can go out of thewindow and basic emotions take over.Consider the difference between papertrading and trading real time. Whilst papertrading, you earn very good prots, youare condent and optimistic. You see avery lucrative business opportunity, so younow decide to open an account and tradefor real.On studying your charts you see anopportunity, a perfect double bottom andprices low in historical terms, now is thetime to buy. You ring your broker to placethe trade; however, the overwhelmingcondence of paper trading has nowdeserted you. Perhaps you had betterdouble-check the formation. After muchdeliberation you decide to phone the brokerand the trade enters the market. Forthe next two days prices rise dramatically,your prots grow; you feel great, what aneasy way to make a living. The next dayprices drop and your prots are cut in half.You feel uncertain; perhaps you shouldtake the prot now before it gets away.You decide to wait. The next day prices fallfurther and close below your mental stoploss. Your system is telling you that youshould be cut. However, you only have asmall loss and it should turn around andyou will soon be back in prot. The nextday, to your horror, prices have collapsedand the majority of your equity is now lost.Your reaction is now one of anger, whydidn’t you bank the prot when you had it!The market’s move is totally illogical, youfeel anger, pain and frustration, you arenow totally disillusioned and fed up, andall you want to do is exit the trade.Welcome to the real world of trading!
“Seeing is believing, but feeling is thetruth.” 
Thomas FullerThe above is a hypothetical yet commonexample of how traders who have mademoney on paper suddenly crumble underthe strain of real trading. Many peoplederide paper trading and say it is of littleuse. However, providing you know thepitfalls in advance, it is a great way tomentally prepare yourself for the day youhave to trade real money.
“The mainstay of training her is condence.That’s why we show them how to let a tank run over them - it gets their condenceup.” 
Ofcer in ChargeUS Special Operations CommandOf course nothing will take the place of the

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