Sadly, there are some people that just plain will NEVER make it as a trader.
Oddly, the reason is NOT because they aren’t smart enough or because they don’t have the ability. It is because of something that happened along the way that they haven’t addressed. They are aware of it to a degree, because they can make money in their trading. The problem is that they have a decent run and then get cocky and reckless, and then wind up giving it all back to the markets.
And this happens again and again and again.
Another ironic thing is that it really isn’t their fault because it is caused by their primal survival systems kicking in and over-riding their rational mind. It’s a response triggered by a specific set of circumstances that are very common in trading, and once activated, this response tends to create a vicious cycle that is nearly impossible to break, at least without some help.
Here’s how it works. We’ll use my friend Jerry as an example (of course Jerry isn’t his real name).
Prior to opening his account, Jerry hadn’t ever traded at all. He’d just heard about it, but didn’t really know what it was about. He quickly sought out the basics of how trading works and chose to try a few things he’d read about on different forums he’d found.
It didn’t take long and Jerry felt confident enough to open a live trading and began placing his first trades. Afterall, how trading works is straightforward enough and he was pretty smart, certainly smart enough to get this.
During this time, he was trying earnestly to make money, but he was mostly hitting losers because this was all still very new to him. When he hit his first decent winning trade, he was jazzed. What a rush! What a great surprise!
The next winner was even bigger and WOW this really rocks!
Jerry managed to run his account up by just over 20% and he was feeling invincible! He’s got this trading thing down and he’s on his way!
It didn’t take long though until Jerry started getting reckless, jumping into trades that he had no business entering. He felt helpless as his account balance went down to break even, then down by 10% from where he started, then down by 20%, then down by 30. He couldn’t stop himself, even though he was well aware of what was happening.
Jerry put more funds into his account because he just knew that he could make this work, that he could repeat his nice run.
Unfortunately, Jerry was able to repeat the run, but not without repeating the rest of the cycle as well.
It finally got to the point where he just had to close his account and take a break. He just couldn’t take it any more. The most frustrating part of it is that intellectually he knew he could beat this, he just couldn’t seem to control himself once he started winning.
So Jerry called me up and asked for my help.
He wanted to understand why this happened and what he could do to fix it.
What Jerry didn’t understand is that what he’d been doing really was gambling. He wasn’t trading, because he hadn’t taken the steps necessary to trade in a calculated and business-like manner. What he had been doing was playing the game of anticipation and seeking the thrill of the unexpected.
Once a winner gets hit when you’re in this mindset, your brain chemistry is essentially the same as a drug addict and a gambling addict. It kicks in and shuts down your rational mind while activating your pleasure centers in a big way.
The added danger of this and the reason that many people won’t make it in trading is because they’ve been caught in this experience, and they won’t be able to shake it until they quit gambling and truly treat their trading as a business – again in a very calculated and business-like manner.
If this story here sounds at all familiar to you, then I strongly urge you to check out the training in the Trading P.I.T. Club. In it you’ll become that business-like trader that you need to be to stop gambling and start real trading.
Of course if you have questions, just let me know.
Cheers
Brian
“The Trading Turnaround Coach”
P.S. Those that don’t attend to the problem described above are bound to only repeat the vicious cycle and unfortunately it can go on for years. Don’t let it happen to you – stop gambling and get on with business-like trading that will help you keep your head clear and let you trade well rather than give it all back whenever you do make money.