Trading is 80 % mental and 20% skill...

If you, like most new traders and also many established traders believe that it is first and foremost your trading system that will make you a good trader think again.

Below are the four main reasons why traders fail.

They do not understand that the markets are a mirror of life on a chart.

They fail to understand their own personality.

They lack the skills  to see the interaction of market mechanisms and interpret them quickly and objectively

They have unresolved psychological blockages which they cover over by positive thinking and learned discipline

And finally....

...add to this under capitalisation and poor trading advice and lack of proper training and the recipe for failure is complete.

I have  traded on and off for many years and learned, like most traders, the hard way. I managed to lose most of my money, in six figures, and had to stop trading for three years partly because of lack of funds. During this time I immersed myself in the study of psychology. The involuntary sabbatical turned out to be a time in my life where I learned much about myself and how the psychological factors that make us good or bad traders impact on one’s trading and why.

Having read many  books on the psychology of trading I found that none of them helped me become a profitable trader for two simple reasons.

I did not know my real self and did not know that I had many serious unresolved money issues.  Preserving my psychological capital was impossible as lack of self awareness made me repeat several self sabotagimg patterns  over and over without my conscious knowledge.

Like most of us I was conditioned to show plenty of stiff upper lip and get on with it. The main goal in life was to keep face and this attitude makes it difficult to be one with market cycles. Making profits was the main objective.

Few books talk about the importance to get to know yourself., let alone show you  how to get in touch with the real you. After all, how can you be in touch with something else if you are not in touch with yourself?

I have worked with a number of professional traders and can tell you that the stiff upper lip attitude is very common among traders. It is common in humans, period. Western culture is goal orientated. We  have learned to look outwardly instead of looking inwardly first. This outward orientation completely ignores the fact that the main player , the pivot upon which all success or failure hinge is YOU.

Trading requires some discipline, an understanding of risk, and above all total honesty with yourself

Our western culture does not teach you honesty and the essence of truth. When you are looking outside of you to measure results of your actions you are receiving a distorted picture of reality bnecause what you see is incomplete.

You probably believe that you are very honest and strict with yourself. Most traders do. Ironically though the odds are that you are probably far too strict with yourself. Excessive discipline leads to failure and makes you miss out on opportunities. It promotes tunnel vision, excessive judgement and anxiety.  None of these characeristics help you to be honest with yourself.

These are tell-tale signs of trading disaster waiting to happen. You may get by for a while. You may even be quite profitable. After all things work until they stop working. Sooner or later  though everything reverts to a mean. This is a market law and a universal law affecting all of us. If you are suppressing core aspects of your personality, and manipulate your mind, you will pay the price at some point.  Suppressed issues have a habit to raise their ugly heads until they are resolved. You cannnot force your mind or body to do anything unless you are ready.

Sooner or later the day of reckoning will come. You are constantly changing, so is your perception of life and of yourself. This is a fact of evolution at work. Just as markets evolve and change. Many S&P constituents of 10 years ago are mot part of the S&P today. There are many trading instruments available today we did not have even 10 years ago. The nature of the market and market volatilty change constantly.

Trading rules change, just think of the fairly recent change of the up tick rules. You may have a fantastic trading system, alas sooner or later, your trading system will abandon you.unless you are in tune with the market. The elliot wave pattern of 20 years ago is not exactly the same pattern today, even though it will repeat. Crowd psychology is similar to what it was 100 years ago, however, crowd dynamics are somewhat different today.

Be like water, my friend...

Congruence with yourself makes for congruence in your trading plan. The concept is simple, yet neither discipline nor willpower will get you to the holy grail of consistent trading profits. Unless you are totally congruent you are spending too much time on disciplining your mind. This requires energy, increases the noise in your mind and will detach you from the market action.

This is why you need to be like water, my firend. Being like water means that you flow with mental clarity unobstructed by false ego considerations.

Consistency is achieved by being one with yourself. If you are at peace with yourself you are more likely to detect flaws in your strategy. You focus better and this means that you learn faster and maintain and apply what you have learned. Only when you are calm  and free from mental noise can you let your profits run.

A common problem is over trading. Overtrading is typically a result of anxiety and insecurity. Particularly new traders are prone to over trade. I guarantee you that there are always hiddden unresolved psychological issues that cause this destructive trading habit.

Know your personal development stage

It is helpful to understand where you are in your personal development. Because your personal development affects how you see the world and the markets.

If you are going through transitory periods you may have identity problems without knowing about it. Your level of development is a measure of your cognitive awareness. How well you are able to understand yourself, how honest you are with yourself all have to do with your level of awareness and your developmental stage. You can only be truly one with the market if you have reached a certain developmental level.

You can  self author your personal development level, once you know where you are.  Techniques, like EFT, which are aan important part of what I teach traders to help them manage themselves better are great tools to assist you in your evolution as a trader.

You can learn about all these things and indeed you should; they will help you become a consistently profitable trader

Invest in yourself before you invest in the markets. Read books on psychology. Knowledge is power and the knowledge of yourself is your number one tool that will bring you consistent trading success.  The trader van Tharp makes his traders work on their psychological issues for one entire year.

Just immersing yourself in psychological material related to trading will expand your cognitive awareness. My book The Buddhist Trader  presents you with many new insights into trading psychology. You will find many tools and hands on techniques, like EFT, emotional freedom technique,  to deal with your shadows and become a successful trader.

And finally a few words on coaching...

Whether you are experiencing diffculties in your trading, are a seasoned trader or are new to trading get a coach. Coaching will shorten the learning curve and cut down your losses. A trading coach will  see with greater clarity what you are doing that stops you from making more money. All master traders have regular coaching and for good reason. We are often too close to ourselves, no matter how grreat our awareness is.  If you begrudge the money spent on coaching you should question your willingness to become truly good at trading. Perhaps you should accept that trading is just a hobby and that you do not really take it seriously.  It is as simple as that.