As you continue to learn the system I am outlining you will begin to realize that making money, at least in the pure sense, is not so terribly difficult. I have a few basic rules to follow, a little common sense, some chart reading and before long you should be able to make money consistently.
But there is a little problem:
AFTER SEVERAL MONTHS OF MAKING MONEY CONSISTENTLY,
MOST PEOPLE END UP REVERSING COURSE AND LOSE ALL OF
THEIR MONEY.
The fact of the matter is that there is nothing more intoxicating than cold hard cash. Time and time again I have watched successful traders earn money and then fall flat our their faces because they could not manage the psychological aspects of making money and managing risk. Martin Pring has written an excellent book about investment psychology, and goes to great length to explain that most investors are very able to trade effectively. However, the problem with most traders lies in the intoxicating effects of earning money trading.
Typically, investors begin to take on too much risk, or make trades that fall outside the parameters of our discussion here, or tackle markets that our principles do not apply to. What I am trying to say is quite simple, really….the psychological aspect and the control of your own greed is, by far, the most challenging aspect of trading. Over trading, taking on too much risk by trading to many contracts, entering marginal trades, developing emotional attachments to trades…these are all the sign of impending disaster and I cannot stress enough that the psychological aspect in managing your trading life is far more challenging than the technical aspect of trading.
I know, I know…I can hear you all muttering….”that may be true of the other guy, but I am a very disciplined individual and this will never happen to me……”
It will happen to you, and how you learn to deal with the intoxicating effects of your cash earnings from trading will determine how well you succeed in the business. I can teach anyone to make the right trades, but I can’t get most people to make the right trades at the right times. There are no patterns in the markets, there are only spurts of momentum, or directional movement….and no matter how much you are sure that something MUST happen it probably won’t. I think it’s a Murphy’s law thing..or at least it seems to be.
Your ability to act in a completely rational manner and day in and day out execute trades as we outline will determine how successful you will be. I cannot harp on this topic enough…and I will, believe me. Investment psychology is the demise of 7 out of 10 traders. Don’t be one of the seven that fail, be one of the three that succeed.
