Have you ever wondered how two traders can have the same analysis on a stock and even enter the stock on the same day and price with the same stop and target, yet one trader profits from the trade while the other loses money? I mean is this even possible?
Unfortunately, the answer is yes.
When I first witnessed this happen, the obvious question I had was how is this possible? How could two traders enter on the same day at the same price and yet five trading days later once had a profitable while the other lost money? It did not take me long to come to what I think is the most plausible answer.
The answer lies in the mindset of these two traders.
I know that may not be the answer most wants to accept, but we have to live in a world of what is. The trader who sold at target when the trade went in their favor did his job, plain and simple. She not only took profit when the market gave her an opportunity to do so but most importantly she did her job. Just like in any other job, when you perform your job well, you get rewarded.
Now the other trader, well he had a different mindset.
His plan and intention started out the same as the other trader. He entered the trade at the same price and chose the same stop and target. The difference with this trader, however, is that he does not have the mindset of a profitable trader. He also is someone that does not see the simple disconnect between doing your job well and reaping the rewards.
All traders have the intention to make money in trading. The majority of traders though not only does not make money but sadly lose money. The difference between profitable traders and losing traders is staggering.
Of a 100 people who trade, 80 of them will lose the majority of their account. This is a staggering truth but one that can change. So the question is how does one go from the 80% of losers to the 20% of winners. This is the golden question.
The answer though is one most ignore. Most spend more and more of the time chasing something new or something else rather than address the real issue. So what does a trader need to do? Before we answer this let us first look at what most traders do.
In life, the basic premise is that if you want to get ahead, or you want to get better at something, you MUST do more. If you want to get a chiseled body for summer, you have to devise a workout plan that involves a lot of cardio and resistance training. Then you must do your cardio and resistance training a lot. Not a little. You can’t skip a week or cut a workout short. Not if you want to have that chiseled body you desire.
The more you stick to your plan and implement it daily, the more the pounds and fat come off, and more of your muscles start to show. There is only one recipe to get a chiseled body, and that is design a plan of doing more and more cardio and resistance training, and then wanting it badly enough to stick to the plan no matter what.
The success lies in the repetition, and it is boring repetition. I mean I guess one can add music to their 15-mile run to spice it up a bit, but at the end of it all it was a boring 15-mile run, but it produced massive results. In most things in life in life, the winning formula is to PLAN and then have a BURNING DESIRE to want it badly enough to take MASSIVE ACTION consistently.
How does the 20% of profitable traders implement this strategy to get profitable results and more importantly what part or part do the other 80% not do?
Let’s break it down.
I have traded long enough and coached enough traders to know that MOST traders trade without a plan. A lot believe they have a plan or try to convince him or she they do, but don’t have one. I believe most confuse their analysis of a stock has their plan.
If I can just figure out which direction the stock will go, then I will make money. This is my plan. I will learn or scan or analyze and determine with confidence what XYZ stock will do and by doing this, I will make money. This sounds logical but how many traders do this, then make no money or lose money. The answer is about 80%.
Let’s look at it this way. How many times do you turn into trading labs and a student asks a question such as when should I get out of my XYZ stock? Hmmm, well what was your plan before you entered the stock the moderator asks to get out?
Well… I bought at 40 my target is 50 but it is trading at 37 and I have a stop of 36 but it doesn’t look good even though my analysis suggested it would go higher but it only went to 43 then reversed, and now I don’t know what to do. Is there a way I can save this trade? THIS HAPPENS almost every trading lab! Why? Because most traders have no PLAN. They want to make money but trade in a manner that moves them further and further away from making money.
Most traders, about 80%, do not understand probability. If a trade or two don’t work, or a new strategy they are trying has a losing trade or two, then their immediate reaction is to abandon that strategy and look for something else.
There MUST be a strategy that has no losing trades that can withstand any market condition. It is not me that is causing me to lose, but it is the current market or this strategy is not working anymore, or I need to go-learn more or try something else.
Most traders, about 80%, believe their lack of results lies in the market or their not knowing something. This causes them to trade in a manner that is random and moves them further and further away from the result they want. The best traders know that not all trades work, but repetition and probability are the key to long-term success. Every trader’s success lies inside of him or her and not in the markets.
If you truly want to make consistent money trading the markets, the BEST thing you can do right now is to master yourself. Devise a plan and then invest and spend time working on your mindset to trade in a manner that allows you to make money.
It is not the market, not any lack of trading idea, no perfect strategy you don’t know about, and no magic way to find trades or anything else outside of you. The answer lies in trading in a manner that allows you to make money. All the rest is just a conversation.
Trade well my friends.