The difference between the two is of certain habits and skills. Winners exhibit certain habits and skills, all of which, or at least most of which, are acquired and perfected through conscious effort over time. Spatial skills, too, make a difference—but not a defining one.
The defining difference is made by the ability to take ownership of each and every action, plus by the strong ability to recognize one’s emotions, accept them, and, most importantly, control them. These skills don’t come naturally to anyone but are rather acquired through practice or, to use the correct term, mental training.
Trading is obviously not a physical activity but rater a mental one. While opinion differs, there’s no denying that right attitude, strong belief in yourself, and control over one’s emotions are mighty important to succeed in trading.
You must take FULL OWNERSHIP of your actions and decisions that you take in regard to trading.
Right Repetitive Behaviors Fuel Success and Wrong Ones Failure
When a certain behavior is repeated many times, a neural pathway gets ingrained in the brain. Eventually, the behavior is repeated automatically, without thinking at all. Consider the example of driving. When you first sit behind the wheels, you are overwhelmed by the quick multiple decisions you must repeatedly make to drive, press the clutch, press the accelerator and by how much, pick the right gear and change to it, etc.
But what happens a few weeks down the line? You make the right choices and execute them automatically.
However, the driving force behind behavior is emotions. If you are angry and driving, it will show in the way you drive. You can hurt yourself and others. Similarly, anger and trading don’t go hand in hand. An angry trader is dangerous—but only to himself, for the interaction with the market is one-sided.
Behaviors can be slotted into different categories, like helpful and not helpful. Traders who are successful have learned to keep away negative emotions from influencing how they trade. They repeat positive behaviors that are in sync with their goal of making consistent money over time through trading and, equally importantly, do not exhibit behaviors that are opposed to their aim.
Learning the right behaviors for someone who is absolutely new to trading is easier than for someone who has been trading for some time and has certain negative behaviors, for the simple reason that the latter has to first unlearn bad habits before learning the right ones.
The Market Doesn’t Give a Damn about Your Fair in It
There’s only one rule in the market: there are no rules. There is no rule about whether you should trade with the market or against, how much you should trade, when you should trade, when you should exit a trade, etc. And no rules make the market a unique environment, unlike any other in our daily life.
Our daily life is filled with rules—rules made by others, like you have to stop your car when the light is red, must study hard to pass the exam, must clear your bills or else pay penalties or face other consequences, etc. There are rules how we engage with others, and if one party breaches his side of the contract, we have the option to go to the court.
However, no such rules exist in trading? The charts do their own thing, and there’s not a thing you can do about that. You can’t move the court against them or plead with them to do as you like. You have absolutely no power over them or the market—but that doesn’t mean you are powerless. You are in complete control of what you do, and your success or lack of it depends solely on how you use this power.
It is you and you only who decide which setup to trade, when to trade, and when to exit the trade. In other words, you have complete freedom over what you do. There are absolutely no boundaries that restrict you. This non-restrictive environment is what draws many to trading. They come thinking that a computer with net connection is all they need to reach to reach the land of riches, but soon they find, much to their determent, that there is no easy money to be made in trading. It is a mean environment, where there are no rules, where each and every decision is subjective, and where hundreds of thousands of money can be earned or thrown away in just a few seconds. Trading is tough and not for fainthearted and undisciplined.
It’s All about Taking Complete Responsibility
The philosophy of successful traders is the same as of people successful in other fields: one may not have control over what cards he gets, but he has total control over how he plays them.
The market is as unemotional as a stone; however, in contrast, human beings have emotions. And emotions like panic, fear, excitement, anticipation, etc. can cloud your judgment if you fail to keep them under check, because the market is unforgiving of your any weakness.
On the other hand, patience and self-discipline are two skills that are paramount to success in trading. These two skills look easy to attain, but are not. Perhaps this is so because as children no one made us sit down and learn them. And it couldn’t be otherwise, because most adults don’t possess these skills, and the practical things of life can only be taught to others if you have learned and practice them day in and day out yourself.
Being disciplined is not the same as being self-disciplined. The former entails following the rules by others, and that’s important in its own way. Whereas, the latter includes using—and, more importantly, trusting—your own good judgment to lay down rules for your own good, and then following them to the T.
And what about patience? We live in the age of instant gratification, where patience is considered as unnecessary. In such an environment, learning to be patient and being emotionally mature about your own freedom is something that only a few can manage.
Successful traders take full responsibility of every behavior and emotion, positive or negative, they express in the market. They don’t blame others for their losses. All of us have the choice to do the same, and whether we take it or not is up to us.
Warren Buffet or, for that matter, any other successful trader don’t become faultfinding if their trade turns out bad. What they do instead is ask themselves a question: Did I stick to my own rules?
And then they answer it truthfully. If they followed the rules, they will judge that particular trade as a financial loss—and not as a personal failure. And they would know that losses are part of the game, and not a marker of self-worth or reflection of bad judgment. And, most importantly, they would know trading is not about being right each and every time but about making consistent money.
On the other hand, if the answer is no, rather than indulging in self-criticism they will take the loss as an opportunity to learn. They will ask themselves further questions, like why I failed to stick to my rules and how do I prevent this from happening again?
Did you notice one thing: all these questions are asked and consequently must be answered in the first person?
Successful traders know what others forget—it’s all about taking complete responsibility.
Place Trust in Yourself
What does taking complete responsibility, a phrase that has been repeated many times above, means? It entails trusting yourself as well as what you see on your charts. It also means following your own rules.
Use resources available to you, like seminars, books, mentors, etc., to educate yourself. However, decisions like how to plan and when to enter and get out of a trade are entirely yours. If you are asking others about it, you should be doing something else with your life, anything else but not trading. Trading is about going solo—it’s not a joint activity.
In case you see yourself asking others if a particular trade is likely to yield good results or not, follow these steps in the order they appear:
- Don’t make that trade. Or, if you’ve already entered it, close it.
- Open your trading plans as well as rules and read, revise, and rework them.
- Take a pen and paper and list the reasons why you were unable to follow your plan.
You can’t pass the responsibility of your actions on to someone else and become a successful trader. That’s not how it works out. You also cannot not learn from your mistakes and become a successful trader. That’s not going to work out, either.
Take complete responsibility of your actions and learn the lessons from your mistakes and do not repeat them. That’s the way traders before you became successful—and that’s the way you too will become successful.