The Trader’s Enemies – Mindset Errors – Part 2
You can put conventional market wisdom such as “You can never go wrong taking a profit” into this same category. Another class of the same thing is seeking guidance from brokers.
Generally brokers have very little understanding of the direction of the market. If they did, they would be investment professionals, or trade on their own accounts and not have to take phone calls, or ring up people for business. They are sales professionals, not market oracles.
Herd thinking means decision by consensus, conventional wisdom, listening to tips or asking for a broker to hold your hand. Herd thinking is the antithesis of successful trading. You need to move away from this and be able to make up your own mind.
Not having a system
Business is all about systems. That is why franchises are popular. You have seen businesses without systems. You put your car in for a service, and they don’t have it ready, or have left the power steering disconnected. You buy your lunch and some days get too much, other days not enough. A business system ensures a consistent outcome.
Trading without a system is like the business that loses your car keys after a service. If you trade from the seat of your pants, you will lose. You need a trading system that is a winner. You need a trading system that suits your view of the market and your risk tolerance.
You can either build a system or buy one. Generally the systems you buy tend to overtrade and have bigger losses than most people are comfortable with. I am currently evaluating a commercial system, so check out the reviews to see whether that is the type of thing you want. Otherwise, you’ll have to build your own, and make sure you thoroughly backtest it for quality.
Conclusion
How can you overcome these obstacles? Well there are some obvious ways: do your homework before starting to trade, get a working system that you can rely on, focus your information gathering on that which your system needs, be realistic about your own limitations – identify and overcome cognitive errors.
Understand yourself and how you tick. Get in touch with who you are and work on overcoming whatever is holding you back. There are some specialised trading coaches who can also help you focus on strengthening your thinking skills. Remember, trading can potentially offer you freedom and wealth, so it is worth letting go of your old thought processes and moving to success!
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