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market could give them. When the trade becomes profitable, their focus changes. They are now concerned about how much money the market can take away. Everything they do arises from a state of fear. Any decision a trader makes while experiencing fear is almost guaranteed to give an undesirable outcome. |
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We have already examined the majority of disempowering beliefs held by novice traders. Are there any others? Not really. The only disem-powering belief that I should mention again in this chapter is the notion that the market is responsible for a trader's profits or losses. Novice traders honestly believe that better market analysis will give them more consistent profitsthat they can predict the behavior of the market. In other words, they believe that by increasing their ability to consistently predict market behavior, they will be able to obtain consistent profits. Most novice traders have a very narrow focus. They allow the market action to determine their attitude. |
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The vast majority of novice traders lack the discipline to always obey their methodology and money management rules. Lack of discipline means they can avoid taking responsibility for their actions. They believe that they have accepted the risk of trading by using a stop loss order, which is definitely not the case. In short, novice traders are trading mentally from a state of fear, which is occasionally negated by euphoria. |
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Novice traders experience euphoria whenever they have a large winning trade. I know what it feels like. After I had traded commodities for a few years, my methodology indicated that I should establish a short position in bonds. I went short, and several days later bonds went limit down. My brother Frank called the morning they went limit down, and I can still remember how euphoric I felt as I talked with him. I exited the position the next day with considerable profits. The question to ask is: Was it the market that made me right, or was it my beliefs and consequently my perception that the market was rolling over that allowed me to take the action my methodology was indicating? Some of you may be thinking in the back of your head, ''What's so wrong with euphoria?" |
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So what is so wrong about euphoria? Easy. The next time I made a trade, was it a winner or loser? If you answered that I lost money you are correct. In fact, it took five consecutive trades before I had a profit. Five consecutive unprofitable trades is a lot for me; consequently I was not a very happy trader. My ability to perceive the market correctly was initially being affected by my euphoria, and then by my sense of dejection at losing on subsequent trades. An amazing thing about the market is that it will bring you back to reality very fastoften whether you want to or not. |
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