The biggest challenge you face day to day isn't the market. It's yourself. Traders have a way of saddling themselves with unneeded extra emotional baggage that can weigh on their decision-making. The end result is emotional fatigue, frustration, and, possibly, under performance, but it doesn't have to be that difficult. The key is self-awareness. What stage of your trading career have you reached?
Stage 1: Welcome to the Game, Newbie. These traders can, and in a friendly market will often outperform even the best of traders in the short-term for the simple reason that they've never been burned. They can throw caution to the wind, oversize positions, be aggressive, and take stupid risks. These are folks that often love cult stocks with no hesitation to buy, hold, double-down, triple-down, then tell all their friends. Honestly, it's a whimsical carelessness I sometimes miss because it does open the door to a potentially huge gain.
Stage 2: I Didn't Know What I Didn't Know. The market eventually comes to collect her tuition. Thanks for playing Stage 1, but now it's time to pay the bill for your lack of experience and mispricing of risk. After some lumps, this player will step back, study, learn, adjust their approach. Maybe they will read a few books or trading articles.
Stage 3: Take the New Brain Out for a Test Drive. This's the experimental stage. After pulling back on the guns-a-blazing strategy, this stage trader will implement some of their newfound knowledge little pieces at a time. Often, new strategies are put to the test as the trader searches for self-identity. It is here, they grow up and mature. They can empathize with traders who have blown up, admire, rather than mock, successful traders, and hopefully, they find a niche.
Stage 4: I Need to Prove I'm Smarter Than the Market. This stage is dominated by those who, while often solid traders, seldom admit failures. They will defend their position in the face of overwhelming facts against it. They'll be right...eventually. From this stage 4, a trader heads to one of two places: back to stage 2 or move forward to stage 5. However, stage 4 can last for a very, very long time.
Stage 5: Congrats! You Made It. These traders go about their business like a silent assassin. They do their job. Hit their market. And don't crow about it. They accept that you trade what works. Period. It can be simple. It can be complex. But they do it without concern of proving anything to anyone or stroking an ego. Your mental health and bottom line are the only things that matter. Success is to be enjoyed, not flaunted. And despite reaching the hill, they will continue learning...
