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September 29, 2023, 08:58:31 PM
Funfani.com - Spreading Fun All Over!INFORMATION CLUBInformative ZoneFinancial LiteracyWhy Profitable Trading And Investing Is So Difficult
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Ryan Martis
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« on: July 11, 2009, 06:28:16 AM »

You know the statistics: Only 5% of all traders are successful and only 5% of all investors retire rich. Add to that the fact that 90% of all new traders will leave their new career within 8 to 10 weeks the question has to be asked: Why is trading and investing so difficult?

Here are several reasons: Particularly the novice and wannabe trader or investor underestimate what they have to learn and what kind of person they have to become in order to be successful. There is a total lack of understanding of market psychology and how cycles work and there is an assumption that anyone with a brain can trade.

Most traders and investors either act out of the need to get rich quick. In order to achieve this goal they follow standard conventional behaviour. However trading and investing do not follow conventional rules. Often you are required to go against conventional belief systems and this poses many inner conflicts that lead to losses.

New traders often follow a trading guru who promises fantastic returns. Unless the system you are trading is in total harmony with your own psychological make up you will not be able to follow someone else's system for very long.

It is a fact that the average person, and that probably means 98% of the population has a very low degree of self awareness and acts on subconscious triggers thinking that he or she is operating in a fully cognizant manner.

You have probably read plenty of advice on trading strategies and investment strategies. You know that you should buy the bottom and sell the top. Sounds logical and simple, doesn't it? Yet most brokers will lose you money and most hedge funds are not fairing too well either. And, if you have traded or invested for some time you will know that the theory is far simpler than the practice.

Yet you, the private individual insists on seeking advice from a broker who clearly has not the faintest idea about the basics of cycle analysis and crowd behaviour let alone universal laws underlying all trading and investing, but probably a good ego based on his background and the fact that he made money at a time when everyone else would make money if they held long enough.

Ah, the good old times. If only...

The idea that price will always come back if you wait long enough has been the ruin of many broker, trader and investor. It does not matter what your time frame is, if you sit idly on your positions the market will catch you out sooner or later. If anyone tells you stop losses are not necessary and that your positions will come back if you wait long enough you should take your money and run as hast as you can for the exit.

It is against human nature to anticipate change and align yourself to it, which means developing flexibility and mental nimbleness. I also call it being like a willow and bending with the wind. Humans don't like this principle. We insist that our opinions have to produce results and when this does not happen we revert to old and subconscious coping mechanisms which are potentially devastating in trading and investing.

Learning to become flexible and change quickly is a major challenge for most traders and investors. The assumption that a trend will go on forever has caused many a profitable investment or trade to end up as a loss. Ironically it is the fear of losing that keeps many people in their positions for too long.

The unreal fear of loss is blown out of proportion for most traders and investors simply because they have no real understanding of how universal forces work. Yet this knowledge is essential if you want to be successful in trading and investing. In fact, I would go so far as to say that a sound working knowledge of universal principles and this includes cycle analysis and knowing how to apply it in multiple time frames is the foundation of good trading and investing.

And then there is the matter of honesty. For the vast majority of people honesty with themselves is but a spurious concept. It is at best understood intellectually yet seldom experienced as a deep insight. And again a sound and deep understanding of your own psyche is essential for good trading and investing. For instance, if you are an aggressive trader or investor you need to know if you are like this because you fully understand that aggressive entries and exits may give you an edge or whether you are acting impulsively out of suppressed fear. In the worst case scenario you may not even realise that your entries are aggressive.

You have to be willing to invest in yourself continuously to develop an edge and mastery. Investing and especially trading are unforgiving. There are no grey areas as such because your results are immediately visible. There is no hiding and when you do, because of a convoluted view of your reality you will get spanked. It is as simple as that.

When trading and investing you are dealing with an alpha male. Your logic does not come into the equation. If you are fearful the alpha male senses it and will swallow you. You need to develop a high mental fresh hold to maintain a focused and objective mind set and few people are willing to spend the time to do this.

I have said many times in many articles: Work on yourself and clear your blockages. Learn energy techniques like EFT to calm your mind and relax as well as clear your stuff. Only when your mind is clear are you able to focus and be objective without conditioned responses and emotions dictating your actions.

This inner work is the price you will have to pay if you want to become good at trading and investing. I can promise you though that this investment in yourself is not wasted, because apart from making you a better trader and investor it will also improve your life in general.

The calm mind sees more of the big picture. The more you see the more choices you have. Ultimately it is expanded self awareness that will make you successful in trading investing and in life.

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