The #1 reason why most traders fail (and how EXACTLY to avoid it)

We want to show you how exactly we can transform your trading, in as little as a few hours.

Trading Consistently Journal is one of the most powerful manual trading journals on the market today. It is a complete system to help you devise, define, enhance and improve any existing trading system and we want to show you exactly how you can benefit by applying these core lessons to your trading.

Even if you don’t use the Trading Consistently Journal you’ll still take away key lessons that you can apply to your trading system immediately and benefit.

Let’s start by defining exactly what a Trading System is – a set of Trading Rules that are formulated prior to entering a trade which defines when to buy and sell signals with little ambiguity or any subjectivity elements.

Why do we need a trading system? Primarily to manage risk, and increase profitability in the long term with the principal benefit of removing emotions from trading.

Movies and television often portray traders on Wall St often in stressful, highly emotional environments. However, profitable trading actually requires the reverse – highly focused & highly controlled individuals. Trades who can ‘keep their cool’ in tense situations will outperform over emotional traders.

But just why is ‘emotional trading’ bad? Emotional trading leads to irrational behaviour which is extremely damaging to your trading account. Can you think of when you’ve emotionally reacted to a trade? Did it end well?

On the other side, traders who are able to control emotions make clearer decisions in tense moments. They are not willing to abandon their strategy just because a few strings of losses. They can control their thoughts and therefore their actions which ultimately helps them be far more profitable.

Everyone who has at least some experience in trading financial markets realises that just because you have a winning trading system doesn’t necessarily guarantee you success. You can give the exact same trading strategy to 10 traders on the same market and almost no traders will have the exact same results as another, even if the rules for trade entry and exit are clear and exactly the same.

Why? Even though all traders might have the same entry and exit rules, they all have differing levels of disciplineemotional control and self awareness and therefore react differently to different situations.

At this point, it’s worth asking the most important question – what is the root cause of your of irrational behaviour? How can we reduce, or modify, the biological urges to ‘fight or flight’?

To understand this, let’s first understand what Emotions are -

Emotions arise often from a lack of certainty or control over events.  We fear loss and also lack control of the market. The market will not obey your command nor care if you won or lost. This fear and lack of control when combined are strong emotions which are bound to cause us emotional pain, which we are biologically wired to avoid at all costs. 

This biological instinct causes us to behave irrational. These irrational actions causes us to take further irrational actions, which leads us on a downward spiral and damages our account. Here is the simple formula -

Fear of loss + lack of control = irrational behaviour = large losses.

So is it possible to devise a system that would reduce triggers that cause instinctive urges to react emotionally and irrationally?

For example – do you think you would trade the same way after 4 consecutive losses? Most traders would typically become desperate for a winning trade and will often enter a trade that isn’t exactly within the rules of their core strategy (often without them even knowing at the time), which causes them to lose even more.

It seems logical to say then that if we can simply remove our fear of loss and also regain our sense of control in the market then we will regain our emotional balance which will mean we have better profitability. So in equation form:

No fear of loss + sense of control = emotional balance = better profitability.

I know what your thinking – “Easy to say, but hard to do”, right? But it’s not as hard as you think, when you know how.

We can regain our sense of control by not trying to control the market, but to control our discipline. If we focus on and controlling our discipline, we will be in a much more able to be emotionally controlled and trade profitability.

In other words – don’t focus on ‘winning’ or ‘losing’. Focus on ensuring your following your strategy correctly. Profits will come automatically when you actually realise this completely.

Here some of you will say “but I don’t know what strategy I should follow” in that case, read more here. If you have a strategy, read on.

In the next part we will talk about how exactly you can focus on your strategy and how to eradicate your fear of losing using the Trading Consistently Journal.

PART 2 COMING SOON

Sow Behl

Sow is a 6 year trading veteran primarily trading FX and equity markets making 1982% return in 2014. After spending years and countless failures trying to find the elusive holy grail lead him to discover elements of what truly makes successful trader. Sow founded the Trading Consistently Journal as a mission to help all traders understand and improve their trading psychology, discipline and consistency. Learn more.

3 Comments

  1. common sense comments that make sense the first time you read them, and try to apply them but once a couple of days go by you seem to deviate from your trading plan without a website like this. great post Sow. I hope I can learn to be more systematic and I seem to be liking the format of the website. it is helping me to follow the ‘clock work’ (systematic boring process which is good) so discipline can be ingrained.

    Reply
    • Glad to see your found this useful Gio!

      Great point! – Trading should be boring! That is the hallmark of knowing your becoming a successful trader. This ensures your following your plan and not getting swayed by emotions. The more mechanical the better.

      I think I’ll do a blog post around that as its a very important point. Thanks.

      Reply
  2. Fantastic post however I was wanting to know if you could write a litte more on this topic? I’d be very thankful if you could elaborate a little bit more. Thank you!

    Reply

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