Limiting Beliefs

Trading can often be very difficult to manage as a business, when you are doing it all by yourself. Every single day you have to get up in the morning and repeat the same tasks over and over again. It can quickly become frustrating, especially in the beginning, when you are not really seeing any outcome of your hard work.

If you have to motivate yourself every day to get started, there is a problem already present. You are not a trader just yet, because you have to overcome the resistance that is constantly present in the background. Think about some other areas of your life, your hobbies, what really interests you? Do you have to struggle to get started in these areas?

Unless we learn to do all the tasks related to trading with enjoyment, we are not traders. We are simple trying to force ourselves into becoming what we are not. The only way to solve this problem is to work with our beliefs.

Try asking yourself, what is it that generates resistance to trading work in your mind? What beliefs do you hold that constantly come up and often do not allow you to work for 8 hours straight with ease and joy?

Here is a sample list:

  1. Trading is boring
  2. It is not “right” to speculate (due to your religious, political or any other beliefs – examine those)
  3. Trading is too difficult
  4. I need someone to tell me what to do in order to do it right
  5. I don’t like working alone
  6. I can’t work from home
  7. I don’t want to spend so much time at the computer every day
  8. My family/friends do not believe in me succeeding and so I can’t take my trading seriously
  9. I am too disorganized
  10. I am lazy
  11. I am not smart enough to trade
  12. I cannot concentrate well enough
  13. I don’t like getting up so early
  14. I don’t like going to sleep so late
  15. I am not lucky (examine your beliefs related to trading being “just luck”)

I could easily continue the list on and on, but the whole point is for each of us to discover our own limiting beliefs.

Let’s examine the first belief, “Trading is boring” in more detail.

  1. I could care less where the Market will go (great, you already have one of the most important components of a successful trader!)
  2. I don’t understand the Market (do you have to?)
  3. I don’t enjoy analyzing the Market (the better you get at something, the more you enjoy it – I did not enjoy practicing guitar the first couple months too)
  4. It is too difficult to keep all the information in my head (make notes, take screenshots, write a blog!)
  5. I am too tired and I am falling asleep as I watch the Market (review your sleeping schedule and eating habits, make sure you drink water ALL THE TIME, review your alcohol/smoking/caffeine addiction)

Once again, this is just an example of how we must take each of our beliefs and break them down into aspects in order to discover what is really limiting our full potential.

Unless you are ready to become self aware and look inside yourself – trading is not for you. Stop wasting your time, your family’s money and go find something you can be truly good at.


The Market can do nothing to hurt you, nothing can cause any damage to your reality, so why is it that we find it hard to just relax? How much easier our job would be if we would follow the Market, instead of following our thoughts about the Market?

The reality of the Market can never do anything that would cause you stress. Only your interpretation of the Market – your thoughts about it – cause emotions and prevent you from being detached.

Yes, it is important to have a trading system – a framework inside of which you view the Market. A trading system will cause you to interpret Market’s actions, so it must be constructed in a way that avoids all inner conflict. However, if you are unaware of your thinking, even the best trading system will fail because you will not be able to follow it precisely. You will never notice when faulty thinking enters your mind and causes you to choose incorrect interpretation of the information Market puts in front of you.

Until we learn to just relax and listen to what’s going on inside, there is no point to try building a trading system. The conflict our unconscious mind tries to hide will be projected into our trading and ensure our failure.

The most important belief

By far the most important belief on the Market is in myself.

Throughout the years I’ve been always trying to perfect my trading system, analyzing each losing trade and trying to figure out what went wrong. I always assumed that any loss means that I didn’t recognize some obvious hint the Market was giving me. I assumed I made a mistake that must be fixed before I take the next trade. That kept me going in circles for many years.

The problem with that attitude is that I was believing that it is possible to be always right. I wanted to be always right. In essence, I didn’t have any belief in myself so I was trying to build an ideal trading system that I could believe in.

A breakthrough was the realization that some trades are simply not working out. There is nothing wrong with them whatsoever. They were taken at the right time and at the right price in the right direction. And yet, the Market did not go in that direction.

When I define “the right trade” or “the right direction” in terms whether the trade made profit I am in for trouble. Basically, I am making sure that any loss will make me “wrong”. A different attitude is to define “the right trade” as the trade that has been taken according to my trading system, without any anxiety or hesitation. The trade might still lose me money, but it is “right” because it wins in the long term. Even when the trading system is not good enough to give me a winning edge, the trade is still “right”, because by following my rules I will soon find out the problems in my system and improve it.

On the other hand, when I judge every losing trade as “wrong”, I will experience emotional pain. If a trade is capable of causing me pain, disturbing my emotional balance, I will soon develop a fear of taking a trade. When I start hesitating pulling the trigger, my belief in myself is further diminished. Before I know it, I am trying to improve my trading system again, trying to make sure it will never lose and become the Holy Grail I can believe in.

Until we can fully believe in what we are doing we can never become consistent in trading. If there are no rules in your trading, you are going nowhere. If there are rules in your trading, which you constantly adjust to make sure the Market does not cause you emotional pain, you are going in circles still. We have to change what’s inside before we can start seeing what’s outside clearly.


Pattern Addiction

Developing a Trading Style

Someone who is watching the markets for considerable amount of time learns to see certain patterns almost automatically. Oftentimes we do not even have to name what’s going on in the market, we just know that the current Price Action looks like something we would want to Sell or Buy. There is nothing bad with learning to recognize certain patterns and use such recognition to read the Market. The issue lies in closing our eyes to everything else the Market is showing us, as long as our favorite, easily recognizable pattern is present.

I’ve been watching the markets for more than 11 years now and all this time I’ve been mostly contrarian trader. I would look for opportunities to Sell at exact highs and Buy at exact lows to get great Reward/Risk ratio in these trades. Of course, I realized that the chances of such trades following through are not very high and that such trading opportunities are not provided by the Market often (especially on Daily charts). However, I kept reminding myself of the great return such trades could offer and kept concentrating on them nevertheless.

For many years my main problem was giving up too early. When you start fading a move you have to be ready for a couple failed entries. There is nothing more frustrating than giving up on a trading idea after 2-3 losses and seeing the Market follow through according to your exact scenario – without you. As I studied Price Action and, much more importantly, psychology, I was able to stick with my trading ideas longer and started generating profits out of them, riding some really nice trends. I accepted the reality of the Market – that it can do anything at any given moment – and would be contempt when my idea did not work out.

As I kept on trading and analyzing my successes and failures I started noticing how rarely valid contrarian opportunities (supported by Price Action weakness) were available. Additionally, I noticed how often I would fade the trend, get my small loss (compared to potential profit) and see the trend continue without me for another couple days or even weeks.

For a while I did not even see any problem with that – I just thought of myself as a Contrarian Trader, and was pretty happy with overall results of my trading. However, through constant analysis I could not help but notice how much potential I left on the table by not even considering going with the trend. To me, any time the price is coming to Support or Resistance is a trigger to consider fading such move. Naturally, there are many filters that I developed over the years not to get into obvious traps, but the point is that fading the move is the only possibility I would consider. If I saw that a breakout is likely I would just forget about that setup and move on.

Adjusting Trading Style

Finally, I started reworking my trading system and adding new setups into my arsenal – with-the-trend setups. After spending a couple weeks going through history I identified valid patterns that I wanted to include into my method. I then proceeded with my trading, now looking for these trend setups as well. I thought that because I defined what good with-the-trend entries look like I should be able to jump on a couple soon enough. However, what happened next was quite surprising.

Because of constant work on my mindset and psychology I was not afraid of losses. I also realized that my Trend Setups may not be of very high quality, so I was ready to rework them as necessary, after analyzing a couple live Trend entries. I simply did not see where the problem might come from as I was ready for anything, except… In the next couple weeks of trading I did not find a SINGLE trading opportunity with the Trend! I kept taking my contrarian entries pretty actively, with about the usual degree of success, so I still saw patterns and took trades. But for some reason I just could not find any Trend entries whatsoever – at least not live.

Naturally, I kept analyzing my performance, taking notes about each live entry. I then saw that almost every time I was analyzing a failed contrarian entry where the price was breaking through and continuing with the prior trend, it looked exactly like one of my Trend setup pictures that I prepared. After seeing quite a couple of these extremely clear (in hindsight) Trend setups I started wondering, why the heck didn’t I see a single one of them live? I’ve been watching the Price Action on that exact trading pair very actively, trying to find an entry to fade the trend, but I just did not see the opportunity to follow the Trend, even though it was right in front of me and looked exactly like one of the setups I have prepared.

I finally realized that after all the years of trading the markets in my particular style I became completely blind to any other information the Market was trying to tell me. I would see only what I wanted to see and ignore everything else completely.

Psychological Blindness

Mark Douglas is sharing a very interesting example in “Trading in the Zone”, Chapter 10 (p. 179), where he decided that he wanted to start running. Initially he met extreme resistance just getting out of his apartment and starting running until finally, after great effort and struggle, he “became a runner”. He started thinking of himself as a runner, seeing himself as the runner. Running was something he was not just doing now, it was something that was very natural for him to do. There was no more mental resistance whenever we wanted to run.

Just like Mark Douglas has become a runner, I have become a “Contrarian Trader”. It was not easy, and I struggled for years to be able to fade the trend comfortably, but at some point most of the resistance just went away – fading the trend was something that was very natural for me to do as a Contrarian Trader. Trading with the Trend on the other hand, wasn’t.

Through many years of hard work I have developed a trading style that was easy for me to follow. However, now that I realized the limitations of trading in only this style, I wanted adjust it. I did not want to become purely Trend Trader, but I wanted to develop a more universal approach, allowing me to look for opportunities during the rejection of Support/Resistance but also when the price is already trending from one S/R zone to another.

Unfortunately, recognizing the need for a change, even recognizing what exact change we want to achieve, is not enough to achieve it. Now that I defined a new mental picture of how I wanted to trade I knew what kind of mindset I wanted to develop in order to become proficient trading the new Trend setups in addition to my Contrarian setups. Implementing such a change of mindset turned out to be a pretty complex task.

After some additional mental work I started seeing Trend setups, but the resistance to act upon them was still great. My brain would quickly find one hundred reasons why I should NOT take a particular Trend setup, no matter how good it looked originally. After recognizing the hesitation problem I started pulling the trigger on more and more Trend setups (almost forcing the decision sometimes).

Next issue was holding the Trend trades. While I would be able to fade a trend and ride the trade in the new direction for weeks, comfortably sitting through heavy draw downs in my floating profit, I did not have any confidence in riding the trend if the trade was initiated with one of my Trend setups. Any time the trend would show some kind of correction, I would see a Contrarian entry possibility. Even though many of such possibilities would be filtered out and I would not establish a position to fade the trend, just seeing one contrarian pattern was enough for me to close my with-the-trend entry.

Trading Mindset

The experience I went through showed once again that having a good Trading Method is not even 50% of our success. In addition to having the edge in Market Analysis and finding good Entry Setups, one needs to develop a proper Mindset that will allow him to trade such method without any resistance. Most traders consider that Trading Psychology is about hesitating pulling the trigger, or worrying too much about an open position. My experience shows that sometimes our brain can simply block out all information that it is not comfortable with. If our Mindset is not developed to work with our Trading Method, we can be assured that the brain will find most elaborate tricks to ruin all chances of our success.

We may believe that trading as about Market Analysis. We may believe it is about being right and knowing what the Market will do next. Some believe it is about statistics (and there is some truth to that, in my opinion). But in the end, trading the Market is about people.

People make decisions and these decisions move the price. People are extremely susceptible to mistakes. People, in general, have huge ego that is telling them what to do. Studying Human Psychology can help us to understand people better. We don’t need to have a masters degree in psychology to trade, but we need to be self-aware and willing to analyze our every thought, decision, action. We also need to be willing to empathize with other traders – be it small speculators (like most of us), large commercial traders, non-commercial businesses that just want to hedge their risks or huge multinational banks that really have the capacity to move the market. They all have their own goals, desires, biases, emotions. They all make mistakes. Understanding this, not only we can be more open to searching for our own mistakes but also we will understand the psychology of other traders and will be able to profit from the mistakes they make as well.

Recommended reading: Emotionally Intelligent Investor by Ravee Mehta

Conversation with the Market

Whenever I look at a price chart I want to make sure that there is no rigid preference in my mind for it to go in whichever direction. If I happen to “know” where the Market will be going, I am setting myself up to a failure in the long term.

And still, I do know something about the market. I am certain that the Market will move, and it is about the only thing I can trust it to do. It may take its time, but eventually it will move sufficiently enough up or down to create an outcome for my trade.

Before I even think about placing any trade, I want to build an acceptable scenario how the Market will be moving up as well as how the Market will be moving down. I am building these scenarios fully acknowledging that the Market does not know about them, could care less about them, and ultimately will move only in such a way that it needs to move in.

I then accept the possibility of either scenario to work, and in case my (limited) understanding of the current market situation suggests that one scenario is more probable than the other, I establish the trade.

What’s so great about the market, is that it is a great teacher, and it never hesitates to provide clear, unbiased, very useful feedback about my trading decision. Soon enough it will show the reality of the current market situation and I will be able to compare it with the possibility that I outlined in my trading scenario before establishing the trade. The actual outcome of my trade is completely irrelevant. What’s important is the feedback I get each time I choose to participate in a trade.

Trading in this way, I am making the Market my most valuable ally, instead of trying to make an enemy out of it. It teaches me, guiding me to greater understanding of its actions. Really, all the Market is trying to do is tell us where it is going. Unfortunately it does not speak English, and so it is our only job to learn the language that it does speak – the language of Price Action.

However, like with any other language, we cannot perfect it by concentrating on just the theory – we have to engage in a conversation with the Market by establishing a trade and learning from its response.

Being in control of your trading

The article is from Market Advance newsletter, issue 3

Three aspects of trading

In last article we explored three parts that in my opinion make up a successful trader. The most general assumption is that trading is about analyzing the market and predicting where the price will go. As we discussed, being an analyst is important – you do need a plan to execute in the market. However, that’s where most traders are stuck – finding a method they believe will make them rich, taking a couple trades that do not work out and then jumping to another method, assuming that they do not have sufficient knowledge about the market and therefore cannot open “the right” trades. The belief that I found to be groundbreaking in my own trading, however, is that there are NO “right” trades. There are simply trades offered by your method of market analysis and you have to take them all, before you make any judgments.

Therefore, the most essential addition to the set of skills of any trader, who desires to make profit consistently, is his ability to execute the trades with no hesitation, trade the plan exactly as his rigid rules are saying to trade it. The plan might as well be faulty and simply not provide the trading edge necessary to win, but without executing a sequence of flawless trades (not from the profit/loss perspective, but in terms of absolute discipline in following the system’s rules) you will never know that and very likely will switch to another Holy Grail only to find yourself with another set of potentially good rules that you cannot follow.

Five or even ten trades is not enough to judge any trading method. Your edge is not going to be visible and such a small set of data bears little to no statistical significance. Imagine a casino operating a slot machine with 4% advantage (meaning that they win 56 times out of 100 on average) calling a mechanic to repair the machine, or suing the gambler for somehow rigging it, just because after 10 customers the casino is in net loss.  Changing the machine after each 10 customers if their gambling produces a loss is just as absurd as changing your system after you have a couple losses in a row, especially if you “jumped the gun” on half the trades.

Mastering trade execution and getting a method of analyzing the market that provides you with some consistent edge are essential for any good trader. However, there is another aspect to trading we briefly discussed in the previous issue and arguably it can be even more important because unwillingness or inability of learning that aspect can help you decide pursuing a career elsewhere, long before you leave your life savings in the market.

Trading is a business

Like in any business, in trading it is most important to stay in control of what you do. First of all it implies having control over yourself, getting your mindset right and acting appropriately on each trading opportunity the market is offering. But when we see that opportunity and ready to enter in our direction, what do we really control in that trade?

I prefer to think of the trader as a small business owner. Anyone can open a small shop as a pursuit of having more freedom in one’s life, but interestingly enough 50% to 80% fail in the first 3 to 5 years. In trading I would argue that the failure rate is closer to 90%. My belief is that the reason for their failure (in business or trading) is defined primarily by the attitude they start with.

As we discussed before, the entrepreneurial freedom NEVER implies freedom from responsibility. In fact, starting out on your own increases the responsibility in almost all areas of your life:

  1. Your level of income
  2. Your medical insurance
  3. Your taxes and book keeping
  4. How you manage your time
  5. Your own development

It is my opinion that the understanding and full acceptance of this responsibility is what defines you as a success or a failure in business or indeed in trading.

In this issue we start our detailed discussion of managing your trading like a business. Being in business means being in control and yet I find that most traders have none –  often unknowingly giving up the only thing they have true control over in trading.

Being in control

If you are a small store owner and you are just starting out you can control quite a few things. First of all you control the stock in your store. You decide how you spend your initial investment. In trading that is your starting capital and in turn you control your Money Management and decide how many positions you can hold simultaneously.

In the store, when you spend $1000 to stock up, how do you know what your returns are going to be? Well, you know for a fact:

  1. The rent you are going to pay this month
  2. The salary to your employees
  3. You know the average bills you have to pay
  4. The advertising costs to attract the customers to your store

It is obviously an oversimplification, but it will do for our comparison. With that information on hand you add it to $1000 you just spent and now you know the amount of money you need to make in order to breakeven. Let’s say it is $1500. Everything above that is your profit (don’t forget the best part – the taxes!). Now, if you want to get $500, you have to sell your stock for $2000.

At that point you’ve already done your research and know that compared to your competition it is a reasonable price tag and given your location you should have no problem selling it at that price point. If (and it’s a big “if”) everything goes well, you just figured out your profit for the month.

Now, in trading you have some benefits, such as:

  1. No additional rent is needed (unless you like working in the office)
  2. There is no one to pay the salary to
  3. The bills are the same as if you would be living your normal lifestyle
  4. You have no product to advertise

In other words, you don’t have that extra $500 minimum you need to make this month just to get out in breakeven. In fact, the only thing you need to do in to order to stay breakeven is to do nothing!

The bad news though is that you have no expectancy for the amount of money you are going to make this month. On the one hand, you know your statistical results over the past months and if you are extremely consistent they can give a good average expectation for your profit (or loss). While the store owner can try to increase his sales in numerous ways by expending more money into advertising, introducing new services, etc., we can only do trades, and usually trying to trade more actively than our system allows will not increase the income by the end of the month – quite on the contrary, you stand a good chance to lose what you earned while following your system as it is.

When a customer enters into our hypothetical store, we don’t know what he is going to buy, if anything. He can go away empty handed or leave half his savings with us. We do know, however, that on this day we already invested ~$500/30 (our monthly expenses divided by the amount of days in this month) into our business in bills alone. We never know how this money is going to come back to us.

When you start your trade, similarly you have no idea what it produces. Yes, your edge provides you with statistics, saying that 12 trades out of 8 will make money, but you can never know the exact winners before they are closed and cashed in.

In reality, when you open your trade, there is one and one only variable that you have certain control over: how much money you are willing to pay the market in order to find out if the trade is going to work. In other words, your risk on that trade. You put your stop and you know where you get out if the trade doesn’t work. Everything else is only your expectation.

Giving up the control

Imagine that in our little store we decide to cut the costs on the salary by declining the medical insurance to our employees and instead paying the direct costs for any accidents they have. Yes, we are happy to know that we saved $100 extra every month but now we never know the costs of doing business. Another unfortunate day a fridge falls down and crashes our clerk’s leg, resulting in $100 000 hospitalization costs and ruining our business, all our savings – our car and the house taken away in addition.

Trading without a SL is exactly the same. If you give up control over the only variable you have in your hands in the market, you are going to do fine until one day you lose it all.

To emphasize the point, I offer this quote by Larry Hite in his interview in Market Wizards:

         I will tell you another story. I have a cousin who turned $5,000 into $100,000 in the option market. One day I asked him, “How did you do it?” He answered, “It is very easy. I buy an option and if it goes up, I stay in, but if it goes down, I don’t get out until I am at least even.” I told him, “Look, I trade for a living, and I can tell you that strategy is just not going to work in the long run.” He said, “Larry, don’t worry, it doesn’t have to work in the long run, just till I make a million. I know what I am doing. I just never take a loss.” I said, “OK…”

In his next trade he buys $90,000 worth of Merrill Lynch options, only this time, it goes down, and down, and down. I talk to him about one month later, and he tells me he is in debt for $10,000. I said, “Wait a minute. You had $100,000 and you bought $90,000 in options. That should still leave you with $10,000, even after they expired worthless. How could you have a deficit of $10,000?” He said, “I originally bought the options at $4k. When the price went down to $1k, I figured out that if I bought another 20,000, all it had to do was go back to $2k for me to break even. So I went to the bank and borrowed $10,000.”


The difference between any entrepreneur (traders included) and usual paid worker is in the acceptance of the risk and the responsibility. Most people prefer to live in the comfort of some assurance in life that they get a pay check every month as long as they follow the rules – and in the current economy that assurance is very tiny indeed. Any entrepreneur accepts and embraces the risk, giving up that assurance in exchange for control over his or her life.

As traders we can learn a lot in regular business. The costs of doing trading business must be defined as rigidly as possible.

We can:

  1. Set our monthly loss limit
  2. Set our daily loss limit
  3. Given the expected activity of our trading system, work out the amount of money we can risk in each trade, so that we do not exceed our daily loss limit after we fail a couple signals in a row

We cannot:

  1. Set a rigid profit expectation for every trade
  2. For every day
  3. Even for every month

Unfulfilled expectations will lead to frustration and mental disturbance, undermining our success in trading.

Being a Trader

The article is from Market Advance newsletter, Issue 2

Today we are going to look at the 3 main parts of trading profession, the essential treats of character for any successful trader.

Being a businessman

Trading is first of all a business. It is about embracing the risk, taking the action and accepting the full responsibility for the actions we take.

When I read about trading online, I always see that trading is about being home, waking up whenever you want to, and taking a couple trades with an easy to follow trading system that you can conveniently buy on the same website for $99.99. Even better, the system can be fully automated, a miniature variant of money printing machine at the convenience of your home office! Sure, I get the fine print required by the government about how risky it is (you can find it in the beginning of this newsletter as well), but the big letters right here say clearly “90% success rate on any timeframe, any trading pair, any account size!”

That was the general mental state I was in when starting to trade.  However, trading turned out to be one of the most difficult paths one can take in life. I was lucky enough to find an online community of professional traders where I learned not only all the basic and advanced technical analysis but more importantly the right attitude to trading. The rules for all newbies were the same: not only had you pay the monthly fee to be allowed in, but every day you had to be there in the discussion from 8am GMT+3 (start of the European session) to 6pm (after the start of US session) and had to create pictures for every single post that pros make. Only by going through that, following them word to word, typing in their comments in the pictures, could you understand what trading is about.

Of course, it was strictly intra-day short term trading – It is a little bit slower pace of action on higher timeframes. Either way, anyone expecting to have a relaxed time trading should seriously reconsider his goals.

Having said all that, it is not just hard work that make the trading difficult for most people. Being a businessman implies another important character trait – the ability to accept full responsibility for one’s life. Most people can never truly exchange the comfort of day job with an expected paycheck by the end of each month, employer provided benefits and a relative sense of stability for more freedom. Freedom of being self-employed implies the ability to make your own choices and decisions in life. It never implies freedom from responsibility. Only by embracing the risk, the unknown, being responsible for each moment in your life you can truly succeed as an entrepreneur.

Being a trader

What does it mean being a trader? If we had to define one core function a trader has to perform, what that would be?

Trading, like any other profession requires a particular set of skills. We teach economists, analysts, bankers, but I will argue that having all these skills, even at a very high level, does not guarantee any success in trading. In fact, I found that studying the market only made it more difficult for me to actually trade.

First of all, let’s define what trading is NOT about at its very core.

Trading is not about analysis of the market. It is not about forecasting the price, knowing where it will go. Trading is also not about understanding the underlying economic reasons why the price moved where it did. Sure, all these things can and will help in trading and I am not denying the great value in this additional knowledge, but at its core these skills are not definitional of trading.

Let’s take a look at an example. A musician, just like a trader, needs a certain set of skills to become successful. He can learn all he wants about the history of music, understand all different musical styles, become very knowledgeable in works of every major composer, learn all ins and outs about musical theory and harmony, etc. All these things are extremely important but in themselves they will only make a good historic of music, or (god forbid) a music critic.

What defines a musician, however, is first of all his ability to play, to perform. There are countless successful musicians, especially in modern popular music, that reached success with no knowledge of musical theory but simply by superb performance of their original or someone else’s work. The technique, the ability to make the sounds pleasant to our ears is the core of any musician.

Coming back to trading, let’s see if we can define a trader’s core skills in a similar fashion. Just like musician final creative output is the sound he produces, the trader’s final output is the money. There is nothing else a trader generates by the end of the day but a balance – negative or positive – in his account.

Musician’s ability to produce sounds pleasant to our ears is defined by his technique – his ability to execute every single note in just the right way. Similarly a trader can produce money by his technique – his ability to execute every single trade at the right time in just the right way.

I accept that one can be a high level composer, writing music for the orchestra or solo performers, without having the ability to perform his work himself to a high standard. You can also be a good market analyst, forecasting the price with high precision. You can plan your perfect trades all day long, and still be unable to trade your plan.

So, at the core, being a trader means executing the trades, pulling the trigger with no hesitation and great consistency. There may be bad trades indeed, but I never said that trading is only about taking the trades – I only shared my opinion that without that ability no one can be called a trader.

Being an analyst

This is where you plan your trades. We discussed trading the plan in the previous section, when in reality you have to plan the trades before you can trade them. However, I feel it is important to emphasize how much more crucial it is to execute the plan then to write it.

When I started my main goal was to analyze the market the best I can, try to forecast the price, predict every single move of the market. I read and learned everything I could find, starting with simple charting tools such as trend lines and channels, then trying every single indicator, hoping that I can find “the one” that works more often than it doesn’t, exploring the Fibonacci set in great detail (going as far as reading his original work), getting stuck with Elliot Wave theory for at least 5 years and then finally programming the most complex automated trading strategies I could imagine, powered with desire to have my own money-printing machine in the office. Naturally, none of that worked.

It was a very vicious cycle indeed, something many traders get stuck in for many years. You find something that seems to work on the history, start using it life, fail with the first couple of trades and quit before too long, swearing never to come back to the markets again. However, as frustration wore down with time I was ready for another try, another great idea to make me rich overnight.

Many traders are lucky to end that cycle either by becoming totally hopeless or losing enough money to quit for good. I did not have such luck on my side. Being careful enough to follow money management rules and never risking more than 1% in a trade I was going in circles for more than 7 years. When I was ready to quit after the first 4, I started programming for other traders and that was fueling my desire to come back to the markets all the time, nonstop.

I never actually did badly, I had many good trades and was considered a good analyst. The fact that I did not get at the time was that being a good analyst, predicting the price and winning consistently in trading have very little in common.

Until very recently I never even considered that my problems could be in trading execution. Any time I would miss a good signal that I planned to take, I blamed my analytical abilities – they are not good enough to provide the confidence to take the trades I plan. And so I searched for the next golden trading rule. When I took the trades that failed, guess what, I blamed my analytical abilities again. When I took the trades I never planned I once again reasoned that I do not have a trading system good enough to trust and not consider taking any trades that are not part of it. You see, our brain is extremely good at finding excuses.

Putting it all together

Just like any other profession or pursuit in life, trading is a journey. In this series of articles on trading mindset and psychology I am attempting to draw a map that we can rely. It is not going to be a perfect map that can change us from failure to consistent success overnight, to follow the map precisely we will need a key. That key is our understanding of ourselves – our own beliefs, fears, expectations, the excuses our brain makes. Developing such deep understanding that is necessary to succeed goes well beyond the scope of any writing – it is the pursuit of one’s whole life.