Thursday, February 5, 2015

How confident are you?

Do you have the confidence in your trading ability? 

Do you attempt to time and take almost every market move?

Do you get angry and annoyed when an analyst gives this advice: stay away from the market since it is very choppy.

Are you a very active trader?

Well, research shows that the most active traders actually make less money than the least active traders.

And, the more confident traders, are actually over-confident. They lose money, find it difficult to be consistently profitable in the long run, trade more and often fight the market trend.

This does not mean that traders should not be confident. Successful traders are generally more confident than average.

Their confidence is not in their trading powers, but in their ability to manage whatever crisis comes up, and, some or the other crisis will come up.  They are confident that they are flexible, ready to adapt and improvise when needed.

Summary: Traders should not have over confidence in their magical ability to make money. This leads to over-trading, silly mistakes and eventual devastation of capital.
Successful traders are humble, understand that the market controls them, are confident that they will face all problems that come in their way.

[The theme in this post is taken from the excellent book by Jason Williams: The Mental Edge in Trading.]

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