Why do some individuals thrive in the world of market trading while others stumble? Is it a matter of sheer luck that dictates success or failure in generating profits from the market? Or is it the trading system or strategy one employs that holds the key to success?
Many would argue that it's the chosen system or strategy that ultimately determines whether you emerge victorious in the market.
The internet is teeming with systems that promise you wealth and success. They claim to be money-making machines, and indeed, they can generate profits. However, the real question is: how much can you truly earn using these systems? What's interesting is that every system or platform you encounter will proudly display its historical performance, illustrating its past achievements. But at the bottom of these pages, there is almost always a disclaimer, stating unequivocally: "Historical data does not determine or guarantee future earnings…"
Why, you might ask, do these websites and pages include such a disclaimer clause?
The reason lies in the uncontrollable element they acknowledge: human emotions.
Human emotions are the ultimate determinants of success or failure in any business endeavor, including trading in the markets. You can absorb all the knowledge from trading books, invest in the most successful systems available, but if you can't manage your emotions, your success in the markets will remain elusive.
This is the very rationale behind those disclaimer clauses – the authors understand that the one thing they cannot control is the emotional reactions of their subscribers or customers.
In the world of trading, there are primarily two dominant emotions that every trader will encounter: GREED and FEAR. These emotions are natural and ineradicable. The key is not to eliminate them, but rather to govern our reactions when they emerge.
Consider the emotion of anger – when we're angry at someone, we might say something regrettable, throw a fit, or even take a plunge into a pool. Each action leads to a different outcome. Similarly, in trading, when we experience consecutive losses, doubt creeps in, and we start to fear further losses. We doubt the efficacy of our trading system.
Conversely, when we witness a string of consecutive wins, we become euphoric and believe we can accumulate substantial profits. This might lead to altering the system or overcommitting capital, which deviates from the original strategy – here, greed takes the reins of our decision-making process.
There's a saying that goes, "The system is only as good as the person using it." Whether we're facing losses or making profits, if we don't adhere to our system meticulously, we're destined to fail. Following a system demands discipline – the discipline to manage our fear and greed effectively, as these emotions will invariably arise and influence our decisions.
Discipline is the linchpin. It requires us to say, "I've achieved my target, and I should take profits now," even if greed tempts us to wait for more. When fear surfaces, discipline impels us to take a position, even when the market doesn't seem favorable.
While these are just two instances when greed and fear come into play, there will be numerous occasions when we must decide to enter or exit the market – these are the pivotal decisions that determine success. Discipline is the guiding principle, compelling us to stick to our chosen system regardless of market turbulence.
No matter how exceptional the trading system might be, the sole path to enduring success in the market hinges on the discipline to transcend our personal emotions and adhere to a specific system with unwavering devotion.