A poster at Trade2win started a discussion recently which I think is very worth addressing here. It starts off with looking at the typical process of the unsuccessful trader:
1. Find or develop a system you think will work
2. Trade the system
3. Experience a few losers and discard the system
Sound familiar? Probably so. It’s a very common loop new traders get caught up in.
Why is this so? Why do new traders give up so easily, when successful traders follow through?
The suggestion is that this happens because of a lack of confidence. While I can understand the case to be made for that being a problem, I’d take it a step further and say that it starts much higher up than that with the fact that new traders totally fail in the vast majority of cases to think beyond the immediate and develop a proper frame for their trading.
To put it simply, if you don’t know what you’re working toward how can you have any confidence that what you’re doing will get you there?
That’s high level thinking, of course. At a more ground level view, I’d contend that most new traders never learn what the elements of a trading system really are and how they contribute to its performance in different market conditions. They just want to plug-and-play and have profits come spilling out. The markets tend to disavow them of that impression quite rapidly.