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Understanding the requirements of trading success

A fellow blogger recently suggested that not knowing what you don’t know is a major hurdle on the path to trading success.

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Ray at Blog for Trading Success – who is one of the contributors to my Trading FAQs book – recently had a post on the subject of why traders fail. He summarizes things fairly well with this comment:

“They don’t know what is needed for success i.e. they lack the foundation for success.”

I totally agree. Most traders coming in to the markets think that basically all they need to do is figure out the best place to buy and the best place to sell. While it’s certainly true that selecting good entry and exit points is important, it is far from the only aspect of trading success.

Ray follows up by adding:

“Traders also fail because they don’t do what they know.”

I might have said, “They don’t know what they don’t know,” but I think the idea is there. This is something that is always the case in any new thing we take on. In the early developmental stages we think we know things, but we really don’t. It’s not until much later that we start to move into the realm of understanding how much we actually don’t know.

In a project I’m working on separately, I’ve been involved in interviewing dozens of very successful volleyball coaches from around the world. We often ask how they compare themselves today to the coach they were when they were younger. You often hear them comment on how little they knew then, but how much they thought they know, whereas in the later stages of their career they were much more aware of their knowledge gaps.

The tricky part about making that progression from not knowing what you don’t know to knowing what you don’t know in trading is that it can be very expensive. One single ignorance-based error can potentially ruin a trading career, and really damage one’s personal finances.

By John

Author of The Essentials of Trading

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