Ray Barros included his beliefs on trader development in his recent Plan & Personality post. Here they are:
- I believe that newbies fail because they focus mainly on getting the plan right. I define a newbie as anyone who has not consistently made money over 3 years.
- I believe that the plan is the least important mandatory element for success. It’s not hard to devise a plan with some sort of edge.
- I believe newbies fail because they fail to manage risk and fail to learn from their mistakes.
- I believe that by learning a simple plan (mechanical rules), trading small and learning to consistently execute the actions I call habits of success, we increase the probability of long-term success.
- I believe that fulfilling our trading potential ultimately means we need to use a plan that suits our personality.
The one thing I would do with Ray’s points here is change “plan” to “system” or “strategy” or something like that. To my mind “plan” is a wide thing incorporating all of the aspects of your trading. Think of the full term “business plan” and you get the idea of what I’m talking about. Ray’s use of plan is more along the lines of the actual buy/sell/hold decision-making process – what could be called the system.
Aside from that question of semantics, though, I totally agree with Ray on his main points. In particular, #3 really jumps out. If you want to become a successful trader you need to not blow yourself up by taking too much risk and learn from the inevitable mistakes you are going to make.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
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- Why New Traders Fail
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