Trader, Know Thyself.
What most determines your success in trading is not your chosen method and not even your risk management. It is you, you will be the one to chose whether you will make it or not. Your perseverance, your faith in your chosen system, you self control in position sizing, whether you can lose ten times in a row and come back and win ten times in a row instead of just giving up and moving on.
You have discovered a great trading system and method, now can you follow it? You lose five times in a row, do you have the faith in your trading methodology to keep going? While to new traders these questions seem silly, to seasoned traders they were the difference between become a winner in the markets versus simply quitting after several frustrating trades.
A great book by Michael Martin is about the weakest link in a trading system, the trader trading it.
The author explains the importance of a trader’s mind set in determining the success of his trading career. The surprising truth for many struggling traders is that successful trading is not about high tech complex indicators, technical chart reading, or even risk management. These are only tools, the most important thing that determines whether a trader is successful in the markets is whether the trader perseveres until they are successful. It is all about the trader finding a trading method and trading instrument that fits their own personality and risk tolerance.
This book shows why you do not want to trade like a specific market wizard, instead you want to ‘feel’ like that trader feels when he is trading at his very best, with a system that matches your own temperament, risk tolerance, and psychological make up and beliefs about the market.
The vast majority of traders are controlled by their own emotions of fear, greed, and pride. If you can really get to know yourself and your own motivations by becoming a specialist in your own emotions you will immediately have an edge in the market over other traders who are swept away by their own feelings. When you stay controlled following your trading plan in a wild market you can continue to trade calmly while others are panic selling or buying. While others hold on to trades for far to long out of greed you will have a simple trailing stop in place and be ready to lock in profits. While others are letting losses grow and ruin their account because they want to prove they are right you will calmly take your predetermined stops because no one trade defines you.
This book is a fascinating read and was difficult to put down while reading it because it is about me, the reader.
It is filled with hard won market understanding and the wisdom that comes from knowing yourself. It is on my top ten list of trading books for the concise way it explains the most important element of trading: the psychology of the trader and how to manage the mind and ego.
New traders have more trouble with getting their head right than any other area when real money starts flowing throw their account in both directions. The main problem of using proper risk management and following a disciplined trading plan stem from the trader not understanding his own mind and emotions. This book will help a great deal with that journey.
The endorsements of this book is a who’s who of trading. Ed Seykota? Victor Sperandeo? Bill Dunn? These guys know trading and are some of the best.
I highly recommend every trader reading this book as a lesson or a reminder, a must have for every trading library.
Trader, know thyself by reading The Inner Voice of Trading.
