Came across this article written quite awhile ago by an accomplished trader from malaysia. It pretty much sums up why 90% of the retailers are losers in the market.
Resistance to change – barrier to improvement
Author – anonymous
“Many investors and traders readily put their blame and admit that they are emotional in their trading, but they are repeating the same emotional sentiments that result in losses for the same mistake they made before. The root cause is their attitude of resistance to changes, and these traders and investors will never able to rectify their trading emotional weaknesses if they do not readily accept their own mistakes and weaknesses to accept changes, put prepare to take responsibility to change to improve. These traders will always stay where they are, that is, losing a lot opportunities and incurring losses because they will make the same mistakes over and over again. Their trading will be continuously driven by the emotional feelings of fear, hope and greed. Some traders may be successful in making money, but without continual improvement, and they will be stagnant with consistent gains without growth, and probably these are the people who are more resistant to changes because they think they are the experts.
Any improvement requires change, and change should be a constant for continuous improvement. We will never able to improve our trading skills and managing our emotions in trading without change – this is common sense thinking. Therefore I can easily conclude that if a trader does not want to change – the tools they use, the approach or method, the person will stay on as he/she is, without improvement. No trader should claim that he/she is a perfect trader that he/she does not need not change the usual way of trading. Even for those who think they are experts or having years of successful trading experience, they have to change their strategies and tactics and methods when the trading environment changes, or when they learn something that they did not know before. For example, at this moment, I may think I am have acquired adequate skills in fundamental, technical, VSA, and psychological aspects of stock trading, but I would not say that I have nothing more to learn, I would change my trading strategies and tactics when I see change that may help me to improve. I believe in continual learning and continual improvement, and I will learn from differing views that may tell me something that I may not know.
From my personal experience in learning, I have changed a lot to reach the state where I am now, unlearning or ignoring the unnecessary and relearning the essential basics that suit me. During my learning journey, I have discovered a lot of new ideas and new knowledge that I have been continuously changing to be a better trader. For example, I was first a strong fundamentalist ignoring the technical aspect of trading, and I made mistakes in entries and exits. Then I learnt technical analysis, and found that I need to change to invest with technical and fundamentals, as fundamental analysis alone cannot allow the investor to manage risks, and a combination of fundamental analysis and technical analysis will enhance gains tremendously. Even in technical analysis, there are many tools, and I learnt to identify the basics that I need, and discard those that may not be so useful to my trading style. For example, I once think that pivot point is useful in trading, but later I found that it is only useful for day trading, but the tool does not fit my newly adopted style of positioning and swing trading. The changes had made me a better trader as a result of continuous improvement. Finally I learnt the importance to VSA and psychological analysis to be able to detect the SM in action, and I changed the way I look at a stock, adding the VSA and psychological perspective, and that actually able to enhance gains by exiting at the right time, and not exiting at the wrong time.
In fact, I have gone through many changes from my original style of investment and trading in the last three months. I also changed my focus on the technical tools that I would want to use to analyse the stocks for entries and exits, as well as forecasting what could be on the right side of the chart. With those changes, I am becoming more confident and I am feeling little stress as far as stock trading is concerned.
The only fear that I have, since I have the focus strategy on only a few stocks, is that something drastically may happen in the company that I invest in – like accounting irregularities, and this is the only risk that I cannot see, control, or manage, but monitoring closely the changes in fundamentals and looking at the chart will tell me when to exit quickly, and I am now able to do all these with my focus strategy. But the probability of such scenario like accounting fraud will be low for a company with good record of financial performance and proven historical growth. We can use common sense to evaluate the company and the management of the company.
How to facilitate change?
For traders who are still looking for a low risk high probability trading system and those who cannot manage the emotional aspects of trading, I can see two options for possible long term improvement.
1. To seek a coach to help them to change if you have a denial syndrome, and refusing to change. A coach may not know much about the tools and systems of trading, but they will know how to help a person to see where their strengths and weaknesses lie to make changes. An experienced NLP practitioner should be able to help. Look up google for NLP to know what it is, and there are many certified NLP practitioners in Malaysia.
2. To develop self confidence in managing emotions of fear, hope and greed in trading by learning to master the trades with a good trading systems, using effective trading tools, and these were what I have gone through during the last three months through focused learning. Attending training programs will speed up the learning process of tools, but make sure that you follow up to apply what you have learnt, and make changes on the tools that fit you. Asking an experienced person to be your mentor will certainly help. A mentor should be able to guide you to avoid mistakes, thus avoiding paying heavy tuition fees without learning anything. As I have been recording many of those I have learnt in this blog, reading and learning from my blog may help if readers can understand and believe every word of what I said.
Whatever learning method that you want to adopt, if you are interested to learn something useful throughout your life time, make sure that you are PATIENT enough not to try to jump into any trade merely from what you heard or read from friends or brokers. Trading without a system and knowledge will create stress, and that will distract you from focusing on learning, and trading without knowledge is like a gambling without knowing the outcome – whether you will lose or win.
But the first step for traders who have trading experience to do is to adopt a mindset of the need to change, and the acceptance will break the strong barrier to change.”