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Many investors’ biggest problem is overcoming their emotions – principally frustration and lack of patience – at those times when trading experiences the inevitable drawdowns and periods of flat performance. Of course this happens to all traders, no matter what system you are trading. It’s performance over time that matters, not the short term approach usually inspired by naive traders.
Reacting emotionally and illogically to periods of poor performance is a prescription for losing money. Unfortunately traders expect that money is to be made regardless of prevailing market conditions. They then tend to micro-manage their accounts and then ‘psyche’ themselves out only to fall prey to their emotions and eventually close their accounts. An investing fact of life usually reveals that, with more patience, their losses could have turned into potential profits.
A point in fact is the case of the Fidelity Magellan Fund steered by non other than Peter Lynch, boasted one of the industry’s best investment records. Unknown to many, upwards of 50% of their investors lost money. How? The answer is elementary: investors fell prey to their emotions by closing their accounts during periods of flat or poor performance – while not giving it enough time to perform. If they’d have had more patience, their losses could have turned into great potential profits.
It’s only human nature to want immediate gratification, but in the real world, this is a fantasy. Only those who hold on and trade through adverse trading situations will have any chance of performing well over time. And it’s only over time that will spell whether you will be successful – or not. Even great sports figures have “lackluster” or “underperforming” periods. Why should traders be any different? The “great” ones overcome these periods and go on to prove themselves worthy of the designation. The “great” traders also went through these cycles and came through with flying colors. They persevered the tough times. They held their emotions in check. They weathered the storms.
All it takes is the amalgamation of stern discipline, lots and lots of patience, a sound 100% objective trading system and a money management approach that limits risk, and you are off to the races. Easy to say, I know, but if you don’t follow these basic steps, the chance of being called a successful trader will be almost non- existent.
The SPBANKBOOK trading systems incorporate all of the above – with the exception of the patience and discipline part. That is your responsibility. When you learn to stay calm while others bow out, you will be the one left standing at the end.
Remember, patience is a virtue – so be virtuous.
Good luck. |
