Do you sometimes feel that trading stocks isn't going the way you think it should?
Just when you think you're getting the hang of it, the market comes along and bodyslams you back to reality. It's enough to make you think the market's primary function is to make a fool of traders.
We've all been there. We make a buck here and give back a few bucks there. Then, all of a sudden, we give back several. The market did it again...it had its way with us. It's just not fair.
Or is it?
It's always easy to rationalize our losses. The market did something unusual...the specialist ripped us off...only the big boys make money...
But consider this...all traders take losses...it's part of trading. However, good traders make money. Sure they have losses but they don't go back to square one wondering what happened. They expect to take losses.
And, if they make money, it's because they know what they're doing. But they know something many of us never think about. They understand something so basic it often escapes attention.
No, it's not a new trading system...or indicator...or chart pattern. And it's not anything your computer can crank out. And it's not anything your broker will tell you. But it is a basic truth that has always been with us.
Let me tell you what I'm talking about...
I believe John Carter, author of MASTERING THE TRADE, said it best, "The financial markets are naturally set up to take advantage of and prey upon human nature. As a result, markets initiate major intraday and swing moves with as few traders participating as possible. A trader who does not understand how this works is destined to lose money."
Think about this for a minute...
It may go a long way to explaining why many traders don't make money. And to understand it is to realize we are often our own worst enemy where trading stocks is concerned.
Imagine...your own human nature is holding you back. Many of the things that make you what you are....your emotions...your behavioral patterns...your biases...are the very things that conspire to deplete your bank account.
They are what the market preys on to take advantage of our very nature. What's more natural than fear and greed. And what's more detrimental to trading than decisions based on these two emotions...you're own silent saboteurs.
It's easy to deceive yourself when buying a stock. It's even easier to deceive yourself when you own the stock. Human nature goes into action to override decisions that are in your best interest.
Astute traders have said for a long time that the market works diligently at creating the most pain for the most people. It means the same thing. This is not a new concept. Winning traders have understood it forever.
So, if you're interested in trading stocks, why not step back and take a good hard look at at this statement. In itself, understanding Carter's statement is not the end all to trading success. But it is a good beginning because it involves a basic concept.
When you understand this statement, trading suddenly makes more sense. It's not the haphazard affair that some people create. You don't just throw money at the market and hope good things happen.
You begin to understand that trading stocks with a plan is the way to overcome emotions and habits that work against you.
It becomes easier to see why most traders often do the wrong thing... they're fearful when they should be aggressive...and they're aggressive when they should be fearful. It's called trading on your emotions. It's also called following the crowd. And it's why the train leaves without you.
But it doesn't have to...
Good things happen when you begin to understand how the market preys on human nature.
Thomas McNatt trades full time. His website, trading-stocks-profits.com, is a valuable source of information and resources for new and struggling traders.