Web Profits Blog

There are several elements to the mental trap that people get caught in when they begin trading that sets them on the wrong course, but one particular mistake is the one that virtually guarantees failure, or at least a rather long and painful road in becoming a successful trader.

Fortunately, even though this situation is one that is difficult to see coming and very understandable that it happens, there is a straightforward and rather simple solution to the issue.

The essence of the trading activity is certainly within the ability of most to grasp, however trading as an occupation does have a significant body of knowledge to absorb and certain skills that are required to trade profitably and with consistency. Coupled with the fact that most traders are of smarter than average,this makes for a situation where the success rate should be much higher than it is.

Like with most professions with a substantial body of knowledge, there is a gradient to trading.

Here is an analogy to illustrate the problem. Let’s take mathematics.

Mathematics begins with the concept of numbers in general, quantifying items. Next come addition, subtraction, multiplication and division. From there, one moves into algebra, geometry, and trigonometry. Once that base is established, then one can comfortably move on to calculus, La Place Transforms, differential equations and other higher math.

If however, a person fails to fully establish the prerequisites for calculus, such as algebra or trigonometry, the ideas in calculus may be understandable, but working the problems will be a considerable challenge, if not near impossible to solve. If one were to attempt to go straight from basic mathematics to differential equations, it would be a very long struggle indeed to become proficient at the higher level.

It has been documented in studies on the obstacles to learning that have found that there are specific physiological reactions when a person encounters this particular phenomenon – that of starting too high up in a learning gradient or missing foundational knowledge while trying to grasp concepts at a given level.

This is the fundamental error that many traders make, and they are generally not consciously aware of this particular situation and its ramifications. Many people begin active trading without the foundational knowledge to trade at the level where they become active. When this happens, this creates a considerable obstacle to adequate learning within an sufficient time frame. Subsequently, the trader often winds up suffering severe losses, sometimes losing all their capital before they have established a sufficient skill and knowledge base to trade proficiently.

The individuals are not to blame. This is a problem of the system which unfortunately most have to suffer through. There is no mandatory training or certification before a person is allowed to put themselves and their capital at real risk, so the high percentage that fail is simply the result of inadequate warning and preparation for what the business of trading involves.

The traders that are fortunate enough to seek out the proper teachings and help are the ones that can minimize the effects of this phenomenon that is so prevalent in the trading world. If one can find a mentor that recognizes this particular obstacle and the others that are present in the development of a trader, then chances are likely for a good trading experience. Most however choose to go it alone or simply make it on sheer persistence alone, while learning the lessons of trading the hard way – through personal experience and numerous losses.

Instead of falling prey to this mistake as many do, you have the choice to save yourself considerable time, losses and personal grief. This begins with backing up so to speak and making sure that you’ve got the basics fully covered, and then moving forward with a focus on mastery and development.

This one factor can determine your destiny as a trader, so it is well worth acting on.

This article covers only one of the components of “The Subtle Trap of Trading”. To find out the rest of the story and pick up a free copy of the powerful report, ‘The Seven Traits of Winning Traders’, go to http://insideouttrading.com.

For more resources & insights into trader development, go to InsideOutTrading.com

You’ll also find the book, “The Subtle Trap of Trading”, which goes in-depth into this article topic, the psychology of trading and much more.

- Brian McAboy