The Benefits of Developing a Trading Edge

Posted by admin as shares and stocks

First and foremost, you need to realize that only a small percentage of traders are successful at developing an trading psychology and the only reason for them being successful, is because they have learnt how to deal with the aspect of failure.

Developing a trading plan is of fundamental importance as far as trading is concerned. What’s of even greater importance though is that you the trader, manages to convince yourself 100% of the importance of a trading plan. Unless you believe your trading success rests solely on a trading plan, you’ll simply not be willing to invest enough time to develop one.

Likewise, I also emphasize the importance of separating oneself from the larger majority. In other words, one needs to find a trading edge. Remember, the vast majority who decide to trade will end up failing and unless you have an edge, you’ll end up joining them.

You’ve more that likely heard and read that on average; only 20% of people entering the markets are successful and actually make money from trading business. So, when you here me making references to the majority, it’s the group of 80% that I’m referring to.

So, where do these figures come from and how can we be so sure that only 20% of traders make money? I know I don’t have any evidence to back such a statement. In fact, when I first considered it, I was of the opinion that it’s no more than a popular cliche.

Frankly, I can see how such a statement could be backed by evidence unless of course there are accurate audits and precise statistical data.

I’ve spent a considerable amount of time mulling over these figures so it came as a welcome surprise when I became involved in a discussion with someone else who also doubted the accuracy of them.

Interestingly enough, we both agreed that as with other professions, traders fall into one of three categories. On one end of the scale you have the top 20% who are highly successful while on the other end of the scale; you have 20% who fail completely. This in turn leaves us with 60% of traders in between, and this is the group who don’t really fail, but they also don’t make any noticeable achievements either. So, now we can see how the 80% group is made up.

Clearly, the largest percentage of traders falls within the 60% group where they just tend to go with the flow. What is it then that drives others further, thus allowing them to enter the top 20% group?

Given what I do for a living, I firmly believe that most people fear failure to such an extent, that they’re in turn reluctant to take risks. I also believe that far too many people perceive failure to be an entirely negative experience when in fact it need not be.

Years ago when I first started with a trading education, an instructor once said that I should never see failure as failure, but instead, we should rather see failure as an opportunity to improve ourselves. Let’s face it, when you experience failure in a certain area, you’ll be particularly vigilant the next time round in order to avoid making the same errors.

An ideal attitude towards failure can be seen in the likes of Thomas Edison who himself experienced many failures along the road to success. Interestingly enough, Thomas once said that instead of failing, he’s simply discovered thousands of ways which don’t work.

Having come to the conclusion that so many people fear failure, Thomas Edison later added that a large percentage will give up, without actually realizing just how close they are to success.

Of course no trader should be willing to storm ahead blindly but there’s a fine line between caution and the fear of failing. I often have to remind myself that I only live once, in order to give myself that extra bit of encouragement for taking a risk. Of course, I then have to do whatever is necessary in order to prevent myself from worrying about my decision.

If this article leaves you with just one thing, I hope it will encourage you to cast off those shackles which keep you restricted to the middle 60% group. While I certainly don’t advocate throwing caution to the wind, please don’t allow yourself to be intimidated by a fear of failing. Take some risks and face your fears, and you’ll be much more likely to get into the top 20%.