There are a huge number of losing traders and some estimates claim that as many as 95% of all traders lose over the long term in the markets. This seems like a huge number to me and makes me wonder if all the excuses given by traders for their losing trades boils down to one thing; the fact that they are actually sabotaging themselves when trading. If this is the case, then avoiding mental sabotage should be your primary consideration when trading.
The truth is that trading is one of the most free forms of money making endeavors available. It is no different from becoming an entrepreneur in that a trader has the freedom to do whatever he likes with his trading business. He chooses when to trade, what assets to trade, how much capital to trade, when to exit the market, and even whether or not to trade at all given market conditions. Most of us are not conditioned to deal with such a huge amount of freedom, and to cope with it we unconsciously decide not to have to cope by sabotaging our efforts at freedom.
When you speak with losing traders they often point to outside forces as the reason for their losses. The market moved in the wrong way, the market became unstable, the market made an unexpected move, etc. The fact of the matter is that there is simply no way that any trader can control the market, so everything it does could be considered unexpected. However, the trader can control himself. He can control his actions, his emotions, and his reactions to market moves. This is where many traders fail. They are unable to successfully control themselves, and the end result is trading losses.
Since there is no way to make the market do what you want, it is critical that traders find ways to plan for every eventuality. This includes planning for the possibility of mental hurdles. By planning for the potential mental hurdles, avoiding mental sabotage becomes possible. If you plan for instances of greed or fear, then you will know how to handle them when they occur. This will put you ahead of 95% of the traders in the market, which is interesting since that is the percentage of traders who many claim lose in the markets.
I’m not going to claim that avoiding mental sabotage is an easy task. It takes some traders years to take control of their thought process, to eliminate negative thoughts that continue to push them to make bad decisions, and to come to a place where they can trade without the risk of mental sabotage on every trade. The rewards of avoiding mental sabotage are huge though. Control of your trades at all times, and the ability to profit in nearly any market conditions will be the end of the path when you can learn to recognize the ways in which you cause your own losses. Sure there will still be times that the market surprises you, but you will know how to deal with these surprises to at least limit your losses, if not even find ways to turn them into wins.