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This chapter describes some other ways of looking at the path traders take to success.

For some years I have set out a simple process which all traders seem to encounter on the road to success. This is detailed below and thereafter I expand this in a way which I feel will be useful for those who want to tread this path.

STARTS OFF “Greed orientated.”

Loses because:

1. Market problems

(a) Not a zero sum game, a “very negative” sum game (see Chapter 25)

(b) Market psychology – doing the wrong thing at the wrong time

(c) The majority is always wrong

(d) Market exists on chaos and confusion.

2. Own problems

(a) Overtrading

(b) No knowledge

(c) No discipline

(d) No protection against market psychology

(e) Random action through uncertainty, broker’s advice for example

(f) Market views.

RESULT: the “greed orientated” trader gets a good kicking and becomes “fear orientated.”

Loses because:

1. Market problems as above

2. Scared money never wins

3. Own problems

(a) Still overtrading – derivatives

(b) Fear brings on what it fears

(c) Tries to cut losses too tight creating more losses

(d) Still no real understanding of what it takes.

RESULT: Traders who persevere “travel through the tunnel” and becomes “risk orientated.” This is when they start to make money because they:

1. Develop a methodology which give them an edge

2. Use an effective Money Management system

3. Develop the discipline to follow their methodology

4. Erase “harmful” personality traits.

This sets out the bare bones and you will note that there are three basic stages. As I often say it is curious that many things come in threes in the markets. Major trends can be sub-divided into three, there are three key trading rules, etc. The three key trading rules in fact equate to the three stages through which traders must pass.