What’s Holding You Back?
At times, making money in capital markets (stocks, commodities, etc) can be tough… very tough!
…What separates the winners from the losers?
This is the million… no, Billion dollar question!
There are many reasons why some investors/traders succeed, and others fail. Here are the top 11 factors that have personally helped me find success in the market.
11 Factors Needed For Being Successful In the Market:
1. Figuring out what you truly want:
Ed Seykota, a famous trader, once said, “Everyone gets what they want from the market. Some people want to win, and they win. Some people want to lose, and they lose, other people want to gamble (i.e. have fun) and they gamble.”, list your wants (i.e. in life and the market) then write them down (critical and often overlooked step). Then review your list and change them when necessary to make sure your actions are
Here’s a challenge for you… take a moment and list your wants (i.e. in life and the market) then write them down (critical and often overlooked step). Then review your list and change them when necessary to make sure your actions are in line with your “wants.”
2. Physical and Mental Capital:
Capital comes in two forms: physical and mental. Make sure you are properly capitalized (on both fronts) before you make your first buy or sell decision. There are countless examples of people who fail simply because they are undercapitalized. In case you are wondering, there are also countless examples of people who “blow up” because they are overcapitalized (i.e. LTCM or Amaranth-Why, because they do not respect risk). Successful investors/traders learn to preserve both; their physical and mental capital.
3. Work Ethic:
If you think that you are going to become a millionaire overnight just because you are buying/selling stocks, think again. One key ingredient for all successful investors is hard work. If you think a 40-50 hour work week is hard, please stay safe with a normal 9-5.
Passion is very important to being successful in the market (and in life). If you are not passionate for what you are doing, find something else to do. Being successful in the market is a very difficult feat for most people, if not outright impossible (due to their personal shortcomings). Therefore, having a deep passion for the market will serve you well in the short, intermediate and long-term.
5. Understanding your own personal psychology:
How you think is everything. If you do not think you are entitled to being successful in the market then most likely you will not be successful… if you do not think that you have all the right stuff and that success is yours for the taking, close your account and find something else to do. It is imperative to constantly maintain a positive (successful) attitude because there will be times when it will seem like everyone is out to get you. When in reality, it is all in your head. Remember, the old adage, “You are your biggest enemy.” Address your psychological strengths and weaknesses or else they will hinder you.
6. Respect Risk:
Every time you make a decision to participate in the market, understand you are risking your capital. Most people try to be “cowboys” and end up losing everything! This can be avoided by simply respecting risk!
7. Handle your losers and the winners will handle themselves:
Losing is inevitable. It will happen, therefore it behooves each of us to plan for it. Most people get sucked into their dreams or hopes and live in a fantasy world where they will make millions overnight. However, that is one of the quickest ways of blowing up. Since losses are inevitable, having a proven system to handle losses is one of the most important “secrets” to being successful in the market.
8. Trade and Invest, Do Not Gamble:
Most people do not understand the market. There are numerous strategies to make money in the market. Find one that works for you and run with it. Follow your system’s rules, do not deviate and most importantly, do not gamble. If you want to gamble go to Vegas, at least they will give you free drinks!
9. What’s your edge?
Remember that you are competing with the most intelligent and wealthiest people in the world each day. Where is your edge? What do you know that others do not? Are you acting before the crowd or jumping onto a moving train? Look for opportunities at the edges.
10. Tenacity & Failure:
Do you have the tenacity to persevere when you feel like everyone is against you? Are you prepared to fail? Are you going to give in when the going gets tough? Failure is almost a right of passage to success. Do you have the resolve, the self-discipline, to make decisions for the right reasons? Remember, there are no guarantees of success. Oftentimes, the key difference between being successful and failing is your ability to recover and stay positive from a series of disasters. Get up, brush yourself off and live to trade another day. The market will always be there; will you?
11. Understand Probabilities:
No one knows what will happen tomorrow or where the stock market will be in 1 year. However, people love to listen to opinions and look for others for guidance. Do not be intellectually lazy, learn to think for yourself and make your own decisions. Since no one knows what will happen tomorrow it is not about being right or wrong, it’s about making money. Therefore, it doesn’t matter if you lose 2% on 7 out of 10 trades as long as you more than makeup for it when you are right.