| Neil A Costa |
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"The Development of a Market Master - Part 3"
Jack Schwager is the author of the popular books Market Wizards and The New Market Wizards. He has also produced a video titles 'What it Takes to be a Great Trader'. In this video, Jack concluded that there were ten characteristics that most, if not all, of his market wizards had in common. These characteristics were essentially as follows:
- Everyone Had a Method
- Discipline is the Key
- Desire and Drive
- Confidence
- Hard Work and Study
- Risk Control
- Patience
- Independence
- Losing is a Part of the Game
- A Love of Trading
In this article, I will discuss the reasons why some traders fail to profit from trading, even when they own and understand a proven trading system.
Failure to Use a Proven System
The reasons why most traders who fail to profit from their trading, do so, is because they do not have a proven trading system. Consistently profitable trading systems can be purchased, or the budding trader can develop one for his or her self. This is not a good idea when you are a novice, as system design requires specialist knowledge, and a beginner would rarely have such knowledge.
Failure to Fully Understand the System
Possession of a proven trading system, especially if it is one that the trader has purchased, does not guarantee trading profits. It is vital that the trader back-test the system thoroughly, as this gives the trader a thorough understanding of the system's rules and their application. Such back testing also gives the trader a 'feel' for the profitability of the system, and it shows the trader that as long as he or she sticks to the system's rules, consistently profitable trading should be the outcome.
I am very much against the use of so-called 'black box' trading systems, that is computer programs that do not disclose the systems' rules. Traders can never gain confidence in trading something that they do not understand - particularly if there is a risk that the spectacular results of the system are due to over optimization of the system's parameters. Three losing trades in a row, and traders usually discard such systems, even though many black-box systems remain profitable over the longer haul. I am also suspicious of some of the marketing for such systems, which usually boils down to "insert CD in drive 'D'; press 'Enter'; watch money flow into bucket placed under drive 'A'"!
Failure to Follow the Rules
This is the most common reason why system traders who fail, fail.
Following rules seems easy, and it is indeed easy to do when one is paper trading. Real trading adds the ingredients of greed and fear, and it is these emotions that can over-ride a trader's determination to follow a system exactly. Most novice system traders who fail to follow their proven system have returns from their trading which are considerably worse than the system should have generated.
Rising to the top few per cent of any profession requires an enormous amount of study and work. Trading is no exception. I commend to novice traders Jack Schwager's excellent books, and his video. Cultivate his ten characteristics, listed above, and success will be inevitable!
Finally, in 'The Development of a Market Master - Part 1', I compared the training of a market master with that of a super salesperson, and mentioned the excellent work of writer and sales trainer Tom Hopkins. Hopkins refers to his super salespeople as 'champions'. I will conclude with a quotation from Tom Hopkins which is every bit as applicable to becoming a market master as it is to becoming one of his 'champions':
The Champions Creed
I am not judged by the number of times I fail, but by the number of times I succeed. And the number of times I succeed is in direct proportion to the number of times I can fail and keep trying! [Tom Hopkins]
[This article is based on an article published in the Australian Technical Analysts' Association Journal, July/August 1999.]
DISCLAIMER:
Every effort has been made to ensure that the content and conclusions presented in The New W. D. Gann Technical Review are complete and accurate.
No part of The New W. D. Gann Technical Review contains trading advice - stated or implied, nor is an invitation to trade. The directors and associates of Lambert-Gann Educators, Inc. are NOT licensed trading or investment advisors. Lambert-Gann Educators, Inc. is an organization designed to assist traders and investors to become more knowledgeable and independent.
The giving of advice is therefore contrary to the very objectives of Lambert-Gann Educators, Inc.
Traders requiring trading or investment advice should contact a licensed advisor.
Stockbrokers and futures brokers are licensed advisors.
Neither Lambert-Gann Educators, Inc., nor anyone else involved in the production of The New W. D. Gann Technical Review, will be liable for any liability, loss or damage directly or indirectly caused, or believed to be caused, by The New W. D. Gann Technical Review.
Traders, to be successful, must take full responsibility for their own actions.
With respect to trading results, past performance is not necessarily an indication of future performance.
By maintaining your subscription to The New W. D. Gann Technical Review, you acknowledge that you understand and accept the contents of this disclaimer.
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