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In an unlimited environment, if you can't confront the reality of a loss, then the possibility exists for you to lose everything, in each and every trade. If you believe trading is like gambling, it isn't. In any gambling game you have to actively participate to lose and do nothing to stop losing. In the market environment, you have to actively participate to get into a trade and actively participate to end your losses. If you do nothing, the potential exists to lose everything you own. With the markets you don't ultimately know what your risk is, even if you are disciplined enough to use stops, because the market could gap through your stops.Also because the event never ends and is in constant motion, there is always the possibility of getting back what you are losing in any trade. You won't need to actively participate to get back what you are losing; you just have to stay in your trade and let the market give it to you. As a result, there is the constant temptation...

The reasons traders would give for their actions are irrelevant. Most traders don't know why they did what they did because most traders don't plan their trades, thus eliminating any connection between themselves and the results of their trades. Most traders act spontaneously and impulsively and then ascribe the rationale for their behavior after the fact. Most of these after-the fact reasons are either justifications for what traders did or excuses for what traders didn't do. In fact, traders who are confident in their ability and know they can have a significant impact on price movement go to great lengths to keep information about their plans away from other traders because that would diminish the possibility of executing these plans. However, this is not to say that after they have taken their positions they won't purposely reveal what they have done to then draw other traders into the same position, forcing them to compete among each other to create price movemen...

When a trader doesn't understand market behavior well enough to know what he is going to do and under what market conditions he is going to do it—but if at the same time, he is very attracted to the action and the opportunities he knows exist and if he is also impatient with the learning process—his impatience and attraction will make him feel compelled to do something, even if he doesn't know what he should do. They must know what they are doing or at least they know more than him. If he does what they do, or better yet, identifies the most successful trader and does what that trader does, then he too can make money.   They all focus blame outside of oneself for unsatisfactory results. In an unlimited environment, the less structure you create for yourself, the less accountable you are, the more easily you will be swept along by the force of events, and the less control you seem to have over your life. However, having less structure has the benefit of shifting the respon...

In an unstructured and unlimited environment, it is essential that you establish rules to guide your behavior. You will need to create definition and give yourself direction. Otherwise, you will feel overwhelmed with too many possibilities. Without these rules one of the most likely possibilities is that you will create devastating losses for yourself. The big psychological problem here is, if you make up and have to play by your own rules, you also have to take total and complete responsibility for your actions as well as the outcome of your actions. The degree to which you do assume responsibility is the same degree to which you can't shift it to the market and be its victim. The typical trader will do most anything to avoid creating definition and rules because he does not want to take responsibility for the results of his trading. If he knows exactly what he is going to do and under what conditions, then he would have something by which to measure his performance, thus ma...

As a trader, you have to decide what is more important—being right or making money—because the two are not always compatible or consistent with one another. There Is Unlimited Potential for Profit and Loss The most effective manner to illustrate the "unlimitedness" of the market environment is to compare it to gambling. With any gambling game you will always know exactly how much you can win or lose each time you play. You decide exactly how much you want to wager, you know exactly how much you can win as well as lose, and you may even know the mathematical odds of either possibility. This is not the case in market environment. In any particular trade you never really know how far prices will travel from any given point. If you never really know where the market may stop, it is very easy to believe there are no limits to how much you can make on any given trade. Prices Are in Perpetual Motion with No Defined Beginning or Ending The markets are always in motion; they n...

Trading systems give us a way to define, quantify, and categorize market behavior. Since the markets offer traders a seemingly infinite combination of behaviors, all with their corresponding opportunities and risks, it is easy to understand how our minds can become overwhelmed. Trading systems limit the scope of market behavior, and therefore make this activity a little easier for our minds to manage. They also give us direction and suggestions about what to do in a given market situation. Without them traders could easily feel as if they are floating aimlessly in an endless sea of possibilities and opportunities with no land in sight. A true skill not only points the way, but almost automatically begins to direct awareness as well. And a thinking methodology controls the selection of which skills should be used and when. Having the skills necessary to consciously manipulate one's psychological environment is essential for the trader who recognizes how ineffectual a trading s...

The following typical trading errors have a specific cause rooted in a thinking methodology that can be changed. 1. Refusing to define a loss. 2. Not liquidating a losing trade, even after you have acknowledged the trade's potential is greatly diminished. 3. Getting locked into a specific opinion or belief about market direction. From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do: "I'm right, the market is wrong." 4. Focusing on price and the monetary value of a trade, instead of the potential for the market to move based on its behavior and structure. 5. Revenge-trading as if you were trying get back at the market for what it took away from you. 6. Not reversing your position even when you clearly sense a change in market direction. 7. Not following the rules of the trading system. 8. Planning for a move or feeling one building, but then finding yourself immobilized to hit the bid or of...

“To get through the hardest journey we need take only one step at a time, but we must keep on stepping.” —Chinese Proverb “One step at a time” may be trite, but it’s still true. No matter the objective, no matter the destination, the journey to anything you want always starts with a single step. When you lift the limits of your thinking, you expand the limits of your life. It’s only when you can imagine a bigger life that you can ever hope to have one. The challenge is that living the largest life possible requires you not only to think big, but also to take the necessary actions to get there. Extraordinary results require you to go small. Getting your focus as small as possible simplifies your thinking and crystallizes what you must do. No matter how big you can think, when you know where you’re going and work backwards to what you need to do to get there, you’ll always discover it begins with going small. Years ago, I wanted an apple tree on our property. Turns out you can...

“Focus is a matter of deciding what things you’re not going to do." -John Carmack Clearly, our best intentions can easily be undone. Just as there are the Six Lies that will deceive and mislead you, there are Four Thieves that can hold you up and rob you of your productivity. And since there’s no one standing by to protect you, it’s up to you to stop these thieves in their tracks. THE FOUR THIEVES OF PRODUCTIVITY 1. Inability to Say “No” 2. Fear of Chaos 3. Poor Health Habits 4. Environment Doesn’t Support Your Goals 1. INABILITY TO SAY “NO” It’s one thing to be distracted when you’re trying to focus, it’s another entirely to be hijacked before you even get to. The way to protect what you’ve said yes to and stay productive is to say no to anyone or anything that could derail you. Peers will ask for your advice and help. Co-workers will want you on their team. Friends will request your assistance. Strangers will seek you out. Invitations and interruptions will come at...