Online Investing: Why do most traders fail?

It 's widely accepted that most traders do not have happened. Yet, there is this small group, which are steadily year after profitable year. How do they do this?How do they get themselves in this enviable position of being able to trade money no matter which direction you are moving the markets?

An interesting observation can be made about the dealers usually follow or not follow the rules. It 's widely accepted that there are no secrets to what makes a successful trader and the rules that have stood the test of time and do a job. Yet most people fail to follow them. Why?

It is interesting to note that many studies suggest that humans are naturally prone to fail commercially. People are naturally inclined to break all the time tested trading rules. Probably the main reason for not following the rules is that people generally do not like losing. Nor can they bring themselves to accept that they are wrong.

For example, there may be a certain type of person who is very confident in themselves and their own capacities different initiatives, and this attitude and confidence naturally leads to their business.

This is potentially a problem, because there will be many occasions when a job does not put his head in the expected direction. The time tested rule 'cut losses' would be applicable instead of those who have a strong self-confidence can find it difficult to close the trade at a loss, because doing so acknowledges that they got the trade wrong in his mind.

This can be a difficult to digest so the easiest option is often not close the trade at a loss and therefore likely to violate one of the most important trading rules there are. For most traders, the idea of not closing a trade at a loss means that they have not had a loss despite the fact that they can have a large unrealized loss.

Money is something that affects people's emotions and your natural instinct with the money often encourage you to break some rules risk tested time management, for example, 'cut your losses' and 'keep your small businesses'.Most traders focus on making money and making a loss goes against the purpose of making money.

Similarly, when you have a position that is performing strongly, a little part of you wants to sell that position to make profit. This is perfectly natural. Letting your profits run and not selling too soon is also an important time tested rule, however due to a focus on money, some people can be very quick to sell when the shares in a profitable situation.

If you find difficult to accept a small percentage of the initial loss in a trade, what makes you think it will be easier later to sell shares when the position has lost 30% or more? Yet, if we consider the influence of market trends and the importance of risk management, the best time to sell stocks is when you are faced with only a small loss.

Thoughts often appear on holding on to shares that are falling in value, because someday in the future, will grow in value and return the price you bought them. This is unfortunately a myth that many actions have on the market.

Some people believe that actions will always return to their previous values, by presenting them with the opportunity to sell to break even. There is the possibility that the stock price can never get back the price they bought them at.

Also, while you can have absolute confidence that a stock price will return to levels that they purchased, consider whether it is worth holding on to them and wait for time to come, if he does. Would not it be better to sell those shares and go on committing your trading capital in a company whose share price trend is clearly up to date?

People often think about how you feel and if they sell the shares in 12 months time, the share price back to where they have purchased. There is a feeling of, 'I should have just kept on them'. In the meantime, however, over the period of 12 months, while you may have expected the share price to return, your trading capital was elsewhere obtaining solid returns for you.

All these emotions and paralyzes you and others can not force you to make a decision. Remember the old adage that says that taking no action is an action.Successful trading is all about sound decision making and it is necessary to ensure that some of these emotional impulses do not freeze or cloud your judgment.

The bottom line is that humans are naturally inclined to break the time tested trading rules. If this is the case, then those who are totally committed to commercial success in their business and are able to concentrate on the task at hand. They are able to exercise great discipline and internal control and do as their trading plan was done.

If you were to isolate the reasons why people do not follow the rules, you would most probably conclude that it is a lack of discipline and emotions involving too much in the decision making process.

What is the right system to follow a dealer? To answer this question, I offer what the trader who broke all time record profits with real money in the United States Trading Championship 1984 has given me. He said that a successful trader needs five key elements:

1. A method

You must have a method that is objectively definable. This method must be designed so that if someone asks how to make the decisions to trade, you can quickly and easily explain. Perhaps more importantly, if the same question is asked again in six months, the answer will be the same. This does not mean that the method can not be changed or improved, but must be developed as a totality before implementing it.

2. The discipline to follow your of method

'Discipline to follow the method' is so widely understood by true professionals in their midst seems almost a cliché. However, it is important that this cliche can not be ignored. Without discipline, you really have no method in the first place. And that is why many traders are increasingly successful military experience - the epitome of discipline.

3. Experience

It takes experience to be successful. Now, some people say "paper trading" as a learning tool. Trade paper is useful for testing methodologies, but has no real value in learning about business. In fact, it can be harmful, because it imbues the novice with a false sense of security. "Knowing" who has successfully completed the paper bag in the last six months, he believes that trade next six months, real money will be no different. In reality, nothing could be further from the truth. Why?Because markets are not just an intellectual exercise, is an emotional one as well.Think about it, just because you are mechanically inclined and like to drive fast does not mean that you have the skills necessary to win the Daytona 500.

4. The mental strength to accept that losses are part of the game

The biggest obstacle to trading success is not to recognize that losses are part of the game, and, moreover, that must be accommodated. The perfect trading system that allows only earn money there. While waiting, or hoping, perfection is a guarantee of failure. Trading is like to beat in baseball. A player who hits .300 is good. A player who hits .400 is great. But even the great player fails to hit 60% of the time! Remember, you do not need to be perfect to win markets. In practice, this is why you also need an objective system of money management.

5. The mental strength to accept enormous advantages

To win the game, make sure that you understand why you're in it. Moves large markets are only one or two times a year. They are the ones that pay you for all the work, fear, sweat and aggravation of the previous 11 months or even 11 years. Not to be missed for reasons other than those required by the method of objectively defined. Do not let yourself unconsciously define the normal range of profit and loss. If you do, when big business finally comes along, you will lack the confidence to take all the promises. In this way, it abandons both method and discipline.