We’ve all heard “You can’t beat the market” and “The house always wins,” but we also all know that some traders and investors DO beat the market, just like some blackjack and poker players make a living in casinos. What are they doing? Do they have a super-secret psychic ability to predict the next big move in the market or a big, complicated plan to get around a casino’s top-of-the-line security system? The answer is “no,” unless you’re talking about a Hollywood movie.
So what exactly is the big “secret”? How do some traders keep “beating” the market while you sit there and go through another frustrating week? What if I told you that you only need two main things to consistently beat the market? Read on to find out what they are and how they can help you join the small group of traders and investors who consistently make money in the market.
To beat the market, you must first beat the bigger “enemy.”
If you want to consistently make money on the market and become a good trader, you’ll have to “beat” yourself first. That’s right, you have to master yourself first before you can be a worthy competitor on the market. If you can’t control yourself and “beat” the temptations and urges that flood your mind and body every time you look at a chart, you have no chance of beating the market.
The idea here is pretty simple in theory, but you probably already know that it is MUCH harder to do in real life. If you can’t learn to ignore the “demons” in your head that tell you to make another trade and risk another lot when you know it’s not in your best interest to do so, you will never consistently make money in the market.
What’s the answer?
A complete change in the way you think.
You have to start thinking that the only real “edge” you have in the market is to stay in charge of your actions and choose your trades wisely. This is your only real advantage over the millions of other people who are also trying to trade.
Why do you think that about 90% of people who try to trade money on the market end up losing all or most of it? We’re not good at trading because it’s not how our brains are set up. We’re wired for “fight or flight” because that’s what has helped us the most over thousands of years of evolution, most of which was spent hunting for food or fighting with other people. Now, in the 21st century, things are obviously a lot different. The Internet has only been widely used for about 10 to 15 years, and mobile trading and online trading from your computer have only been around for even less time. Long story short, most people aren’t born with the right wiring to beat the market. You have to develop it through discipline, patience, logic, planning, and thinking ahead. These things don’t come naturally to most people, nor do they “feel easy.”
So, you need to accept and realize that as soon as you start trading on a live account, you’re already fighting the hardest trader you’ll ever face: yourself. I have written a lot of articles about patience, discipline, and trading consistently, but you will never beat the market unless you are willing to TAKE ACTION to fight the emotional trading demons in your own head.
So, the solution is simple: accept that YOU are the biggest enemy you have to beat to consistently make money in the market, and then make a PLAN OF ACTION to make it happen. After that, it will be easy to beat the market.
The second most important thing to do to beat the market is…
You are completely wrong if you think that the 10% of successful traders are just “lucky” or had an unfair advantage.
You see, the market doesn’t care about you or your skills like many other jobs do. You could say that the market is the “Great Equalizer” because it treats everyone the same. In trading, the only things that really matter are how good you are at trading and whether or not you’ve “beaten” yourself, as we talked about above.
To beat the market, it’s clear that you need to learn a good way to trade and really get good at it. But even if you are a very good trader, you won’t be successful until you beat the trading demons in your head. So, you can’t just have one of these two things; you need both. You need to be a skilled trader and have full control over your own mind and actions on the market.
Warren Buffett is probably the best example of how skill and self-control can help you beat the market. Warren Buffett is the best investor of all time, and it’s not because he’s been lucky. According to this article on Bloomberg, Buffett is very good at choosing the right stocks, and he sticks to his plan. He is known as the “Oracle of Omaha” for a reason.
What’s the answer?
A lack of trading skills and knowledge can be fixed by getting good training and education on a real-world trading method, such as price action.
Once you understand how the strategy works, you need to try it out on a demo account and start making a trading plan. Your plan will need to be tweaked and changed over time. Don’t think of it as a set of “rigid rules” to follow, because it shouldn’t be. It should be a daily guide or a checklist that you look over to make sure you’re on the right track. It will include the main things you look for in a trade setup, but it can also include things like daily trading affirmations or inspiring quotes, anything to keep your mind focused and on track.
Think of your trading plan as the “glue” that holds your whole trading routine together. If you stick to it, the trading plan will give you some structure and help you stay on track by keeping your mind on the trading strategy and rules you’ve set up. Traders who try to “wing it” and think they will become disciplined traders overnight by some magic almost never succeed. Everyone needs a plan and a routine to turn their desire to be disciplined into a habit that sticks in their mind over time.
Conclusion
To beat the market, you must first “beat” yourself. In the world of trading, you will never face a tougher opponent than the one inside your own head. But there’s a pretty easy way to beat the market: Master a simple and effective trading strategy like the one I teach in my trading course, and combine this trading skill with mastering yourself. If you can do those two things, you’ll be well on your way to beating the market, and best of all, you’ll be in charge of it.
“If you don't find a way to make money while you sleep, you will work until you die.”
- Warren Buffett
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