What Is The Weakest Link In Your Trading Chain ?

You probably won’t be surprised when I say that “YOU” are getting in the way of your trading success and your overall success in life. It might sound like I’m saying something bad again, but sometimes we have to take responsibility for our own bad choices and face the truth of our lives. In trading, as in the rest of our lives, this negativity is all about us: our egos, actions, and feelings.

But instead of just focusing on the bad, we’re going to turn the bad into good in today’s article by showing you how to break through these barriers to success. This should lead to more money and a happier life in general.

I want you to think of the following points as links in a chain. Keep in mind that it only takes one weak link for the chain to break, so you really need all of these in the right order…

EGO of the mind

The male ego can be a huge problem in trading, which is mostly done by men. Studies have shown that women do better at trading than men because they don’t get too confident in their skills like men often do. The ego is affected by hormones, and men are more likely to take risks because they are more confident, which is partly caused by testosterone. In trading, this usually means taking too many risks, taking risks that are too big, or both. When it comes to financial risks, women are much more level-headed and tend to be better at managing them. In fact, this is a pretty well-known fact that has been studied by renowned behavioral economists Brad Barber and Terrence Odean, who are known for their seminal research paper “Boys will be Boys: Gender, Overconfidence, and Common Stock Investment.”

So, if you’re a man, which you probably are since men trade more than women, you’re already at a big disadvantage when it comes to trading because of how we’re made and how we think. This doesn’t mean you’re doomed to fail; it just means you need to be more self-aware and realize that your hormones and ego may be hurting your trading and making you feel like Superman when you’re really Clark Kent. This ego problem can be solved with the right kind of training, planning, and discipline (learning from a mentor, sticking to your plan etc.).

People tend to trade on a whim, but the market and price know more than you do.

People can look at a chart and see a clear signal right in front of them, but that doesn’t mean they will act on it. People tend to trade what they think and do what they think rather than what the market is telling them through evidence, I have an article which explains this more in-depth, called trade what you see not what you think. Remember that if you see a signal, you should trade what you see. Don’t second-guess yourself.

It’s important to stick to your plan and the price action strategies in it, but all too often, it doesn’t matter how much a trader has studied and practiced, sometimes the “3rd eye” (the mind) of the trader takes over, and it can be quite random. Don’t call yourself a “bull” or “bear.” Instead, adapt to market conditions as they happen and don’t get attached to your direction or bias of the market, even if objective evidence shows that your bias may be wrong.


Successful traders have a sickening amount of patience. I may sound like a broken record because I’ve probably said this a million times on this blog over the years, but it’s true. But I’m not talking about just any kind of patience. I’m talking about the most counterintuitive emotion a person must deal with in all parts of life: fighting the need for instant gratification. We are wired to want things right away, and as traders, we have to fight against these genes that make us feel like we need results right away. Just staying out of the way is a strategy in and of itself, and it’s a part of being patient. Part of being patient is letting trades play out without getting too involved or trying to control every detail.

The “need” to be right instead of being willing to admit when you’re wrong

In general, people have an innate need to be right and have a hard time admitting when they’re wrong. In the trading world, this can be very bad for money. Most traders would rather lose than admit they were wrong, even if they don’t realize it. This is especially true for new traders, who often don’t even realize they’re doing it. We are hardwired to think we are right, so when we lose, we have to fight against our natural desire to hang on to losers and learn to cut our losses every time.

I’ve never met a profitable day trader

I know you want to be a “cool” day trader, but I’ve never met one who did well. I think, like me, you got into trading so you could have more fun in life, right? So, why do you try to be a “gung-ho” day trader by just sitting around and looking at your screen all day?

Many studies have shown that the more you trade, the less likely it is that you will be successful in the markets. There are many reasons for this, but the main ones are that when you trade more often, you tend to trade in a more random way because much of the market movement on any given day is just noise that doesn’t mean anything. Also, the more you trade, the more your transaction costs add up, which cuts into your profits, if you have any. Read my article on high-frequency vs. low-frequency trading and my article on why I hate day trading to learn more about this topic.

Most people don’t think this way about trading, but it’s helped me…

You’re buying and selling with other people, right? So, traders should think of trading as a sport or competition against others. Most people don’t do this, but if you walked onto a soccer field and thought you were playing against a computer, it would be hard to think you could win because you wouldn’t be as motivated as you are when you’re playing against another person. So, if you think of trading as a competition with another person, you’ll have more confidence that you can win. Remember that when you’re trading, it’s other people you’re up against, not just “the market.” If you do this, you’ll gain the competitive confidence you need to beat your opponent. This is true in business, in sports, and in money. It takes down the wall of “me against everything” and turns it into “me against you.”

It’s not about how much money you won or lost in each trade.

The outcome of your trade should not be about profits, losses, percentages, or anything else. It should be about the trade itself. Again, read that sentence.

People focus too much on how much money they lost or won, or how much they could have lost or won, instead of looking at trading like a business and remembering that every transaction over the course of the month adds up to the monthly profit and loss. In the end, each trade is just part of running a business. The moment you start to think about the individual dollars you risked or made on a trade, your mind will start to suffer, and your trading will suffer with it.

You need to treat trading like a sportsman on the field treats playing his sport, by separating the activity from the money you make from it. This is similar to some of the ideas I wrote about in an article called “Focus on trading, not the money,” but I think this discussion may be even more in-depth. When you’re learning how to trade and getting better at it, money doesn’t come into the picture. Money only comes into the picture when you add up your profits and losses at the end of the year. In this way, trading is more like a game or competition that requires skill, and the only way to win is to take money out of the equation. The money will always be there, but the point is that the more you think about it, the less likely you are to do and think about the things you need to do and think to make money.

It’s also important that traders don’t measure their profits by the percentage or number of pips they gain or lose on each trade or by the percentage of their account’s performance over xyz time. Instead, traders should use units or ‘R’ to measure and score performance (total risk units based on risk vs reward). I wrote a long article a while ago about how important it is to measure trading performance in terms of R, not percentages or pips. You can find that article here.


My trading courses are based on my real-world trading experiences, which include the links of the trading “chain” that I talked about above. Many financial market educators and bloggers who teach about trading are just trying to sell you the “next best” entry technique. But even if you had the Holy Grail entry technique, you’re doomed to fail if any of the above links in your trading “chain” are weak or broken. If you make sure all of the above “chain links” are strong and combine that with even a simple trading strategy, you’re bound to do big things in the trading world.

“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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