Traders Obituary

The following is from my trading friend Kerry Syzmanski, proprietar of www.harmonicedge.com

Trade PsychologyTrader's Obituaryby Kerry Szymanski

It is a sad but simple truth that most people fail at trading the markets for a variety of reasons. Failure to research, formulate and follow a good trading plan is a common theme as is the inability to control emotions. Under capitalization and unrealistic expectations is another.

When you are new or struggling, it is normal to feel some self doubt and fear. There are no guarantees in trading and anything is possible. The most frightening factor in trading, however, may be the potential we have to wreck havoc on ourselves by becoming addicted to a pattern of losing. If we engage in a pattern of behavior that is strongly associated with losing, we will fail.

What pattern can be observed in losing traders? They trade impulsively. Impatience causes them to enter and exit trades prematurely. They either lose focus or become hyper focused. They add to losing positions. They don't book small losses but do book small wins. They get euphoric when they win and depressed when they lose. They risk too much on a single trade and get emotionally involved with the outcome.

Dr. Alexander Elder begins his trading day by saying: "My name is Alex and I'm a loser - I have it within me to do serious damage to my trading account today."

Perhaps this is a bit extreme but I think the basic idea is correct. Especially if we have an addictive personality type and find ourselves repeating destructive patterns simply because they feel familiar or comfortable.

Several years ago one of my trading friends, Leslie Jouflas, suggested a little exercise. It was to write my trading obituary. It sounds a bit morbid but I think it's useful. No one knows what we are doing in our trading rooms better than we do. If you manage to blow out your account, what will the steps be that take you from point A to point B? Take a few minutes to put this down in writing and then place it some place where in your trading room where you can easily review it once a day.

What is the scariest thing in trading? It's the fellow who stares us down in the mirror. If he doesn't do us in, we'll most likely be just fine. I don't keep my obituary posted on the wall anymore, but it's never too far away. Consider writing your own as a reminder of what you must avoid doing to preserve your trading account.

Traders Obituary

Here lies trader Kerry who blew out his account. He allowed himself to lose focus by permitting too many distractions and demands on his time. He traded too many markets, was overconfident and susceptible to trading "highs". This led to over trading and over use of leverage. He failed to control his emotions. Fear caused him to become too bearish and he resisted trading the long side of the market. He failed to take modest profits when offered and effectively manage risk. May he rest in peace.

Thanks Kerry!