Your Greatest Obstacle as an Investor? Look in the Mirror.
Here's how to tame that voice in your head that can lead you astray of market success.
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The biggest obstacle to your market success is you. You are your biggest enemy. You are constantly led astray by that voice in your head that wants you to believe that you are smarter and possess more insight into the stock market than you really do. That voice prevents you from seeing the stock market as it really is, and that prevents you from making the important decisions that you need to make to produce superior returns.
One of the most important attributes of great investors and traders is the willingness to admit when they are wrong. Those who have great success evolve to the point where a bad trade or investment isn’t viewed as a mistake. It isn’t about being right or wrong, it is just part of the process of trading and investment. Money-losing trades are inevitable, and if you don’t have losers on a regular basis, it is an indication that you are not taking sufficient risk. The only way to make big money is to be willing to take risks, and if you take risks, you will be wrong quite often.
The goal isn’t to eliminate all losing trades. The goal is to cut those losses very quickly before they can do any substantial damage. You don’t avoid risky trades, you just manage them very closely.
Unfortunately, in the age of social media, there is not a very clear picture of how many bad calls even the best traders and investors make. There is always some critic on social media who is eager to point out failure so they can feel better about their own abysmal results.
Everyone prefers to talk about their success rather than their failures, but it is the failures that are the most instructive. Too often, success is a product of good fortune rather than some special insight or strategy. Learning to deal with failures is what will boost your returns more than anything else.
Great traders need to be confident, but being confident doesn’t mean excessive ego. It means being confident that you can deal with the many trades or investments that are not going to work and move on to the next opportunity. The market is sometimes called the Great Humiliator, because it humbles even the greatest investors at times. No successful investor has even escaped the humiliation of the market. The best we can hope for is to take the humiliation in stride and not let it stop us from moving on to the next opportunity.
No one "conquers" the market. We merely find ways to harness its power at times to generate returns. The market beast is the boss, and we are sure to extract vengeance when we fail to recognize and honor its power.
The market beast provides a great gift to investors and traders -- a steady flow of opportunities to make money. It isn’t easy, and we can’t forget who is in control of the outcomes, but we work at it day after day and honor the beast we have the potential to produce exceptional rewards.
At the time of publication, DePorre had no position in any security mentioned.
