From the outside looking in, the stock market appears to be this simple mechanism, where people can make a lot of money. It gives the illusion you can become rich with a secret indicator of some kind, great tips, or a little bit of luck. The answer is none of the above. The world’s best stock market operators or futures market traders do not need some secret indicator, they do not follow tips or advice from others, and they certainly do not depend on luck to amass fortunes. The world’s best have developed, in a trading sense, proper cognitive diversity. They can think successfully in a multitude of ways, pertinent to trading the markets.
The stock market, and other trading venues, fool most of the people most of the time. These markets are what is known as, a complex adaptive system. They give illusions of simplicity, but in reality, it takes many years of proper trading education to be consistently successful. The learning curve is a steep one. It is not just about learning strategies, methods, and techniques that work. The number one factor that determines success is the psychological part of trading. About 5 to 10% of all traders in the stock market and futures market make almost all the money. To join this elite group, you must be able to think proficiently, in a multitude of crucial ways. You need to think, and act, differently than the 90 to 95% of traders that lose in the long run.
The best way to become successful at anything, is to learn from someone who has already achieved great long-term success. Once you learn the strategies, methods, and principles required, then implement them for yourself. Much of what I have learned about the stock market comes directly from William J. O’Neil. O’Neil is the founder of Investors Business Daily, and is widely considered one of the best stock market operators of all time. When it comes to trading the futures market, much of what I have learned comes from Richard Dennis and Michael Covel. The trend following method they utilize is absolutely exceptional. In fact, John Henry, the majority owner of the Boston Red Sox, made most of his money implementing this superb method of trading. Learn from the best. Read their books. Study and learn their strategies, methods, and principles. Then implement what you learn into your own trading.
Once someone can implement successful strategies, methods, and principles into their trading, they have taken a major step toward joining that elite 5 to 10% I was alluding to earlier. These elite traders make most of the money in the stock market and/or futures market. They also understand and implement proper trading psychology. Most of the time, normal human nature does not work, when it comes to trading the various market venues. Emotions such as greed, fear, and hope will cloud your judgement. When this happens, you really have no chance. Mark Douglas is an expert when it comes to trading psychology. He taught me how to develop a successful traders mindset. It was at this point, I became consistently successful, whether I was trading the stock market or the futures market.