Fantasy Versus Reality

“A successful trader is a realist. He knows his abilities as well as his limitations." He knows how to react when a piece of information flows in the markets. A professional trader cannot afford illusions.

Our fantasies have the power to influence our behaviours, and the environment of our markets makes it easier to develop fantasies. They distort reality which can stand in the way of our success.

There is something called the "brain myth" which can help us in understanding our fantasies. For example, many traders feel like trading requires some specific knowledge, but in reality, trading is very simple. Because of this distorted reality, they make complex trading systems, taking parameters which are not needed and they ultimately lose money.

The Undercapitalization Myth

Another reason is that traders feel that they would be successful if they can trade in a bigger account. Most of the traders suffer losses because of a string of losses that were locked in a big account. Some traders borrow money from their relatives or friends, which is not a good idea because if an adverse event occurs, it can create an embarrassing situation. 

So how much money should be required to begin trading? 

The answer is simple, a small percentage of your equity should be adequate. Taking time to learn from the markets is a good idea, and, lastly, controlling our losses is something that we should learn.

The Autopilot Myth

Imagine a man comes up and tells you that there is an automatic driving system. You just need to install a chip and car runs automatically; you can also take a nap in the car. You would probably laugh at that man. But what be your reaction if the same told you there is an automatic trading system?

The author here is trying to explain that the creation of wealth cannot be automated, no matter how good a system is. Markets are always developing and changing. One needs to monitor the markets themselves and react accordingly. 

Even if you have a good trading system, applying individual judgement is very important to succeed in the markets. Our trades must be based on some defined rules. 

As we execute a trade, it is important to analyse our feelings and making sure that our decisions are intellectually sound. It is also important to structure our money management in such a way that no string of losses can kick us out of the markets.