The truth is that many people set rules to keep from making decisions.Mike Krzyzewski
I've seen traders sit quietly, motionless, appearing in control, while their minds are in such a twisted rage that they are incapable of closing a bad position. I have seen people curled up in their seats holding their stomach in physical pain from stress. I've been before the screen, myself, palms sweating, blood pounding, face flushed, and adrenaline pouring through my veins, as if I were in physical danger. All I was doing was watching numbers on a computer screen. Ever wonder what the inner enemy is, that makes this business such a battle? What are the forces that can bring out irrationality, even violence, while watching something as logical as numbers?
Learning to conquer the inner enemy may be the single most important element in succeeding as a trader or speculator. While some fail and some succeed, the difference is not intelligence, it is not knowledge. It is the will to execute knowledge! Acquiring the requisite knowledge to trade is relatively easy, execution not necessarily so. Take for example the subject of weight loss. You can walk into any bookstore and find a countless number of books, by experts, on the subject of weight loss. Yet only 12% of those who start a weight loss program actually lose weight and only 2% maintain the weight loss for more than one year. That is a 2% success rate, which is even worse than the 5% success rate for people trading futures.
Whether it is losing weight or trading, the most difficult part isn't knowing what to do or how, the most difficult part is making the decision to do it, and sticking to it. When following through is difficult, it is because our minds are still in a state of conflict regarding which course to take. What is the source of this conflict? Why is it that even when we know what we should do, it often seems impossible to do it?
"My head tells me to stop, but my heart tells me to go for it," this common statement implies a dualism in the nature of human beings; the rational side on one hand and the emotional side on the other. Most people believe these two aspects of human nature are separate, unrelated, and often in opposition to each other. The acceptance of this dichotomy between emotion and reason, the belief that they are necessarily unrelated and often conflicting, is at the root of most human conflict.
How can it be possible to lead an integrated, fulfilled life without suffering constant inner turmoil and frustration? If you accept the premise that emotions and reason are mutually incompatible, it is not possible. As long as you believe the soul is destined to permanently duel with itself, it will. This is the enemy that can make trading such a war. The way to end it, is to challenge the premise that emotions and reason are separate and unrelated aspects of human nature, which means focusing on the nature and purpose of emotions in human life, with particular emphasis on the role of anger and fear.
Reprint from a 2006 Prudent Trader Newsletter