Surviving Chaos

The battlefield is a scene of constant chaos. The winner will be the one who controls that chaos, both his own and the enemies.
Napoleon Bonaparte

Why is it that some people who are very successful in demanding professions have trouble gaining confidence as a trader? Why do some people buckle under pressure, yet others thrive on it? Perhaps because markets are often unpredictable and uncertain; causing some to act impulsively, abandoning their trading plans prematurely. Traders, who are able to weather the storm to make enormous profits, have a combination of characteristics that make them winning traders.

Of course there is no substitute for experience. The winning trader has experience with the markets and with his or her own personality. New traders are very much like beginners learning a new sport, such as skiing or tennis. They haven't experienced the variety of events that may come up. They see the market as a structure of random movements. The winning trader sees structure in what others see as chaos. Over time, comes an intuitive feel for the markets. They can sense when particular market conditions have emerged and they know that the odds of success are on their side.

Uncertainty is anxiety provoking and new traders succumb to the fear. When they are ready to put on trades, they aren't calm and focused; they are scattered and afraid. Winning traders, in contrast, have experience, and confidence. They know that the odds are in their favor, and that if they make enough trades under these ideal market conditions, they will come out ahead. Since they know that in all likelihood that they will succeed, they are calm and relaxed. Of course there are no guarantees, but they truly believe that it won't be the end of the world should they hit upon a series of losing trades. Should they encounter the worst-case scenario, they know they will live to trade another day and make the losses back.

When a trader has genuine trading skills, he or she knows that there is little to worry about in the long run. He or she is never stressed out. The uncertainty and unpredictability of the markets that produces stress in the new trader is seen as excitement and opportunity by the skilled, seasoned trader. The more trades you make, the more success you enjoy, the more likely you will gain experience and hone your trading skills. It will not happen over night, but it will happen eventually. In the meantime, you might as well accept your fate and patiently wait until you build up superior skills and confidence. If you stay optimistic, working hard, you will gain valuable market experience, and survive the chaos.

From PrudentTrader Archives 2006