Novice traders often confuse the differentiating factors that can make the difference in success or failure. These traders often spend too much time focusing on skills, finding the perfect system or edge, and psychology. Yes, skill is important but it is only part of what I call the triangle of trading success. The triangle consist of skill or edge, mentality (desire to trade and discipline to execute), and resources (time and money or capital). If any leg of this triangle is missing the whole structure collapses. I can tell you from experience that having all the skill and talent in the world without trading capital will produce nothing. Additionally, I have tried to mentor traders with more then enough capital, way more then what was needed, and they have not experienced the success they are capable of because they haven’t developed the other legs of the triangle.
The triangle is just the basic requirement and needs to be extended with process and growth development for longer term success.
There’s an insidious risk that arises from becoming more skilled without increasing ones risk control. A trader once asked if it was possible to make 1,000% in a week? My response was if any trader who could make 1,000% in a week then they would probably be unable to stop and would end up blowing out. The more skilled and the more talented that a trader becomes then the greater the risk they are to themselves and the greater the need for serious risk control and management.
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at firstname.lastname@example.org.
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