What are the differences between the winners and the losers? Here are some of them:



Mindset

Mindset is the primary definer of winners and losers. Mindset encompasses independence, decisiveness, ability to handle both success and failure and responsibility for trading results.

The successful trader controls their mindset and attitude, transcending greed and fear, replacing this with the enjoyment of the challenge of trading. They are at peace with themselves, and have resolved internal conflicts.

Losing traders don't have this mental edge. They follow the herd rather than thinking independently, and want their broker to hold their hand. They always look for someone else to blame for their failures. Self sabotage spoils their chances of success. They may feel more comfortable staying on the same financial plane as their colleagues and friends.

Trading, with winning and losing a daily occurrence, quickly reveals your true character and exposes the limitations of your thinking. Make developing a winning mindset your highest priority.

Managing risk

There's an trading saying "There are old traders and there and bold traders, but there are few old, bold traders". Winning traders manage risk, losing traders don't.

A winning trader will limit their risk on each trade, use a model with a positive expectancy (long run positive return) and carefully manage capital. They are careful to diversify their risk, for example, by not opening positions that tend to be highly correlated.

In contrast, a losing trader will overtrade by taking positions too large for their capital, refuse to use stop losses and not use a tested and profitable trading system, often using "seat of the pants trading".

Using a system

Most winning traders have a working system. Not only that, they stick to their system, and have confidence in it, refusing to second guess it.

Losing traders either don't have a system, don't have a system that works, or don't have any confidence in their system and constantly override it, or stop using it after a few losses. Sometimes, they will spend $79.95 and buy a system cobbled together by someone else in the vain hope that it will be a short cut to riches without need for any personal effort. Of course, that is rarely successful.

Successful traders don't just buy a system and hope that it will work. They develop a system that reflects their own views of the market and risk tolerance, and extensively back test it themselves. This gives the winning trader a lot of confidence about the performance of the system under various market conditions.

A final note

Winning traders have an an exciting opportunity to build substantial wealth. To be one, you need a systematic approach to trading, typically by developing your own system. There are no short cuts to success, so you will need to read widely and critically, and work on your trading psychology.

We wish you successful trading.