Exerpt from Way of Turtle, Curtis Faith...
Live By the Ego, Die By the Ego
"This is the major reason why beginning traders are drawn to discretionary
trading. Discretionary trading feeds the ego; it is trading
that relies on one’s judgment, in contrast with systematic trading,
where trading decisions are made by using rules that specify exactly
when and how much to buy and sell. So when you use your judgment
to trade and you win, the ego wins. You can then brag to your
friends how you are the master of the markets.
I see this particular behavior constantly on online trading
forums—especially the broad-based ones that attract new traders.
You regularly see posts from individuals bragging about how they
bought just before a run-up, or they have found the Holy Grail and
have a 90 percent accurate system, or they have been trading for
three months and have made 200 percent. They invariably have
done this by trading with too much leverage, so they might have
turned $5,000 into $15,000; however, they run a very high risk of
losing that $15,000 because they are trading too aggressively. A few
months later, you may see the same traders post that they have
blown up their account and lost everything. These individuals were
trading to feed their egos, and as the saying goes, live by the ego,
die by the ego.
There are many successful discretionary traders, but there are
far more unsuccessful ones. The biggest reason for this is that the
ego is not your friend as a trader. The ego wants to be right, it
wants to predict, and it wants to know secrets. The ego makes it
much more difficult to trade well by avoiding the cognitive biases
that hinder profits".
Live By the Ego, Die By the Ego
"This is the major reason why beginning traders are drawn to discretionary
trading. Discretionary trading feeds the ego; it is trading
that relies on one’s judgment, in contrast with systematic trading,
where trading decisions are made by using rules that specify exactly
when and how much to buy and sell. So when you use your judgment
to trade and you win, the ego wins. You can then brag to your
friends how you are the master of the markets.
I see this particular behavior constantly on online trading
forums—especially the broad-based ones that attract new traders.
You regularly see posts from individuals bragging about how they
bought just before a run-up, or they have found the Holy Grail and
have a 90 percent accurate system, or they have been trading for
three months and have made 200 percent. They invariably have
done this by trading with too much leverage, so they might have
turned $5,000 into $15,000; however, they run a very high risk of
losing that $15,000 because they are trading too aggressively. A few
months later, you may see the same traders post that they have
blown up their account and lost everything. These individuals were
trading to feed their egos, and as the saying goes, live by the ego,
die by the ego.
There are many successful discretionary traders, but there are
far more unsuccessful ones. The biggest reason for this is that the
ego is not your friend as a trader. The ego wants to be right, it
wants to predict, and it wants to know secrets. The ego makes it
much more difficult to trade well by avoiding the cognitive biases
that hinder profits".
