Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis

SINGLE-MINDEDNESS: UNRAVELING THE ONION LAYERS

My grandfather used to tell a story about the cow that would kick over its pail after each milking. Such stories reveal much about human nature and trader psychology. Successful trading has as its prerequisite that traders are single-minded in their pursuit of success. The only obstacle to success in trading is the trader. Like my grandfather's cow, conflicted traders often are able to enjoy profits and even achieve a limited level of success, but because of various unresolved psychological conflicts, they either surrender these profits or create an artificial ceiling to their successes.

The reasons for these internal conflicts can be as varied as life itself. One trader I know kept sabotaging his successes because he was in a bad marriage and felt his success would have enriched an undeserving spouse. In such instances, it is almost impossible to trade effectively. We must believe that everyone benefiting from our success (including us) deserves it or we will continue to kick over the pail of milk. Single-mindedness sounds like an easy accomplishment; instead, it is a continuous process of self-assessment and refinement.

Although the obstacles to single-mindedness are virtually infinite, I also believe every single internal psychological block to our success stems from a single issue: self-worth. Whether we deny ourselves success because we erroneously think money is evil² or because our success would result in the enrichment of undeserving ...