Trading on Target: How to Cultivate a Winner's State of Mind

THE PERPETUALLY UNDONE TRADER

Roy, a brilliant man and a very poor trader, is the poster boy for a fatal case of greeditis. His trading systems are so dazzling with genius that it is difficult to imagine anyone using them without making millions. When Roy starts trading, he calls with the news that he is making money at the rate of some amazing percentage—as much as 100 percent per week. His astounding success will go on for seven or eight weeks during which he will call with plans for what he will do with all of his future earnings. As weeks pass, his plans become more and more elaborate and inflated as he dreams of great riches. Suddenly, the calls stop and he will not be heard from for a month or more during which time he has once again lost everything.

Why does a trader continue to lose all that he makes in the markets when his talent is as great or greater than the best traders in the field? In Roy’s case, he is perpetually undone by his unbridled greed. Strangely enough, when Roy is poor, he is the least greedy individual you will ever meet. He would happily give you the shirt from his back. When he has no prospects of having any money, he will share whatever he has. However, just give him the vision of riches in the future, and Roy rapidly loses all sense of proportion, reality, and self-discipline. He breaks all of his own, most cherished trading rules until there is nothing left to trade.

It would be possible to make the case that traders like Roy are simply afraid of ...