The Common Trading Mistake Nobody Wants to Talk About

by Darrin Donnelly on February 21, 2012

Traders often suffer from "Grass Is Always Greener Syndrome."

Jack Schwager interviewed dozens of the world’s most successful traders for his famous Market Wizards series of books.  In The New Market Wizards, Schwager summed up THE critical element that separates good traders from bad traders:

“When asked to explain what was important to success, the market wizards never talked about indicators or techniques, but rather such things as discipline, emotional control, patience, and mental attitude toward losing.  The message is clear: the key to winning in the markets is internal, not external.”

Few successful traders would argue with Schwager’s point.

Those who have survived the trading wars year after year will tell you how important the emotional elements are.  They’ll tell you how hard it is to persevere during a brutal drawdown, how they learned the importance of staying humble during a winning streak, how the real money is made by having the discipline to wait for just the right moment, etc.

Even beginning traders learn quickly how brutal the emotional side of trading really is.

Not surprisingly, the demand for help with these internal factors has created a large industry of books and services focused on helping traders master their emotions.

These books and services have benefited many traders, myself included.

But through the years, I’ve found one common and devastating psychological issue consistently ignored.  It’s what I call the “GIAG Syndrome.”  That is, “the Grass Is Always Greener Syndrome.”

This GIAG Syndrome is actually an “effect” of all the internal “causes” traders struggle with.  It’s a RESULT of worry, stress, fear, lack of discipline, and anxiousness.

It works like this.  A trader hits a losing streak, suffers a drawdown, or just gets plain bored with his recent trading.  So, he goes searching for an answer to his “problem.”  This answer, the trader believes, lies in finding a new system, guru, or overall trading philosophy.

Instead of trying to solve the internal issues that are creating this urge, the trader erroneously thinks that the problem is the system.  The day trader becomes a swing trader, the technical trader becomes a value trader, the stock trader becomes a Forex trader, and so on.  Whatever the trader was doing before is no longer working and the new system or guru that has caught his attention would be a much better fit, so he thinks.

This is a losing battle because the trader is trying to solve an internal problem with an external solution.

Ironically, a lot of the well-intentioned books and services that aim to help traders with their internal game actually end up ENCOURAGING the trader to go down this “grass is always greener” external path.  They tell traders to go out searching for the system that is just right for them.  They tell traders, “There’s one strategy out there that you are meant to trade and once you find this perfect fit, you’ll be effortlessly in-sync with your internal bliss.”

Unfortunately, this causes traders to embark on a never-ending search for the system that fits just right; their own little “Holy Grail” of trading.  And thanks to all the financial news and aggressive Wall Street marketing, there will always be an endless supply of trading systems with greener-looking grass just around the corner.

But isn’t there some validity to this advice?  Isn’t it extremely important for the trader to find the right system that fits their lifestyle and their personality?

Absolutely.  But chances are, you’ve already found it.

Sure, you don’t want to blindly jump into some unproven and over-hyped trading strategy that you stumbled upon when surfing the Internet or browsing a magazine.  A little common sense and a lot of thorough research is a must before committing yourself to a trading system.

However, if you’ve been seriously following the markets for any longer than a year or so, chances are high that you’ve looked into a few different strategies and found the one you’re most comfortable with.  At the very least, you’ve found the overall trading philosophy that is most appealing to you.

You won’t hear many “gurus” tell you what I’m telling you, which is to stop trying new systems.

The reason you don’t hear this is obvious.  Like many other traders, I offer a newsletter that adheres to a specific system (the “Darvas System,” in my case).  If you’ve stumbled onto this article, you may in fact be open to trying a new trading system.  Yet, here I am telling you that trying a new system – even if it’s MY system – is highly unlikely to solve the trading problems you’re dealing with!

Regardless of this fact, I think it’s hugely important to acknowledge this problem among traders.

To sum it up: If you’re not getting the trading results you want, the system you’re already trading is more than likely NOT the problem.  The problem is much more likely to be internal, which can’t be solved by changing your external strategy.

Sure, you want to be certain you’re trading a strategy that has been proven to work and not something being sold right next to the snake oil ads.  But once you’ve found a strategy you like and you know it works, stick with it.

Don’t blame the system when you should be blaming yourself.


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