There are many traps for traders. The first is that trading is not a gimmie. For some reason that I have no idea how to explain, people think making money by trading is a cinch.
There are obstacles to overcome, and below are some recent blog excerpts on related topics.
From John Kay at johnkay.com
"Irrationality lies not in failing to conform to some
preconceived notion of how we should behave, but in persisting with a
course of action that does not work."
When it doesn't work, it doesn't work. Accept that fact and move on.
There's some very good advice offered by David at CrosshairsTrader.
I suggest reading the original for all the details.
Here's one sample:
"Do the hardest work first. The greatest performers in
any field delay instant gratification in pursuit of their ultimate goal,
which is to be the best they can be while pushing through less than
comfortable situations. For me, the hardest work is determining a loss
target. I firmly believe that the very best traders determine where a
loss is to be taken before determining where money can be made. It is
difficult to consider how much you are willing to lose before you
consider the instant gratification of adding to your bank account. But
it has to be so. Accept a loss and delay the gratification of instant
money for the reward of a lifetime of income."
Here is an example of simplified Mark Cuban advice, from his blog maverick. It's a repeat of what he has said before, but it's so important that I want to help spread the word.
"Now that Madoff is in jail, no investment can offer returns with zero
risk. If you don’t fully understand the risks of an investment you are
contemplating, it’s ok to do nothing. In times of massive uncertainty like we are facing today, doing nothing is a valid and IMHO preferable investment strategy. Just put your money in the bank."
Carl, at behavior gap discussed Things You Can Control
is a huge problem when it comes to making investment decisions. In
fact, it’s a huge problem when we’re dealing with any issue that has an
unknown outcome. It’s clear that we’re very bad at dealing with unknown
outcomes, but the biggest problem is that we actually think we’re good
We think that we can control much more than we can, and we can
actually forecast the future. Often we point to what we view as clear
evidence and wonder how anyone who doesn’t see it the same way can be
so stupid. Focusing on the things that matter and the things we can
control will go a long way to avoiding investor overconfidence."