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Forget Being Perfect and Be Profitable
05/15/2014 6:00 am EST
Frank Kollar of FibTimer.com explains why being a perfectionist may work in most careers, but it won't help in trading.
Perfectionism may help some people succeed in many other careers. It is often the difference between success and failure. We have all been brought up knowing that we must strive to be all that we can be, and to put everything into achieving our goals.
But perfectionism can be fatal in market timing (and all trading). Ironically, it leads neither to higher performance nor greater happiness. Anyone who approaches the financial markets with the intention of winning on every trade, or even on most trades, is in for a huge surprise.
Perfectionism can destroy your enjoyment of market timing. The perfectionist needs to be a winner in all or most of his or her trades. A losing trade may escalate to a panic-like state. It can even cause you to miss buy and sell signals out of fear for the results.
The drive to be perfect becomes self-defeating, as the individual often places the intense pressure on himself, which can become crippling.
Fear of Failure
Probably the biggest obstacle to overcome as a market timer is the fear of failure.
If you have a perfectionist mentality when market timing, you are really setting yourself up for failure, because it is a given that you will experience losses along the way.
If you cannot take a loss when it is small, because of the need to be perfect, then the loss will often grow to a much larger loss, causing further pain for the perfectionist market timer. Holding on to a losing position in hopes that it will return to break even is a surefire path to losses.
Trying to Control Uncontrollable Factors
Perfectionism causes timers to attempt to control uncontrollable factors in a trade. Examples are waiting for all the risk to be out and everything to look "perfect;" hoping or "willing" a better outcome by doubling down on a loser; cashing in on a profitable trade too quickly to be able to assure a gain; and many more.
When a market timer focuses on such uncontrollable issues, he or she is more likely to tighten up and not be able to pull the trigger when a new buy or sell signal is generated.
And remember, most buy and sell signals are generated when the prevailing sentiment is the opposite of the signal. That makes them harder to follow, but follow them you must if you wish to succeed.
Profits Are Achieved Over Time
We must remember that when timing the markets, it is the total gain achieved over a period of time that makes you a winner, and not any single trade. In fact, if losing on a trade is something that will cause you to second guess your next trade, you are very likely to lose money over time.
Perfectionism will eventually cause you to second guess and skip trades. It will grow into a fear that will hinder your ability to profit.
The only way to conquer fears and control the emotions of fear and greed that make most traders lose in the financial markets is to follow an unemotional timing strategy. Unemotional strategies that follow trends will never miss any sustained trend. This is why committing to a tried-and-true timing strategy is the only way to win in the financial markets.
When following a strategy, you are not swayed by fear or greed. You cannot be moved by perfectionist tendencies. The strategy makes the decisions; emotions are avoided. But you must commit in order to succeed. Bypassing one's ego and committing is tough to do, but in doing so, you can beat the market and profit.
By Frank Kollar of FibTimer.com