Trading is 80% psychology and 20% strategy

Trading is 80% psychology and 20% strategy. Ask yourself these questions:

  • Do I have too much ego to admit that I’m wrong or I don’t know the answer, a hundred times a day? Many high IQs think they always know better.
  • Do I have the emotional stability to base my trading decisions on the market, rather than my own greed or fear? Many high IQs aren’t prepared to fail.
  • Do I have the consistency to follow my process, even if it seems old and unexciting? Many high IQs are energized only by newer, bigger ideas.
  • Do I have the drive to develop new ideas and poke holes through old ones every day, all day? Many high IQs are better at learning than inventing.
  • Do I have the self-reliance to ignore the crowds and find my own voice in the marketplace? Many high IQs fit better in professionalized groups.
  • Do I have the initiative to be in charge, start to finish? Many high IQs are best when focused on one particular piece of the whole.
  • Do I have the real-world sensibility to implement the trading strategy in real-time? Many high IQs prefer perfecting theory to executing in practice.

A high IQ is a great tool. But trading is not a math problem. Trading is a real-world action demanding split-second decision-making despite partial knowledge and intense emotional pressures. Trading is an arena in which your mistakes will hurt your chances of success far more than your greatest traits and even triumphs. Trading is an entrepreneurial venture dependent more on a gritty psychology, animated by an implicit feel for context, than good grades and differential equations.

A powerful engine and perfectly-tuned suspension are great, but a driver with experience and a good head on his shoulders matters a lot more.

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