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The Red Badge Of Courage, Financial Markets are No Place for Bravery

InvestorEducation / Trader Psychology Oct 19, 2009 - 01:00 PM GMT

By: Charles_Maley

InvestorEducation

If you lose hope, somehow you lose the vitality that keeps life moving, you lose that courage to be, that quality that helps you go on in spite of it all. And so today I still have a dream - MARTIN LUTHER KING JR.

Roy Longstreet, legendary commodity speculator once said, “To trade successfully, one needs two things: Knowledge and Courage. The knowledge you can learn or buy. Courage cannot be learned or bought. You either have it or you don’t. But you cannot succeed without it.”


Most traders associate courage with the ability to put trades on and at times add to the position. They think it’s the ability to stay with the winners until they are geometric multiples of the losses. This does take courage, but I think there is some confusion that courage is an offensive trait, when in fact it is both offensive and defensive. What about the kind of courage it takes to quit when you’re wrong, and take the loss? The ability to “stand there and take it” like some tough guy might work in boxing, but it is counterproductive in the trading game.

What about the courage to “keep on keeping on” when things look dismal? This is where you build character and get strong. When you look fear in the face and still do the thing you didn’t think you could do. Confucius once said, “To know what is right and not to do it is the worst cowardice.”

Roy goes on to say, “The great danger is in confusing courage with bravery. The market is no place for heroics. That is for another battlefield. In the market place it often takes more courage to live than it does to die. The greatest courage is the one that lets you graciously admit that you are wrong when you no longer have a good reason to trade. The courage associated with the hero often destroys the courage that is needed to be successful. I have witnessed cases where temporarily successful traders have lost their touch because they lost their courage. They exceeded their stress point too many times. They became uncertain of their judgments. They sell when they should buy. They reduce when they should add. It is a wise trader who knows his stress point.”  

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Charles Maley
www.viewpointsofacommoditytrader.com
Charles has been in the financial arena since 1980. Charles is a Partner of Angus Jackson Partners, Inc. where he is currently building a track record trading the concepts that has taken thirty years to learn. He uses multiple trading systems to trade over 65 markets with multiple risk management strategies. More importantly he manages the programs in the “Real World”, adjusting for the surprises of inevitable change and random events. Charles keeps a Blog on the concepts, observations, and intuitions that can help all traders become better traders.


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