V.17:7 (305-308): How Great Traders Go Bad by John A. Sarkett

How Great Traders Go Bad

As traders achieve success and higher levels of profitability, they become more at risk for failure. The problem? Their egos get in the way of their success. Here’s how to stay the course. Like a pilot, a police officer, or a trapeze artist, a professional trader knows he must follow the rules just to stay alive. Usually, this thought is enough to focus the mind. But occasionally, the realization is lost. Mistakes follow. Losses mount. An otherwise great trader succumbs. A great trader goes bad. How to avoid that tragic circumstance was the subject of a recent Futures Industry Association (FIA) presentation in Chicago by professional trader and trading coach Ray Kelly. “Large traders trade more zeroes than small traders, but the process is the same,” he opined. “The catalyst for destruction,” Kelly says, “is most often ego.” Ego is the Ebola virus to the active trader. There is an antidote, however: humility. At the onset of paralyzing ego, humility must be administered at once, or results can be fatal. It is even more effective if administered in advance, not unlike a vaccine. Can you or I become infected? Of course. What can be done to protect against ego and its devastating effects? Kelly suggests paying close attention to the following four areas: self-knowledge, market knowledge, trading strategy, and risk management. Answer the hard questions for yourself before the market does it for you. Like meditation or exercise, attention must be paid each day for maximum effectiveness.