There are several elements to the mental trap that traders get caught in when they first start trading that sets them on the wrong course, but one particular mistake is the one that makes for imminent account blow out, or at least a rather lengthy and painful journey in becoming a successful trader.
Fortunately, even though this situation is one that is difficult to foresee and very understandable that it happens, there is a straightforward and rather simple resolution to the problem.
The core of trading is certainly within the ability of most to grasp, however trading as an occupation does have a significant body of knowledge to absorb and specific skills that are required to trade profitably and with consistency. In addition to the fact that most traders are of smarter than average,this makes for a situation where the success rate should be much higher than it is.
As is with most professions with a significant body of knowledge, there is a progression to trading.
Here is an analogy to illustrate the problem. Let’s take mathematics.
Mathematics begins with the concept of numbers in general, quantifying items. Then one moves to addition, subtraction, multiplication and division. From there, one moves into algebra, geometry, and trigonometry. Once that base is developed, then one can comfortably move on to calculus, La Place Transforms, differential equations and other higher math.
If however, a person does not fully establish the prerequisites for calculus, such as algebra or trigonometry, the concepts in calculus may be understandable, but solving the problems will be a tremendous challenge, if not near impossible to solve. If one were to try to go directly from basic mathematics to differential equations, it would be a very long struggle indeed to become proficient at the higher level.
It has been documented in studies on the obstacles to learning that have found that there are specific physiological reactions when a person encounters this particular phenomenon - that of starting too high up in a learning gradient or missing foundational knowledge while trying to grasp concepts at a given level.
This is the fundamental mistake that many traders fall prey to, and they are generally not consciously aware of this particular situation and its impact. Many people begin active trading without the foundational knowledge to trade at the level where they become active. When this occurs, it presents a sizable obstacle to adequate learning within an efficient time frame. Subsequently, the trader often winds up taking a severe financial beating, sometimes losing all their capital before they have established a sufficient skill and knowledge base to trade proficiently.
The individuals are not to blame. This is a systemic problem which unfortunately most have to endure. There is no mandatory training or certification before a person is allowed to put themselves and their capital at real risk, so the high percentage that fail is largely the result of a lack of warning and preparation for what the business of trading involves.
The traders that are fortunate enough to seek out the proper guidance and help are the ones that can minimize the effects of this situation that is so prevalent in the trading world. If one can find a mentor that is aware of this particular obstacle and the others that are present in the development of a trader, then odds are greatly improved for a positive trading experience. Most however choose to go it alone or simply make it on sheer persistence alone, while learning the lessons of trading the hard way - through personal experience and numerous losses.
Instead of falling prey to this mistake as many do, you have the option to save yourself considerable time, losses and personal anguish. This begins with backing up so to speak and making sure that you’ve got the basics fully covered, and then moving forward with a focus on mastery and development.
This one factor can determine your destiny as a trader, so it is well worth heeding.
This article covers only one of the components of “The Subtle Trap of Trading”. To find out the rest of the story and pick up a free copy of the powerful report, ‘The Seven Traits of Winning Traders’, go to http://insideouttrading.com.
For more resources & insights into trader development, go to InsideOutTrading.com
To download your free copy of the powerful report ‘The Seven Traits of Winning Traders’, go to http://www.insideouttrading.com
- Brian McAboy
Highlights 
May 18th, 2008 