make knowledge your trading edge

At the heart of every trader’s endeavor is the struggle to turn knowledge into

success. There is a learning phase where understanding about the nature

of the markets and the way to go about trading develops.

But after this phase and perhaps several years of experience, you see

that many traders struggle to attain a level of profitability.

Is this because they’ve not learnt enough? Is it because they’ve got too many distractions in their life? Or is it because they’re just not cut out for trading? Any of these might apply.

However, in many cases none of them apply. Yet there is still a disconnect

between knowledge and performance. But trading is certainly not the sole

source of frustration in people’s lives.

Diet, exercise, smoking, drinking and many other things which are far

simpler than trading, end up being lifelong struggles for many. This is

what makes the subject so fascinating.

A tremendous amount of frustration stems from the fact that although

there are numerous facets to organize in order to give yourself the very best

opportunity to capitalize each time your edge shows up, each one is

relatively simple.

Of course an argument can be made on the relative degree of complexity

requisite for the mastery of each part of the process. However, many still fail

at even the most basic level. Not through ineptitude – it’s due to the

process breaking down.

It’s no coincidence that Van Tharp has the “Planning Trader” as one of the two types of trader with the highest

potential for success. Effective organization allows you to get to the

end of the loop and start again.

A large part of the problem is that the when things go wrong, it is far easier

to fall back into a natural state of being than to persist with what you are

currently doing –

and if the natural state is unproductive, subsequent success is

obviously going to be made more difficult. So the question is one of how

to change what comes naturally.

If you notice where belief is in the process, you’ll see that it’s right at the very end. This is perhaps why so many

fail to really get going with their trading in the first place.

It is belief which allows desire and commitment to take an iron grip on

the rest of the process – without these, there’s a greater chance the rest

of the process will break down and a trader will struggle to achieve the

consistent results they desire.

What I mean by belief is the confidence in your own ability to execute and in the power of your strategies. Genuine belief is only

generated by the observation of your own results over time.

Of course it can be of benefit to back-test and this will create a certain type of confidence – but true belief is built from experience. It is built over time.

It is added to and as importantly, it is also taken away from. This is why it’s so important to have each part of the

process loop well organized and functioning correctly.

Belief allows you to act in a certain way in the face of uncertainty on that very hard, right edge. It allows you to accept the possibility of a loss and to humbly take one when it comes your

way.

It gives you the dogged tenacity to embrace your trading plan more than

ever when you make costly errors, instead of abandoning the very foundations from which you are striving to achieve your success.

Belief generates consistent action and this is vital in changing your natural state. By acting consistently we are

able to form habits. Some habits are strong and some are weak, but over

time, they can get stronger.

If you tend to the process loop well, you can create strong and valuable habits. If you leave it to chance, you

may find that your habits hinder your progress.

In essence, we are but a sum of our habits. As we live we form new ones and together with those which we

have already developed, our actions are largely orchestrated without the need to consciously make decisions.

Trading is a profession where many habits which serve people well in

broader society, can be problematic.

Changing these and creating new and useful habits boils down to keen

organization, the development of belief through process and repetition over time. Of course there are many

other cogs to the machine,

but if you adhere to this outline, you will find that you will be able to more consistently do the things which you already know to be helpful – and in time, you will turn your knowledge

into trading success.