The main reason why even the most knowledgeable investors, who know how to identify patterns and read the market, don’t rake in consistent profits:
Inability to transform their understanding of how the market ticks into consistent actions.
There’s a huge difference between seeing a pricing chart and saying “Hey, the market will go up (or down)”…
And actually acting on that insight.
Without acting and turning your knowledge into trades — it doesn’t matter if you or your investing system are right and the expected scenario actually happens.
You won’t make money either way.
There’s one phenomenon responsible for causing such inaction and loss of profits…
Mark Douglas dubbed it the: Psychological Gap
Filling this Gap is critical for achieving long-term success.
Yet even though it sounds painstakingly simple to do so, in reality this is one of the most difficult challenges for investors.
And certainly the most mysterious one because the whole process happens in your head only.
Today, I’ll try to give you the tools to bridge said Gap.
A tall order, I know.
But if I at least get you thinking about actively working on closing the Psychological Gap, you’ll already be ahead of most investors who don’t realize it’s a thing. Yet are failing because of it.
With that said, let’s get into it.
Anyone Can Become A Successful Trader, But Only A Few People Do. Here’s Why
No, the few consistent winners don’t possess superior intelligence.
Nor do they work harder or are top analysts with better investing systems.
Nor do they have personality characteristics that make them immune to the inherent pressure of trading.
Of course, the above holds true for some consistent winners. But it’s definitely not the norm.
For example, most investing failures are society’s brightest and most successful people…
Like CEOs, doctors, lawyers, entrepreneurs, wealthy retirees, etc. Not to mention that some of the best analysts in the world are also the worst traders.
So, no, the biggest differentiator isn’t among these most common “culprits.” It’s actually something far less profound than you’d expect:
Successful traders think differently than the rest of the herd.
In other words, they’ve built a mindset with a unique set of attitudes. Ones that ensure they remain disciplined, focused, and confident no matter how adverse market conditions get.
Consequently, successful traders become immune to the common fears and trading mistakes holding everyone else back.
But this kind of mindset transformation doesn’t happen overnight. And it usually comes after a great deal of (both emotional and financial) pain.
However, there are ways to minimize, or perhaps even completely eliminate, this pain.
The Least Bumpy Path To Building A Market-Beating Mindset
The crux of any approach that leads to long-term success in the stock market is the same:
Build the necessary knowledge and mental skills.
But, as I’ve said, the trial & error path is ridden with financial and emotional pain. Which has led many an investor back into the hands of the financial establishment and to “safe,” but low returns.
The best way to avoid such a scenario is to get proper guidance. By someone who not just understands the nature of trading and has been successful at it…
But can also teach it.
Now, I realize how self-serving this sounds given that at Share Wealth Systems I offer mentorship services.
But notice there’s no link to said services or any sort of hard sell here.
You don’t have to mentor under me. But understanding the role and importance of mentorship in charting the course to long-term profitability in the stock market can save you from a world of hurt.
And this doesn’t only apply to the stock market.
Think of all the most successful people in the world (athletes, business people, traders etc.) and I guarantee most of them (if not all) have had some form of mentoring along the way.
But mentoring or not, it’s crucial to break the mental contradictions that make it so hard to become a consistently profitable investor.
The biggest of which is a paradox that’s responsible for way too many financial disasters:
Perspective, attitudes, and principles that bring success in our daily lives tend to have the completely opposite effect on your stock market efforts.
In other words, they just don’t work.
If you don’t internalize this fact, you don’t understand what it means to be a trader. Or what skills you should develop and to which depth.
This lack of understanding is where the “Psychological Gap” stems from. And it’s best seen in one of the most important aspects of investing…
Managing risk.
TRULY Embracing Risk Is The Key To Succeeding In The Stock Market
Investing is inherently risky. So, simply taking on a trade makes you a risk-taker, right?
Well, not really. At least not to the full extent.
Sure, each trade carries risk because the outcomes are never guaranteed – they are probable. But that doesn’t mean you’re also accepting that risk.
True acceptance comes only from understanding the possible consequences and coming to peace with them.
In other words, you know the exact probability for your trade to be a success… or a failure…
And have come to terms with both events unfolding while having the next action ready.
From this acceptance and planning comes tranquillity…
And the confidence to make a trade without hesitation or conflict. And to accept a losing trades and back out of them – with zero emotional discomfort.
In other words, you’re accepting investing is a probabilities game.
And are doing your best to put said probability on your side.
This in turn eliminates the fears of being wrong, losing out, and leaving money on the table.
And ensures you execute your plans & strategy with confidence.
In a nutshell, trying to avoid risk and emotional pain will lead to failure.
But embracing them will lead to success.
When you learn the trading skill of risk acceptance, the market can’t produce information that you interpret as painful.
And when the info the market generates can’t hurt you – there’s nothing to avoid.
It’s just info that tells you what kind of possibilities you’re dealing with and signals your next action.
Why Traders Never Pinpoint The Reason For Failing To Its Actual Cause – Faulty Attitudes
Well, it’s simply much more natural to see the source of the problem as external than internal. It’s simple human nature.
Nobody likes to be wrong.
So placing the blame elsewhere exonerates us, and we search for external reasons as to why a trade went against us…
Which in turn makes it feel like the market is causing us pain, frustration, and dissatisfaction…
When in fact we’re doing it to ourselves.
The truth is 95% of your trading errors come as a consequence of your attitudes about being wrong, losing money, missing out, and leaving money on the table.
If you let these four primal fears guide you – you will fail.
But if you develop attitudes that let you enter & exit trades based on what the market is telling you from its perspective…
Your chances of long-term success skyrocket.
Yes, I realize how abstract all these concepts sound. And that’s precisely why most traders never bother with them.
Yet building the right beliefs, attitudes, and perceptions is as crucial to profitable investing as a good serve is to tennis, or a good swing to golf.
You just can’t succeed without them. Not in the long run.
The Choice That Will Define Your Investing Career And Profits
From this point on, there are two paths you can take.
The first one is that of a “market analyst.” Meaning you try to eliminate risk by learning about as many market variables as possible.
The alternative is you learn how to redefine your investing approach & mindset by accepting risk. And no longer let fear guide your actions.
It’s clear I’m in favour of the latter. The former is, IMO and IME, the ultimate road to frustration…
And it won’t solve the investing problems caused by a lack of confidence or discipline.
I’m not saying you should disregard market analysis completely. You need it to define and recognize opportunities.
But don’t make it your guiding beacon. Do so, and the Psychological Gap will widen continuously.
Instead, go down the less-travelled route. And learn how to build a mindset that lets you trade without fear while following a pre-defined plan that never allows you to get reckless.
It will be worth it in the long run. Both financially and emotionally.
To your success,
The Peaceful Investor
