If the psychology of the trader ultimately determines the choice of trading method and money management technique, it should now become clear that psychology plays a crucial role in trading. Since no method is guaranteed to work, your choice of method is a function of your belief in which one will outperform the others. Therefore, you ultimately determine the success or failure of your trading, and not necessarily the trading method.

Cunning, savvy and a host of other traits will be helpful in trading, but all these abilities pale in comparison to your entire psychological profile. Many people believe the only key to success in trading is intelligence and finding the right trading method. There are many extremely intelligent people who have devised excellent trading methods, but have never made, or have even lost substantial sums of money trading. Trading is not simply an intellectual exercise, but a total mental and physical involvement in a complex and extremely challenging high stakes game. Trading will test your emotions, stamina, feelings about yourself, and many other things-in essence, it will provide you with an excellent and thorough evaluation of yourself.

We have looked at the intellectual and philosophical part of psychology. What about emotion? Let's say you have found a method which is intellectually and philosophically compatible with you. You must now deal with the most difficult part of trading-the emotional aspect. ,

Assume you are trading a method which is long the market. You are initially excited and optimistic about the prospect of making money and winning at this game. However, the market begins selling off and then takes a sharp break turning your profitable position into a breakeven. Should you get out, or stay in and endure this temporary setback? The market rallies slightly, but then spirals down­ward with lightning speed, turning your profit to a loss. Your hands begin to sweat, there is a pain in your stomach, and you become lightheaded.

You freeze and refrain from selling at the market, hoping the market will bounce back even though your method has provided a sell signal. You are scared-your emotional side is now in control. The market rallies again and a glimmer of hope surfaces anew. But the resurgence of optimism is misplaced as the market renews its free fall plunging to new lows. You are now weak and have lost all desire to trade or hope in salvaging the position. You are now thinking, "Get me out I don't want to play anymore"! Your optimism has turned to apathy as you exit the trade.

Once intrepid, you now cringe with fear. You finally realize the need to rely on your primal instincts for survival. You have experienced the emotional battlefield of trading and you are now terrified. It is a frightening but vivid picture of yourself. You are scarred but have survived-congratulations and welcome to the world of trading!

All those intellectual exercises and philosophical discussions are thrown out the window. Your method told you to get out a long time ago, but you waited, and now it is too late. Maybe emotion does affect a person's trading success!

Your psychological makeup-emotions, philosophy, and intelligence will ultimately determine how successful you are in trading. The search for the great trading method that always works should now be over with-it is within you. Does this mean that you can trade any method and be successful? Of course not. There are many terrible trading methods which will not make money, and it is quite difficult to develop a reasonably profitable trading method. But, there are some trading methods which do make money, and yet, many people cannot trade them because they do not believe in them. It is not enough to develop a trading method which works-you must develop one you are compatible with and believe works. This is much harder, but necessary, for successful trading. You must develop a successful trading method, but you must also believe in and live with the method you develop which is just as difficult if not harder.