As soon as you begin creating your rules you will find contradictions occur, and plenty of reasons to scrap what you have developed. But one of the things many find hard to accept is that the nebulous trading environment never really allows for a resolution of arguments or rules. Sometimes knowing the outcome, no matter how bad, is better than being kept in suspense and not knowing at all.

Most traders want a simple means to consistently make money. They want to resolve the mysteries of the market, but what they are really asking is to consistently understand human behavior. This is much harder than it might seem. The stock market crash of 1987 provides an example. The fundamentals of the economy had not materially changed before, during, or after the market crashed. The only thing which changed was peoples' perception about the fundamentals. Fundamentals will ultimately affect the prospects of a market, but investors' reactions to the perceived fundamentals or reality is what drives the price of the market.

A lot of our frustration in life does not always result simply from failure or disappointment. Our frustration is often due to uncertainty or not knowing what the outcome will be, which brings about the agonizing worry and waiting we dread. In essence, it is part of human nature to seek resolution, and in fact many religions and philosophies are based on the resolution of what we believe to be unanswerable questions. Trading seldom answers but more often creates questions. Which is the better technical study? What is properly diversified? These questions are but a few which are integral to trading and have no clear answers.

 

DISTINGUISH BETWEEN CHANGING MARKETS AND CHANGING STRATEGIES

Some people have a fear of success, or possess destructive personalities which may impede their success and not allow them to make money. However, the vast majority of traders want to succeed and be profitable. Many traders make money and then lose it, not because they don't really want to succeed, but because they rely on methods which worked in the past but no longer work now. In other words, the trader has not changed but the market did; so the trader is left confused as to the next course of action.

Other times traders do consciously try to change successful methods, because they believe the market will change and the method will no longer be valid. It is very easy to say, "stick with your trading style because it has worked in the past and you know it makes money." The problem is you do not know if the method will continue making money, and it is natural to assume that the results might change. We live in a world of constant change, and find it easy to rationalize the markets will change too.