Would you say that trading success is more attributable to trading techniques or psychology?
The answer is both, but the point where the two intersect is risk management. A huge percentage of trading success or failure can be laid at the doorstep of risk management. Although it is only one of the pillars of success. You do need good psychology and trading techniques, but for me it is the most important element.
A book on risk management quoted by specialist trader psychologist Brett Steenburger observed that across different traders and trading firms, 90% of all profits were attributable to 10% of all trades. This is an astonishing discovery.
My own system only produces winners about 50% of the time, but the majority of the big profits comes from the few really big hitters, the +30% winners that come along every month or two.
So while professional traders and novices would like to think of themselves as making money on a majority of their trades, the reality for most frequent traders is that a minority of trades are winners and by year end it is the few large winners that produce most of the favourable results on the profit/loss statement (P/L). So it really doesn’t matter how many times you are right versus wrong, the only thing that matters is how you control your risk. Get this right and you are putting the odds of success very much in your favour.
May today be a profitable day…for all of us.