How do you go about understanding your trading outcomes? Do you feel that it is all about you, that personal factors, such as hard work, talent, or ability are primarily the reason? Or do you tend to believe that much of your success is the result of external forces, such as luck or fate? Perhaps you think it is a little of both. How you look at this issue may strongly influence how you feel about trading, and what steps you will take to gain mastery.

When one looks for personal reasons for success and failure, one tends to take full and complete responsibility for an outcome. For example, one may say, “I made a profit on the trade because I prepared properly, waited for the right signals, and traded my plan.” That’s an explanation based on internal, personal factors. After a winning trade, it’s easy and desirable to explain the outcome with internal factors.


We have a natural tendency to build ourselves up and enhance our ego when we win, so it makes us feel good when we do well and believe that it is due to our talents and skills. But what about a losing trade? When we lose, it’s also due to our talents and skills, but in this case, it may be a lack of talent and skills. Such a possibility is harder to accept. When faced with a defeat, most people suddenly switch from looking for internal forces to looking for external forces: “The market conditions changed too quickly. The market makers are manipulating the price again. I shouldn’t have taken the advice offered by that uninformed analyst. I was unlucky.” It’s easier to find an excuse than take full responsibility when faced with a loss.

It’s at these times when most of us tend to look at the world in a self-serving way, attributing our success to internal personal characteristics, but our failures to external situational causes. However, there are advantages to bucking our natural instincts and always taking full responsibility for both our triumphs and defeats: One gains a sense of power and complete control.

When people attribute life outcomes to internal forces, they are more satisfied and ready to take action. They believe they can overcome any possible setback. Rather than always looking for excuses and trying to place blame on situational factors, all energy is focused on increasing performance and developing new skills. Traders who don’t take full responsibility, in contrast, tend to devote the bulk of their psychological energy to defending themselves against their mistakes.

Rather than cultivating an accurate, objective view of the markets, they are easily biased because of an incessant need to protect their egos. An emphasis on external causes for setbacks makes one feel good in the short term, but it hinders performance in the long term. Over time, skills aren’t developed, and limited psychological energy is wasted on protecting one’s ego. It takes time and energy to find an external reason for failure. This time is better spent identifying one’s flaws and developing new skills to compensate for these deficits.

Taking full responsibility is difficult, especially after a losing trade. It’s hard to look at one’s faults and limitations. But in the long run, the payoff is greater than the temporary uneasiness one experiences while reviewing one’s limitations. In the end, if you look at your faults, acknowledge them, and take full responsibility, you’ll be gaining power and control. So take full responsibility and take control.

Comments are closed.