Profits are a function of time. By definition, any trade that is exited with a profit requires a certain element of time. The problem is that most people have a natural tendency to seek immediate gratification at the expense of long-term gratification. That is why most people lose money on Wall Street.
Think about a diet. Why do most people struggle to lose weight? The answer is human nature. Most people do not have the willpower, or ability, to,delay gratification (even if it is in their best interest). So, instead of going to the gym and experiencing short-term pain, most people sit on their couch and eat chocolate (enter the desert and snack of choice) and gain weight. The immediate gratification of eating chocolate is more powerful than an often immeasurable benefit of going to the gym and eating right. The same phenomenon plays out in all areas of life, especially on Wall Street.
Successful Investors Are Patient
I see this phenomenon manifest itself everyday in the stock market. In theory, what should matter most is the absolute return on investment, but unsuccessful clients are always looking for the holy grail and jump from strategy to strategy or portfolio manager to portfolio manager in search of immediate gratification. Years pass, and they are always behind.
On the other hand, successful investors are patient and understand profits are a function of time. They are able to exercise patience and win in the long term. That is why I interview everyone before taking on a new client and only accept business from people who are not looking to get rich quickly.
5 Steps To Becoming a Long-Term Success
1. Make Rational, Not Emotional, Decisions
-- Do you have a plan to enter and exit your trades? Or do you just wing it? If you have a plan, write down your rules, and make sure that you trade your plan. If you don't, or can't, follow your rules, hire someone who can.
2. Respect Risk
-- Wall Street is not going anywhere. If you risk too much, your emotions will take over, and you will likely go broke. Always know where you are going to exit before you enter and how much you are going to risk if wrong.,
3. Don't Judge Your Success One Trade at a Time
-- Losing money is part of trading. It happens to everyone. Once you learn to expect that will happen, you can plan for it and get past normal pitfalls, such as giving up on your system after a few losing trades.
4. Think like a winner
-- Remember that winning starts within. How you think is everything.,
5. Ask For Help
-- Making money on Wall Street is simple, but it is definitely not easy. Don't let your ego get in your way of making money. Most people have a hard time asking for help. That's just one reason why most people lose money on Wall Street. You don't have to go it alone. Find someone you trust and are comfortable with, and don't be afraid to ask for help.
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