Sunday, 28 August 2016

Fragile Trader, Anti-Fragile Trader

By Steve Burns

Reading Nicholas Taleb’s book Anti-Fragile really got me thinking about how traders are broken. (This may actually be my favorite book out of over a thousand I have read in my life.)

Traders can become fragile and be broken in several ways:

  1. They can quit because they believe that trading successfully is impossible.
  2. They can lose half their account or all of their account and just give up.
  3. They can become emotionally traumatized by one huge loss or a string of losses and just not be able to trade any more due to the psychological pain of trying to have faith in their trading or methodology again. This is mental ruin.
  4. A trader can lose faith in their self as a trader.
  5. A trader can lose faith in their system.
  6. A trader can trade too big and blow up their account, they want to trade and they believe they can make it back but have no money. left to trade with. This is financial ruin.

A trader can become anti-fragile and can even benefit from adversity at times by:

  1. They have 100% confidence that they will be in the 10% of consistently winning traders, it is just a matter of time.
  2. They do not give up after losing the majority of their very first account they just accept it as paying tuition and start again this time with faith they will win after much homework.
  3. The anti-fragile trader trades small, their emotions do not bleed into their trades, each trade is just 1 of the next 100. They risk 1% of total trading capital per trade. No one trade makes them fragile they separate their risk over a long period of time and individual trades.
  4. The successful trader identifies themselves as a successful trader, losing trades do not change who they are.
  5. The trader believes that time is on their side and draw downs are just temporary, short term losses do not change the trader’s belief in long term success.
  6. Successful traders know that their trading account is their life blood, guarding it against big losses is their #1 priority.
  7. They truly believe that only time separates them from their goals as a trader because they are willing to do the home work and persevere until successful.

Fragile traders are inevitably broken due to ego, laziness, ignorance, or arrogance. Anti-fragile traders are not only not broken but benefit from circumstances by learning, growing, and becoming more resolved to win. Adversity makes them stronger.
www.newtraderu.com

Quote for the day

"Continuous effort - not strength or intelligence - is the key to unlocking our potential." - Winston Churchill