The only three things that are important are discipline, persistence and psychology [my emphasis]. Without those three things there isn’t a strategy in the world that will work for you. With those three things, just about any strategy will work.
– James Altucher

Discipline: Self-control. The ability to be able to withstand setbacks without losing confidence.

Persistence: The ability to stick with a good idea even when you take a loss. It doesn’t mean you stick with a wrong opinion or a bad system. It means that as long as your methodology has a positive expectancy you stay with it while making adjustments when needed.

Psychology: In Van Tharp’s original book, Trade Your Way to Financial Freedom, he said that psychology contributes about 60% to success, position sizing contributes 30% and system development contributes 10%.

In Super Trader, a book written almost twenty years later, he somewhat changed his mind about his original conclusions. He now thinks that trading psychology accounts for 100% of success. He believes that for two reasons: “First, people are generally programmed to do everything the wrong way. They have internal biases that lead them to do the exact opposite of what is required for success.”

Second, he says, “every task I model requires that I find the beliefs, mental states, and mental strategies that are involved. All three ingredients are purely psychological, and so it’s hard not to conclude that everything is psychological.”

If you get the psychology right, discipline and persistence will take take of themselves. So we should spend most of our time working on the “you” in trading and investing, not a particular strategy. I suggest you read the book Super Trader by Dr. Van Tharp for more information on how to do that.

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