All of us are comfortable buying stocks when prices are high and rising and selling when they are declining, but we need to develop an attitude that encourages us to do the opposite. Because of the task of beating the market is not difficult, it is the job of beating ourselves that proves to be overwhelming. In this sense, " beating ourself" means mastering our emotions and attempting to think independently, as well as not being swayed by those around us.
Success based on an emotional response to market conditions is the result of chance, and chance does not help us attain consistent results. Objective is not easy to achieve because all humans are subject to the vagaries of fear, greed, pride of opinion, and all the other excitable states that prevent rational judgement.
The principal difference between considering an Investment or trading approach and actually entering the market is the commitment of money. When that occurs, objectivity falls by the wayside, emotion takes over, and losses amount. Adversity is to be welcomed because it teaches us much more than success. The world's best traders and investors know that to be successful they must also be humble. Markets have their own ways of seeking out human weaknesses.
Markets are a zero-sum game: For every item bought, one is sold. If some traders expect to profit, it follows that they must battle successfully against these some people with decades of experience. Therefore, is it reasonable to expect success in the investment game without thorough study and training? The reason many of us are unrealistic is that we have been brainwashed into thinking that trading and investing are easy and do not require much thought or attention.
Many legendary investment role models have likened trading and investing in the markets to other forms of business endeavor. As such, it should be treated as an enterprise that is slowly and steadily built up through hard work and careful planning and not as arapid road to easy riches.
People make investment decisions involving thousands of dollars on a whim or on a simple comment from a friend, associate, or broker. Yet, when choosing an item for the house, where far less money is at stake, the same people may reach a decision only after great deliberation and consideration. This fact, as much as any, suggests that market prices are determined more by emotion than reasoned judgement. You can help an emotionally disturbed person only if you yourself are relatively stable, and dealing with an emotionally driven market is no different. If you react to news in the same way as everyone eise, your are doomed to fall into the same traps, but if you can rise above the crowd, suppressing your own emotional instincts by following a carefully laid out investment plan, you are much more likely to succeed.