The Single Most Important Lesson of Successful Trading One of the most important books on trading is Van Tharp's aptly named Trade Your Way to Financial Freedom. It is chock-full of psychological insights and lessons for would-be traders. Tharp gives equal weight to the work of philosopher Karl Popper, the psychologists Daniel Kahneman and Amos Tversky, and leading trading system programmers. But his most crucial insight comes down to this... There are probably hundreds of thousands of trading systems that work. But most people, when given such a system, will not follow it. Why not? Because it doesn't fit them. One of the secrets of successful trading is finding a trading system that fits you.
It turns out that an investment philosophy is much like a life philosophy. Each of us has to develop our own trading philosophy. It must be molded carefully to fit our personalities. I like to think of different approaches to trading as competing styles in martial arts. In martial arts, there are different schools of fighting, such as boxing, karate and jiujitsu. Each martial art has a unique philosophy. A karate black belt fights his opponents differently than Muhammad Ali did in the boxing ring. Trading also has its different schools: fundamental analysis, technical analysis, value investing, growth investing... even options or futures trading. Trend followers surf the waves of long, sustained trends across dozens of different markets. Value investors look for cheap stocks and out-of-favor sectors. Activist investors prod company management to maximize shareholder gains. Yet each discipline has the same objective. In martial arts, the objective is to defeat your opponent. In trading, it's to make money. How to Find Your Holy Grail Investors spend decades searching in vain for the single "holy grail" - a system or philosophy that unlocks the secret of the financial markets. Here's the irony... You won't find your holy grail of investing by imitating Warren Buffett or George Soros. Instead, you'll find it by studying many approaches. The most crucial step in finding your holy grail is deciding what you want to trade and how you want to trade it. If you prefer the nonstop action of the markets, learn to day trade. After all, the financial markets are the best live "video game" available. If, like Warren Buffett, you prefer a life of "lethargy bordering on sloth," invest in value stocks. If you are fascinated by high-risk story stocks like Silicon Valley venture capitalists, focus on technology and biotech. In short, find a trading philosophy that suits you. Just as there's more than one way to defeat your opponent in martial arts, there's more than one way to make money in the markets. But it's only by understanding different trading styles that you can choose a philosophy that suits you. The investment styles of Buffett and Soros could not be more different. Yet both figures are among the most successful investors in history. And therein lies a valuable lesson... Like all the world's great traders, you must develop your unique trading style. To "trade your way to financial freedom," you must find your own holy grail. Good investing, Nicholas | 
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