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* Adapted from the original DST Trading Psychology manual by Todd Brown and The Trading Authority. *

Almost every successful trader has realized that success in the markets comes from INTERNAL CONTROL.

This is radical news for most people.  Internal control is not necessarily that difficult to achieve.  However, the challenging part for most people is to realize just how important it is, so that they do what is necessary to achieve it.

The reason why most traders do not succeed is that they do not realize that investment success requires internal control more than any other factor. This realization is the first step toward trading success. People who dedicate themselves to developing internal control are the ones who will ultimately succeed.

Let’s explore internal control from another perspective. Basically, there are three areas, all of which are key to successfully trading the markets:

• Psychology
• Money management / Position Sizing
• Trading Strategy Development

Many newbie traders emphasize system development and de-emphasize the other two topics.  They think that the more that they know about the technical indicators the more effectively they will apply them. Most follow in this frustrating, fruitless direction for years, moving from system to system and guru to guru, only to finally realize that their lack of internal control is what keeps leading them back down the same losing path.

If they are lucky, smart, or find the right teacher, traders who eventually become successful do so because they realize that psychology is the most important aspect of trading.  Professional traders who have made BILLIONS of dollars in the markets profess that it is ‘internal control, patience and how you deal with losses’ that separate winning from losing traders.

Ed Seykota, industry-recognized trader and lecturer, once taught a college course in trading that lasted ten weeks. He spent the first week of the class teaching basic information about trading. He then spent another week teaching the class Donchian’s 10-20 moving average crossover system.  However, he needed the remaining eight weeks of the class to convince the students to use the system that he had taught – to get them to work on themselves enough to accept the losses that it (or any other good trading system) would generate.

Dr. Van Tharp, author of ‘Trade Your Way to Financial Freedom’, has argued that trading is 100% psychology, and that psychology includes position sizing and system development. The reason is simple:  we are human beings, not robots. To perform any behavior we must process information through the brain.  Psychology is involved in both the design and the execution of a trading system.

As traders, you know how difficult it can be to maintain the internal control necessary to follow your trading plan through all kinds of markets and myriad personal life events.  Even if you are an experienced trader, you know that it is sometimes difficult to keep your emotions out of trading.

How many times have you missed trading opportunities because previous losses had made you feel unsure about whether you should take the next trading setup?

How many times have you anguished over the “right time” to enter the markets even though your rules supposedly outline it clearly?

If you sometimes struggle with the internal control necessary to follow your rules to the ‘t’, having a trading system with defined rules and little opportunity for discretion will be a key component to your trading success.

A trading system that decides for you when to get into a trade and when to get out takes the guesswork out of trading and saves time, energy, and effort.  It allows you to focus on maintaining the most important factor in trading:  internal control.

If you are interested in a system that does the thinking for you, check out the FOREX Model software at www.4xauthority.com