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The Market as a Mirror

  
  Education

The yogis say our true nature is joy.  When we’re laughing and truly having fun, perhaps that’s when we’re most being ourselves – and not the product of something else.

 It is easy to be jocular and personable when things are going well, but you get to see who you really are when things are going badly. The energy required to maintain interpersonal facade is redirected toward survival. The market is a very good mirror. And a very bad one.

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Who you really are is very much like a stock in Portfolio Theory. The good side is the rate of return, but most compare that with the additional information of the standard deviation of the returns.

Similarly a person should be measured along the same lines. The person who is happy go lucky most of the time but occasionally has bouts of violent anger is not as desirable a friend as one who is relatively constant but with lesser high points.

Each person responds differently to stimulus. And as with stocks it is the bad side that is most important. Someone who is in a funk for a long time has the risk of getting clinically depressed, with physiological damage to the synapses.

I always liked the saying that “not all great companies are great stocks”. Forgot who coined that one–maybe from the Livermore books that I have read. Meaning that the stock of the good company may not act or behave well for speculation. In general, it is interesting how stocks are given human qualities by specs.

Patience & Confidence

  
  Education
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The market, as much as anything in life, has a way of transforming us from cool, calm, collected individuals into irrational, impulsive, disoriented speculators. Clearly it’s in our best interest in terms of long-term profitability to spend the majority of our time in the former group rather than the latter.

Acknowledging when things aren’t going our way is the first step to becoming a more patient trader, but it’s having the patience to wait things out until we find a more harmonic rhythm that contributes immeasurably to our success.

It’s the losing positions that invariably do traders in. A number of the bigger losers many traders experience come as a result of not being patient and waiting on the right opportunity. Many of us tend to press when things aren’t working out, or we’ve just had a losing trade.

Traders can begin to play catch-up and go on an emotional tilt. It’s the paradox of trading in many ways. The same competitive drive we use to achieve our success has components that can hasten our failure.

When going through my daily checklist, I send out to members of my mentoring program, I always emphasize that the markets provide a multitude of chances to trade. One need not force action when the setups aren’t right. Traders who get into positions with “the best of it” or “an edge” significantly increase their chances for success in the long run.

Confidence comes from a number of sources and is developed through successful implementation of a strategy. It is also a byproduct of the unwavering belief that what you are doing will be successful. This is critical because, at the moment of truth, when you are in a position, self-doubt has a way of creeping in. It’s tempting to deviate from your plan at these times.

While I’m not suggesting that you be inflexible in your position management, I am saying that having belief in what you are doing goes a long way toward your success. In fact, it’s the confidence in your trading skill set that can give you the ability to make a decision to get out of a position, knowing that things aren’t working out. This conviction is a hallmark of great leaders and inspires others.

14 Emotions of Traders-Really Dangerous

  
  Education
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  1. Anger- Revenge trading
  2. Fear- Inability to take an entry or hold a winner in a trend.
  3. Disgust- Can lead to loss of a traders confidence.
  4. Happiness- Surprisingly can lead to trading too big and taking on too many positions.
  5. Sadness- Can lead to having difficulty taking the next trade entry or cutting a loss.
  6. Surprise- Can many times lead to making decisions based on emotions and abandoning a trading plan.
  7. Neutral- Trading is a lot of work and only passion and energy can move you toward doing the required homework that leads to eventual success.
  8. Anxiety- Can lead to exhaustion due to excessive stress.
  9. Love- If you truly love trading the markets then only time separates you from success. If you love the wrong things or people it can be destructive.
  10. Depression- Leads to abandoning your trading.
  11. Contempt- Having contempt for the markets or other traders will result in bias and bad decision making.
  12. Pride- Leads to trading too big, not cutting losses fast enough, and wanting to be right and prove something more than being a rational trader.
  13. Shame- Makes it difficult to talk to others about your trading and look at your account capital due to your bad decisions.
  14. Envy- Leads to external focus instead of the internal focus needed to trade successfully.
  15. Trading is only successful long term when it is done with the mind,  emotions are only valuable if they create the energy in you to get you where you truly want to be. Emotions are positive if they protect our psychological boundaries, not so great if they just support an out of control ego. Emotions are great tools at times but terrible masters.

Four things traders can try to get Success

  
  Education
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  1. pinnumber4Trust your gut If something looks like crap and smells like crap, then chances are, it is crap. Listen more to your gut to tell you when to cut a loss and move on.
  2. Keep it simple If something is working, keep doing it. There aren’t any bonus points for being clever. The money is the same color no matter how you make it. So do the simple things and chip away at the profits. I once had a client who felt he had to do complicated trades in order to make money. Bottom line was, he was wrong. Keeping it simple is the proven strategy for success.
  3. Probabilities don’t lie If you’re not carefully tracking the metrics on your trades, you might as well be gambling at a casino. Make it a point to track the data on your trades and study them. That way, you can do more of what’s working and less of what’s not.
  4. Avoid speculating and predicting I can’t begin to tell you how many times I see traders blow up their accounts because they try to speculate or predict what’s going to happen in the future. The simple fact is, no one knows. Even the best traders have a winning percentage of around 50 percent. That means successful trading is not about being right, it’s about what you do when you’re wrong. The bottom line is, trade what you see, not what you think.
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