Archives of “January 2019” month

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Is Your Self-Esteem Tied To Your Account Equity?

  
  Education
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Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with you’re trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.  When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state.  And our internal state has a lot to do with how well we trade.

Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.

Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory.  A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.

Avoid EGO in Trading

  
  Education
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“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
“At other times in the past, investors lost a good profit by holding on too long, trying to get a long-term capital gain. Some investors, even erroneously, convince themselves they can’t sell
because of taxes—strong ego, weak judgment.”
“When did you turn from a loser to a winner?When I was able to separate my ego needs from making money. When I was able to accept being wrong.Before, admitting I was wrong was more upsetting than losing the money.”
“Most traders who fail have large egos and can’t admit that they are wrong.”
“Clearly, flexibility and suppression of ego are key elements of Gelber’s success.”
“Actually, the best traders have no ego. To be a great trader, you have to have a big enough ego only in the sense that you have confidence in yourself.”
Ego can also stop you from being profitable as a trader. Maybe you only like to short because you think this economny is going to H____ and the market rallies for a month and the whole time you try shorting it when you should be buying the pullbacks. In this scenario, the stongly held belief system is affecting the traders ability to see what is really going on and costs either being stopped out, or only making a small profit and missing the big moves etc.
So, the more we can become egoless, flexible in our mind and not have a preconceived direction the market is going in, the better we will be as a trader.  (more…)

The Greatest Investment Book Ever Written

  
  Education
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No, I’m not talking about Security Analysis or Intelligent Investor by Benjamin Graham or even Greenblatt’s You Can Be a Stock Market Genius.  I’m talking about Doyle Brunson’s Super System: A Course in Power Poker.  
OK, so the title of this post is a bit of an exaggeration and yes, there are probably tons of better poker books out there now post-extended-poker-boom.  The first edition of this book was published in 1978.  The connection between poker and trading is nothing new.  Just google “poker and trading” and there’s a lot of stuff out there; how poker guys started hedge funds, how a hedge fund guy became a poker guy, how they are similar/different, what can be learned from one or the other etc.   And the connection between gambling and trading was well documented in Fortune’s Formula.
But I just wanted to make a post about this book because I’m starting to reread it again (don’t ask).  I am not a poker player, but I remember reading this book a few years ago having borrowed it from a poker-playing friend.  Knowing that many traders and investors are very good poker players, I wanted to see what I can learn from reading about poker. 
I remember falling out of my chair at the similiarites between poker and investing.  I come from more of a trading background than an investing one and what was written in this book, particularly the early chapter “General Poker Strategy”,  has great advice that applies to traders and investors too.   I would make that chapter required reading along with the other investment “must reads”.
Anyway, here are some comments about what Brunson talks about in this chapter by sections.  I only comment on some of the stuff so this isn’t a summary of the chapter by any means.  (more…)

Trading Wisdom

  
  Education
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WISDOMDo more of what is working for you, and less of what’s not. Each day, look at the various positions you are holding, and try to add to the trade that has the most profit while subtracting from that trade that is either unprofitable or is showing the smallest profit. This is the basis of the old adage, “let your profits run.”

Don’t trade until the technicals and the fundamentals both agree. This rule makes pure technicians cringe. I don’t care! I will not trade until I am sure that the simple technical rules I follow, and my fundamental analyses, are running in tandem. Then I can act with authority, and with certainty, and patiently sit tight.

When sharp losses in equity are experienced, take time off. Close all trades and stop trading for several days. The mind can play games with itself following sharp, quick losses. The urge “to get the money back” is extreme, and should not be given in to.

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