REGRET: “Regret is toxic because it encourages you to look back and to focus your energies on the past, when you should be using your valuable time and energy to focus on the here and now in order to uncover trading opportunities”.
CONFIDENCE: “The best traders are successful because they are able to maintain unshakable confidence in themselves and in their decisions. This serene self-confidence creates a positive state of mind and the will to act”.
All I can say about the following is WOW, talk about THE perfect explanation for the reason behind unreasonable and illogical crowded moves in the stock market…
The most striking peculiarity presented by a psychological crowd is the following: Whoever be the individuals that compose it, however like or unlike be their mode of life, their occupations, their character, or their intelligence,the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind which makes them feel, think, and act in a manner quite different from that in which each individual of them would feel, think,and act were he in a state of isolation. There are certain ideas and feelings
which do not come into being, or do not transform themselves into acts except in the case of individuals forming a crowd. The psychological crowd is a provisional being formed of heterogeneous elements, which for a moment are combined, exactly as the cells which constitute a living body form by their reunion a new being which displays characteristics very different from those possessed by each of the cells singly.
…and it was written by a psychologist in 1896!
Rules that I can live by: my rules have to be rules that I stand a good chance of keeping, not the kind that I will follow for one day and then give up the next. I’m not the kind of trader that can follow rules mechanically, like if x happens 3 times then do y.
• Rules that I own: my rules must belong to me. They must be rules that I have adopted out of personal choice after careful thought to understand what exactly they mean to me, not out of a sense of having to follow the ’101 of trading’ or what someone else has told me. Why? Because if my rules do not feel like my rules, I will subconsciously reject them. I may do so anyway, as I have authority issues; but the more I can imbue my rules with a sense of having been chosen by me out of my own free will, the more likely it will be for my subconscious to embrace them.
• Rules that are integral to my trading approach: my rules should be an integral part of how I trade, not bolted on. They should feel like they are facilitating, not restricting, what I do. A stop, for instance, should be perceived as an opportunity, by getting me out of a losing trade so I can reenter at better prices or as a trading signal indicating that I should reverse my bias. Similarly, a timeout should be perceived as giving the market sufficient time to get to where I think is the best location for a trade.
• Rules that are tailored to my weaknesses: my rules should help me work around my weaknesses. In particular, they should keep me out of trouble on trend days, as it is on these days that I usually run into problems. They should be preventative rather than reactive, i.e. they should steer me clear of meltdowns, rather than try to guide what I do after I have already gotten into one, by which time it would be too late as I won’t have the composure to follow any rules.
